This Tax Season, Beware of Ghosts!
March 9, 2021
It’s a brand new year. Cue popping champagne corks, heartfelt resolutions, 2020 tax forms and … ghosts? Wait, aren’t they for Halloween?
Unfortunately, every season has its own ghouls as ever-fiendish swindlers gear up with seasonally appropriate frauds. From now until mid-April, that will mean tax scams galore. Some new, some retooled, and some oldies-but-goodies.
“Ghost” tax return preparers fall in the latter category. It seems as if every year, income tax prep becomes more complicated (is everybody absolutely clear about how that stimulus money works, tax-wise?). This creates an ideal environment for folks who want to step in and take the headache off your hands – for a price.
Enter the ghost preparer: someone you hire to prepare your tax return, but who refuses to sign it, either electronically or on paper, as the paid preparer.
It Looks Good on Paper But…
This kind of tax scam doesn’t necessarily look criminal on the surface. Your preparer fills out the return, prints it and tells you to sign and mail it to the IRS. If you e-file, he or she prepares it, but without signing as the preparer. You might not even notice, if you don’t carefully review the file before it’s sent.
Unfortunately, if that happens, the IRS will treat your return as self-prepared. You bear all the responsibility, while your phantom preparer flies under the radar.
This is not only ill-advised, it’s illegal. By law, anyone who is paid to prepare or assists in preparing federal tax returns must have a valid Preparer Tax Identification Number, or PTIN. They must sign the tax returns they prepare and include their PTIN, which provides the IRS with identifying information.
These crooks are looking to make a fast buck without accepting responsibility or oversight. They will often promise a big refund, and may charge you a fee based on a percentage of the refund. According to the IRS, these preparers may also:
- Require payment in cash only and not provide a receipt.
- Invent income to erroneously qualify you for tax credits.
- Claim fake deductions to help you get a larger refund.
- Direct refunds into their own financial account.
The Bottom Line
Remember: you are legally responsible for all the information included on your tax return, even if someone else prepares it. Always review your return carefully before it is signed and filed to ensure the information is accurate. If anything isn’t clear, question your preparer. If you’ve enabled direct deposit for your refund, make sure both the routing and bank account number on the completed tax return are correct.
To find a legitimate tax preparer, taxpayers can visit the IRS preparer directory at www.irs.gov/chooseataxpro. If you do fall victim to a disreputable tax preparer (or notice warning flags before you get involved), report them to the IRS. Use Form 14157 PDF, Complaint: Tax Return Preparer. If you suspect your tax preparer filed or changed your tax return without your consent, you should file Form 14157-A PDF, Tax Return Preparer Fraud or Misconduct Affidavit.
This article is designed to provide informative material and is distributed with the understanding that it does not constitute legal or other professional advice. Opinions expressed herein are subject to change without notice. Information has been obtained from sources believed to be reliable, but its accuracy and interpretation are not guaranteed.