The Internal Revenue Service issued a warning Wednesday to taxpayers to beware of unethical “ghost” tax preparers who don’t sign tax returns for clients.
The IRS has released similar warnings in tax seasons in recent years as the phenomenon has grown and the term “ghost preparer” has been attached to it. A ghost preparer may prepare and print out the return, but ask the client to sign it and mail it to the IRS. For electronically filed returns, the ghost will prepare but refuse to digitally sign the return as the paid preparer.
The IRS has been cracking down more and more on unscrupulous tax preparers, although it still has not yet been able to require licensing for tax preparers after a court struck down a registration program in 2013.
The service is, however, still allowed to require paid tax preparers to register with a Preparer Tax Identification Number that allows it to trace illegal activity or incompetent practices. But ghost tax preparers avoid affixing the PTIN to their returns to evade detection and instead have the taxpayer write “Self-Prepared.” Some unscrupulous preparers set up shop only during tax season, prepare a number of fraudulent tax returns, and then disappear without a trace right after the tax deadline passes.
“A lot of them move from one city to another every year and reestablish their client base through word of mouth,” said Fernando Angell, a board member of the California Tax Education Council, in a statement.
CTEC is a state-mandated nonprofit that manages the registration of 40,000 tax preparers in California, and it too issued a warning last week. “I had a couple come to me for help because their immigration status depended on it,” said CTEC board member Esperanza Escobedo in a statement. “The ghost tax preparer refused to answer the door after their attorney told them to get their return amended for a court case. There was at least $13,000 worth of Earned Income Tax Credit fraud, not to mention Social Security fraud.”
Other typical scams of ghost preparers include sticking a business label on the tax return instead of signing it. Clients receive the label copy so it appears to be signed, but the preparer actually files a blank copy without a business label affixed.
Some ghost preparers will claim they simply “forgot” to sign the return and promise to sign it “later” after they have been paid.
“One client I helped had a ghost tax preparer block their calls after getting notices from the IRS for two different tax years,” said Angell. “More victims from this ghost tax preparer keep coming to us for help. He had quite the scheme going.”
The IRS warned that ghost preparers may also require payment in cash only and not provide a receipt. They may also invent income to qualify their clients for tax credits and claim fake deductions to increase the size of the tax refund. They may even direct refunds into their own bank account instead of the taxpayer's account.
The IRS recommends that taxpayers visit the IRS’s
The IRS cautioned taxpayers to verify their routing and bank account number on the completed tax return for any direct deposit refund and beware of ghost preparers putting their own bank account information on the returns instead of the taxpayer’s account.
Taxpayers can report misconduct to the IRS by filing a complaint on
