Identity theft knows no limits and every year the IRS warn taxpayers to avoid unethical tax return preparers, known as ghost preparers. Ghosting is a form of identity theft that usually occurs on a dead person for monetary gain. Cyber criminals can often get away with ghosting because it can be months after a person dies before entities like credit reporting agencies, the Social Security Administration, and the IRS receive, share or register death records. Many of us have heard of being “ghosted” after a death, but have you ever been ghosted by your tax preparer?
Unfortunately, many have, and they’re often met with serious consequences. Black Market Tax preparers set up shop around tax time, usually in a rental or short-term location. They will often (but not always) promise fast or large refunds to filers. Also known as “Ghost Tax Preparers”, these are un-certified individuals that bypass checks and balances in the tax preparer certification system. Commonly, the big refunds they promise are not calculated in legal ways.
Ghost preparers actually prepare the tax return, but when it’s submitted to the IRS they ask the taxpayer to sign their own return, making it look like it was self-filed. This doesn’t seem like a big deal, until something goes wrong and the preparer is nowhere to be found. Since the return is technically self-filed, the taxpayer is liable for any errors or omissions the ghost preparer made, including underpayment and negligence penalties, which often accompany these situations because the large refund promised was not accurate in the first place.
How do they do this? According to the IRS, ” The ghost preparer does not sign a tax return they prepare. Unscrupulous ghost preparers will print the return and tell the taxpayer to sign and mail it to the IRS. For e-filed returns, the ghost will prepare but refuse to digitally sign as the paid preparer.”
The IRS has been urging taxpayers to wisely choose preparers, along with directed resources, since 2006. After the FBI took control of “Operation Ghost Click,” the IRS increased oversight of tax preparers to combat corrupt the industry and began to require all tax preparers to have a PTIN, or a Preparer Tax Identification Number. But this system only works if tax preparers sign the returns they file. Some tax preparers that don’t want to follow the process, simply don’t sign the returns!
By law, anyone who prepares, or even assists with preparing, federal tax returns for compensation must have a valid Preparer Tax Identification Number (PTIN). Tax preparers should sign the tax returns they prepare and include their PTIN on the tax return. Ghost tax return preparers may also:
- require payment in cash only and not provide a receipt
- invent income to qualify their clients for tax credits
- claim fake deductions to boost the size of the refund
- direct refunds into their bank account, not the taxpayer’s account.
- Do your research! Don’t be afraid to ask about their processes, credentials, and for their PTIN. The IRS has resources to help you check those credentials.
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