A ghost tax preparer is any paid tax professional who prepares your tax return but refuses to sign it or include their Preparer Tax Identification Number (PTIN). This is risky because the IRS considers your return self-prepared, meaning if anything goes wrong, you’re held accountable.
Ghost tax preparers charge you for the service, prepare your return, and then vanish from your paperwork entirely. No signature or anything linking them back to your tax return. In this guide, we shall discuss why this is a problem, how to spot ghost tax preparers, and what to do if you’ve already used one.
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Key Takeaways
- Ghost tax preparer – Any paid tax preparer who fails to sign and include their PTIN in their clients’ returns.
- Accountability of a tax return filed by a ghost preparer – Even if a ghost tax preparer claimed false deductions, the taxpayer is responsible for it.
- The risk of using a ghost preparer – They often inflate refunds by claiming false credits, inventing deductions, misstating income, or using the wrong filing status.
- How to fix the ghost preparer errors – Ask a legitimate tax professional to review your tax returns and amend your return, respond to IRS notices, and protect yourself.
What is a Ghost Tax Preparer?
A ghost tax preparer is any tax professional who is paid to prepare tax returns but does not sign the return, include their name, or use a valid Preparer Tax Identification Number (PTIN).
In most cases, the ghost tax preparer will charge a taxpayer a fee to file returns on their behalf, but instead share a “completed” tax return for clients to sign and mail it to the IRS. Some may also e-file on behalf of the client without notifying the IRS that they were the preparer. As a result, in the eyes of the IRS, you prepared the return yourself. Ghost preparers do this deliberately to avoid accountability when the IRS starts asking questions.
Ghost prepares often operate without a formal registration, accountability structure, or continuing education. However, even a tax professional with credentials who refuses to sign a return and omits their PTIN is considered a ghost preparer.
Why Ghost Preparers Don’t Sign Tax Returns
There are many reasons ghost preparers refuse to sign returns, the leading ones being:
- Avoiding accountability: Ghost preparers avoid signing returns because doing so creates accountability. If the IRS sees a pattern of inflated deductions, false credits, questionable business expenses, refund manipulation, or other made-up details on the return, they can check the paid tax preparer’s name and PTIN to hold them accountable. No signature, no accountability.
- Reduce the risk for penalties (against them, not you): When a preparer fails to sign, they may be able to avoid IRS scrutiny, dodge preparer penalties, or avoid being connected to suspicious returns. Without their signature, only their client is accountable for their wrongdoings.
This is convenient for them because they know they’re looking to earn a quick buck and aren’t complying with tax laws.
How Taxpayers Unknowingly Get Pulled in by Ghost Preparers
Unfortunately, ghost preparers position themselves in a way that’s too good for taxpayers to say no. Here’s why taxpayers are likely to work with a ghost preparer:
- They promise bigger refunds or deductions: For example, a ghost preparer may claim to have some special tricks or loopholes that can help a taxpayer claim a bigger refund. The prospect of receiving more money can be really hard to resist.
- Their fees are relatively cheap: Unlike legitimate tax professionals, ghost preparers don’t invest in licensing, training, software, or compliance, so they charge lower fees that can be very appealing. Also, in most cases, their main goal is to inflate the tax refund and get a cut from it.
- They target taxpayers who are unfamiliar with the tax laws: They could be from your FB, reddit, or even TikTok thread where you’re innocently trying to get clarity on a notice you just received from the IRS. They know you don’t understand the rules, and they’re ready to convince you to use their services.
- They market aggressively: Ghost preparers advertise heavily through word of mouth, community groups where they may position themselves as experts, and social media. The familiarity with their online presence makes them easy to trust.
For taxpayers facing financial struggles or complex tax issues, a ghost preparer can seem like an easier alternative. Unfortunately, this ends up being more expensive in the long run.
Common Red Flags of a Ghost Tax Preparer
If you’re worried about hiring a ghost tax preparer, this checklist will help you eliminate the bad weeds. Here are common traits of ghost preparers:
- They refuse to provide a PTIN and refuse to sign the return.
- They ask you, despite paying for filing services, to sign as the preparer.
- They also promise huge guaranteed refunds, compared to other quotes you might’ve received from other tax professionals.
- They don’t issue receipts and mostly prefer cash.
- They have no online presence, or if they do, the brand name keeps changing.
- They ask you to deposit money directly into their account instead of paying it directly to the IRS.
Attorney Jason Wiggam has appeared on Atlanta News First speaking about this topic, and he’s committed to helping clients who have been misled. You can get more insights on this from the video below:
What Ghost Preparers Commonly Do Wrong on Tax Returns
Ghost preparers often manipulate returns to increase refunds. They may claim credits such as the Earned Income Tax Credit, the Child Tax Credit, education credits, fuel tax credits, or others that have strict eligibility requirements. They may also invent or inflate business income and expenses.
A ghost preparer may misstate your filing status or dependents, potentially with duplicate dependent claims. Inflation of mileage, home office expenses, and other write-offs that cannot be documented may also be used to inflate a refund.
Their main objective is to maximize refunds; they don’t care about accuracy or compliance.
Real-Life Example: The “Bigger Refund” Promise
Here’s what can happen: Jane hires a tax preparer through an FB recommendation. The preparer promises a bigger tax refund than other tax professionals had quoted. The preparer uses only her W-2 and basic personal information for the return. Jane learns she’ll receive a $20,000 refund, even though she was expecting a $10,000 refund – and since it was so large, she was happy to pay the preparer $5,000.
A year passes, and the IRS sends Jane a notice saying she claimed a tax credit and business expenses she wasn’t eligible for. Turns out the ghost preparer set up a self-employment business and fabricated expenses to increase her refund.
The result? Now Jane must repay the tax refund she wasn’t entitled to, interest accrued on the unpaid tax, and penalties for the inaccurate return.
