Beware Of “Ghosts”
(Unethical and Fraudulent Tax Preparers)
Before we get to the ten tips to consider, it is important to discuss one critical thing to avoid: “ghost” preparers. More on that in a minute.
Since it’s the time of the year when you may be choosing a tax professional to help file your tax returns, let’s consider ten things you should think about when choosing your tax preparer. It is important to choose wisely because you are responsible for all the information on your income tax return. That’s true no matter who prepares the return.
10 Tips For Taxpayers
Here are ten tips for taxpayers to remember when selecting a preparer:
- Check the Preparer’s Qualifications. You can use the IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications. This tool helps taxpayers find a tax return preparer with specific qualifications. The directory is a searchable and sortable listing of preparers.
- Check the Preparer’s History. The Better Business Bureau can be a valuable resource. Check for disciplinary actions and the license status for credentialed preparers. For CPAs, check with the State Board of Accountancy. For attorneys, check with the State Bar Association. For Enrolled Agents, go to the verify enrolled agent status page on IRS.gov or check the directory.
- Ask about Service Fees. Avoid preparers who base fees on a percentage of the refund or who boast bigger refunds than their competition. When asking about a preparer’s services and fees, don’t give them tax documents, Social Security numbers, or other information until you have hired the tax professional.
- Ask to E-File. Make sure your preparer offers IRS e-file. The quickest way to get your refund is to electronically file your federal tax return and use direct deposit.
- Make Sure the Preparer is Available. Avoid fly-by-night preparers. You may want to contact the preparer after the April 15 due date.
- Provide Records and Receipts. Good preparers will ask to see your records and receipts. They will ask questions about such things as total income, tax deductions, and credits.
- Never Sign a Blank Return. Do not use a tax preparer who asks you to sign a blank tax form.
- Review Before Signing. Before signing a tax return, you should review it. Ask questions if something is not clear. You should feel comfortable with the accuracy of your return before you sign it. Always make sure your refund goes directly to you – not to the preparer’s bank account. You should review the routing and bank account number on the completed return. The preparer should give you a copy of the completed tax return.
- Ensure the Preparer Signs and Includes Their PTIN. All paid tax preparers must have a Preparer Tax Identification Number. By law, paid preparers must sign returns and include their PTIN.
- Report Abusive Tax Preparers to the IRS. Most tax professionals are honest and provide great service to their clients. However, some preparers are dishonest. You can report abusive tax preparers and suspected tax fraud to the IRS and/or the preparer’s governing board.
Now, Back To Those “Ghosts”
Bayshore CPA’s, P.A. along with the Internal Revenue Service warns taxpayers to avoid unethical tax return preparers, known as “ghost” preparers.
As stated in #9 above, anyone who is paid to prepare or assist in preparing federal tax returns must have a valid 2019 Preparer Tax Identification Number (PTIN). Paid preparers must sign the return and include their PTIN.
But “ghost” preparers do not sign the return. Instead, they print the return and tell the taxpayer to sign and mail it to the IRS. For e-filed returns, they prepare the return but refuse to digitally sign it as the paid preparer.
According to the IRS, similar to other tax preparation schemes, dishonest and unscrupulous ghost tax return preparers look to make a fast buck by promising a big refund or charging fees based on a percentage of the refund. These scammers hurt honest taxpayers who are simply trying to do the right thing and file a legitimate tax return.
“Ghost” tax return preparers may also:
- Require payment in cash only and not provide a receipt.
- Invent income to erroneously qualify their clients for tax credits or claim fake deductions to boost their refunds.
- Direct refunds into their own bank account rather than the taxpayer’s account.
You are urged to review your tax return carefully before signing and ask questions if something is not clear. The ten tips presented above can help you choose your tax professional wisely.