A Grave Error: Don’t Allow “Ghost Preparers” to Turn Your Taxes Into a Horror Story

Preparing your taxes doesn’t have to be scary, but this spooky season I would like to share an example of how things can go frightfully wrong. Imagine this terrifying scenario: Someone offers to prepare your tax return, promising a big refund. All you have to do is take their word for it and look the other way, or sign a blank tax return, and they do the rest to work their magic.

Then, one dark and stormy night, something happens that could inspire dread in even the bravest taxpayer: You receive a notice from the IRS stating there is an issue with your return and you think back to what your preparer promised.

This isn’t a work of fiction. Many unsuspecting taxpayers are bewitched by deceptive preparers. Some of these preparers operate under cloak of darkness by refusing to sign their names to their clients’ returns. The IRS refers to them as “ghost preparers,” a name befitting their ethereal nature.

Unlike their namesakes, ghost preparers prefer not to be transparent. There are several reasons why they do not sign their names to returns. First, they may not have a Preparer Tax Identification Number (PTIN), which is a number the IRS requires all paid return preparers to include on returns they prepare. Second, by lurking in the shadows ghost preparers try to avoid being held accountable for inaccurate or fraudulent returns.

TAS has previously provided some information on how to select a reputable return preparer. Beware, not all ghost preparers are alike, and many are not acting in your best interest. Potentially ominous ghost preparers:

Only accept cash and do not provide receipts;
Direct refunds to their own bank account instead of yours;
Invent income or claim fake deductions to increase refund amounts;
Charge a fee based on the size of your refund or guarantee a refund; or
Ask you to sign a blank or incomplete return.

Unfortunately, doing business with such a return preparer can have dreadful consequences. Regardless of whether someone else prepares your return or you do it yourself, you are ultimately responsible for its accuracy, and any resulting additional taxes, interest, or penalties. And if you put your trust in the wrong person, when it comes time for help with an audit you may be the one getting ghosted by your preparer.

Conclusion

The message here is simple: Don’t pay someone to prepare your taxes if they aren’t willing to sign their name to your return. When you choose a preparer, always make sure it is someone you trust. Otherwise, your tax return could come back to haunt you.