When it comes to selecting someone to prepare your tax return, there are a lot of criteria to consider. Have you thought about whether the person offering to do your taxes is a legitimate tax preparer? Protect yourself from tax prep scams by knowing how the IRS evaluates tax preparers.
The IRS has warned taxpayers to be on the watch for what they’re calling ghost preparers—a catch-all term for unethical preparers and even scam artists who claim to be able to get you a huge refund quickly. These ghost preparers are often set up in a temporary office or other space and may even offer you a refund loan so you can get cash that very day. If you allow one of these ghosts to prepare your return, some common tactics they may use include misreporting your filing status, tax credits, education credits, or business expenses.
By the time your return reaches the IRS and is flagged for an audit, the ghost is long gone. The taxpayer is then left to deal with the consequences of the ghost’s actions.
How do I know if my tax preparer is a ghost?
There’s one very simple litmus test: is the tax preparer willing to sign and file your return? By law, all tax preparers must have a Preparer Tax Identification Number, or PTIN. When a legitimate tax preparer completes your return, he or she will sign the bottom and provide his or her PTIN. This system protects you, the taxpayer, from the tax preparer fraudulently completing your return. If the IRS conducts an audit and you realize there’s an issue with the tax preparer’s work, the IRS can track the preparer down.
Ghost preparers, on the other hand, won’t sign your return and provide a PTIN. Instead, they may give you the final return to sign and submit or e-file for you without signing as the paid preparer. If you find yourself dealing with a tax preparer who won’t sign your return—regardless of the stated reason—run (don’t walk!) away.
The IRS has reported other common behaviors among ghost tax preparers that should be red flags that you may be walking into any number of tax prep scams:
- They require cash payment for their services and don’t provide you with a receipt.
- They report income that’s different from what you received so that you can qualify for credits for which you aren’t eligible.
- They invent deductions you can’t take, such as education or business expenses.
- They offer to front you the money for your refund in exchange for your refund being directly deposited into their accounts.
How do I find a legitimate tax preparer?
The IRS maintains a public database of federal tax return preparers. You can search by geographic location and even by the credentials you need for specialized returns. You can also search by the individual’s last name if you wish to vet a preparer you’re thinking of hiring. Always ensure that your preparer has a valid PTIN and is willing to sign your tax return. Also, don’t forget to ask how you will reach the preparer after tax season is over. If you find yourself being audited, you’ll need to contact your tax preparer. If you do suspect you’re dealing with a ghost preparer, don’t hesitate to notify the IRS. Form 14157 provides a process for submitting any concerns you may have about a tax preparer.