According to the Better Business Bureau, a “ghost tax preparer” is someone who isn’t certified but still prepares tax returns.
They not only waste filers’ funds, but their schemes can cause serious problems in the long run, the BBB said.
What these “ghost preparers” do is get everything ready for your tax return, but when they submit it to the IRS, they ask you (the taxpayer) to sign your own return, making it look like it was self-filed.
They have to do this because, in 2006, the IRS introduced a Preparer Tax Identification Number (PTIN), which increases oversight of tax preparers.
Having you sign and file the return yourself is the ghost preparer’s way around the PTIN.
The BBB admits that this doesn’t seem like a big deal. So you’re taking the prepared files and mailing them to the IRS yourself? So what?
But when something goes wrong, the preparer is nowhere to be found. And since your return was technically self-filed, you are liable for any errors or omissions the ghost preparer made. That includes underpayment and negligence penalties, which happen often because the large refund the ghost preparer promised you wasn’t accurate in the first place.
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.
So how do you avoid falling victim to a “ghost preparer”?
The BBB offers these 6 tips:
1. Be wary of those offering fast refunds or large returns.
If someone promises quick refunds or big returns, be careful. Your return amount, deduction amount, or taxes owed are solely based on your past year’s tax information and the current tax laws. The time it will take to receive your refund or tax notice will depend entirely upon the IRS.
2. Don’t sign your own tax return if asked by a tax preparer.
Never sign your own tax return if someone else prepared it. Legit preparers will sign it and include their PTIN.
3. Review your tax return.
Before you send it, look through your tax return to make sure it was signed properly by your tax preparer, that it’s complete, and that your information appears to be accurate.
4. Only allow funds to be deposited into your personal accounts.
Some ghost preparers will have funds deposited into their own accounts “to be later distributed.” That can be a red flag.
5. Do your research.
Check BBB.org for complaints and reviews on tax services in your area. Be cautious of “pop-ups” and seasonal tax services. Don’t be afraid to ask about their processes, credentials, and for their PTIN. The IRS has resources to help you check those credentials.
6. Report unusual activity.
If you see a ghost tax preparer or think something isn’t right, tell your local BBB or use BBB’s Scam Tracker.