How the IRS Detects Fraudulent or Suspicious Returns
The IRS has several tools to identify suspicious or fraudulent returns. They match information from third-party sources. Employers, clients, banks, and other reporting sources provide the IRS with W-2s and 1099s. If what is reported does not match, the IRS will look deeper.
They may also compare dependent claims, Social Security numbers, filing patterns, and credit eligibility. Credits that don’t match your income, filing status, or household may also cause the IRS to examine your return.
IRS systems also flag suspicious Schedule C activity. If the business income or deductions aren’t consistent with your history as a taxpayer or look unusual for your industry, the IRS may request more information.
What to Do If You Think You Used a Ghost Tax Preparer
If you’ve already used a ghost preparer, don’t panic; it can be fixed. However, the best approach is to take control of the situation and act quickly before the IRS reaches out. Here’s what you need to do:
- Step one: Review your filed returns. Did the preparer sign or include a PTIN? If not, they’re for sure a ghost preparer. Verify all the numbers, deductions, and credits to ensure they align with records the IRS will receive from third parties.
- Step two: File amended returns. If you find any incorrect or fake deductions or tax credits (which you likely will), file an amended return.
- Step three: Document everything: Get copies of everything — payments sent to the preparer, any communication with them, and ads or posts made on community forums and social media.
- Step four: Report the preparer. You can do this by filing Form 14157. If the preparer filed or altered your return without your knowledge or consent, also file Form 14157-A along with it.
If you’ve started receiving notices about denied credits or you don’t know how to fix inconsistencies in your return, you should reach out to a tax professional. They can help you respond to these notices and minimize the damage.
How to Choose a Legitimate Tax Preparer
Choosing the right tax preparer can help you avoid the damages that come with hiring a ghost preparer. Legitimate tax professionals include CPAs, enrolled agents, tax attorneys, and non-credentialed preparers with PTINs.
Here’s a quick checklist you can use to verify a professional before sharing your personal details:
- Ensure they have an active PTIN
- Confirm they’ll include their PTIN and sign the return as a preparer
- Ensure they’re registered with your state authority if it’s a requirement
- They provide a written engagement letter and itemized fee structure (the lack of paperwork is the holy grail of ghost preparers).
- Ensure the tax professional will share copies of all filings before submission
- They have verifiable reviews, referrals, and a solid online presence.
Frequently Asked Questions (FAQs)
Here are answers to the top questions we receive on ghost preparers:
What makes someone a ghost tax preparer?
Lack of a paper trail; if someone is paid to file your tax return but does not sign the return or include a valid PTIN, they are a ghost tax preparer. They file your return and get paid for it, but make it appear as if you filed it yourself.
Am I responsible if my tax preparer made a mistake?
Generally, yes. Taxpayers are usually responsible for the accuracy of any return filed under their name. However, if a tax preparer signed or included their PTIN, they may also get tax preparer penalties from the IRS for the errors. You can also report a tax preparer’s misconduct to the IRS by filing Form 14157. However, with ghost preparers, they can’t be held accountable because their name isn’t on your tax return.
How do I find out if my preparer signed my return?
Look at the paid preparer section of your return. If they were a legitimate preparer, this section would have their name, signature, PTIN, and firm name (if applicable).
What should I do if my return says self-prepared but someone else prepared it?
This means you used a ghost preparer. Save proof that you paid the preparer, including payment records, communications, and documents. Review your return for errors and consider talking to a legitimate tax professional for damage control.
Can I report a ghost tax preparer to the IRS?
Yes, you can report a ghost preparer to the IRS by filing Form 14157 and submitting all supporting documents, such as payment records, a copy of the return, and any communications you had with them. This can help prevent the ghost preparer from taking advantage of other taxpayers.
Can a ghost preparer steal my refund?
Yes, how they may do it is the main concern. In most cases, they ask you to split your tax refund as payment. The problem is they maximize these refunds by claiming credits and deductions you don’t qualify for, adding non-existent business expenses, etc. All activities that could lead to audits and/or penalties. Some ghost preparers may also direct the refund to their bank account and steal the entire refund.
Should I amend my return?
Yes, if the return contains false or inaccurate information, you need to amend it to avoid IRS collection actions later and to ensure compliance with tax laws. But before you do so, you should talk to a tax professional to limit your exposure.
Can a ghost preparer cause criminal tax problems?
It’s common for ghost preparers to cause civil tax problems, like additional tax bills, penalties, interest, audits, and collection issues. However, criminal exposure may also become an issue if the IRS believes that the taxpayer intentionally and knowingly participated in false claims.
Note that most taxpayers who use ghost preparers do not face criminal allegations; they are usually the victims in this entire situation.
Did Your Preparer Ghost You? We Can Help You
Ghost preparers are getting really great at positioning themselves, and with AI, they can create false results to manipulate innocent taxpayers by lying that their crooked ways have worked before. What they fail to mention is that the “big refund” they’re promising won’t be legally obtained, and by the time the IRS comes knocking for answers, they’ll be long gone.
If you’ve accidentally worked with a ghost preparer and need help with damage control, we can help review your tax return and amend it to avoid issues with the IRS, represent you in audits, help you fight penalties, and get relief.
Schedule an appointment with us to resolve your tax problem. You can also call Wiggam Law at 404-609-1300.
Resources:
https://www.irs.gov/newsroom/what-taxpayers-should-know-when-choosing-a-tax-professional
https://www.irs.gov/taxtopics/tc254
https://www.irs.gov/tax-professionals/ptin-requirements-for-tax-return-preparers
https://www.irs.gov/newsroom/irs-dont-be-victim-to-a-ghost-tax-return-preparer
https://www.irs.gov/help/report-fraud/report-a-tax-return-preparer
