As tax season approaches, many of us start the hunt for reliable professionals to help us navigate the complexities of tax returns. However, amidst the legitimate companies and qualified preparers, lurk shadowy figures known as “ghost” preparers. These unethical individuals pose a significant threat to your financial well-being and can land you in hot water with the IRS.
So, how do you identify and avoid these imposters? Here’s what you need to know:
What is a Ghost Preparer?
A ghost preparer prepares your tax return for a fee but refuses to sign it. They may print the return and pressure you to sign and mail it yourself, or for e-filed returns, simply disappear after preparing the electronic forms without digitally signing them. This is a major red flag, as anyone legally preparing federal tax returns must hold a valid Preparer Tax Identification Number (PTIN) and sign the return with it.
Why Should You Steer Clear?
Ghost preparers are motivated by quick profits, often through dubious means. They might:
- Fabricate income or expenses: They inflate your earned income tax credit (EITC) by inventing business income or manipulating expenses.
- Claim fake deductions or credits: They invent charitable donations, off-road fuel credits, or other fabricated deductions to boost your refund.
- File without your knowledge or consent: They file your return without you reviewing it or even obtaining your signature.
- Direct refunds to their accounts: They divert your refund to their own bank account, leaving you high and dry when the IRS catches up.
- Lack of knowledge and insurance: They rarely take continuing education, are unaware of current tax laws, and don’t carry errors and omissions insurance, putting your finances at risk.
The Consequences of Ghostly Encounters
The consequences of falling victim to a ghost preparer can be severe:
- IRS penalties and interest: You’ll be liable for any inaccuracies or fraudulent claims on your return, resulting in hefty penalties and interest payments.
- Financial hardship: Repaying ill-gotten refunds and penalties can drain your finances for years.
- Legal trouble: In extreme cases, the IRS may pursue legal action against you.
Protecting Yourself: Finding Reputable Help
Choosing the right tax preparer is crucial. Here are some tips to ensure you avoid ghosts and find ethical professionals:
- Ask for credentials: Look for preparers with relevant qualifications like Enrolled Agents, Certified Public Accountants (CPAs), or attorneys specializing in tax law.
- Verify PTIN: Check if they hold a valid PTIN on the IRS website.
- Get it in writing: Ensure all fees and service details are clearly outlined in a written agreement.
- Review and ask questions: Thoroughly review your return before signing and ask questions about anything unclear.
- Verify bank details: Confirm your routing and bank account information are correct on the return.
- Beware of red flags: Be wary of promises of unrealistic refunds, pressure to sign blank forms, or requests for cash payments.
Reporting Ghostly Encounters
If you suspect you’ve encountered a ghost preparer, you can report them to the IRS using Form 14157, Complaint: Tax Return Preparer. For suspected fraud or unauthorized filing, use Form 14157-A, Tax Return Preparer Fraud or Misconduct Affidavit.
Your tax return, a pivotal document with weighty financial implications, deserves more than the spectral presence of a “ghost” preparer. Choosing a qualified and informed professional is essential to shield your finances from potential hauntings. Stay vigilant by being informed, asking questions, and reporting any misconduct. This proactive approach safeguards you from the deceptive practices of these shadowy figures. If ghost preparers have already caused IRS trouble, fear not! We’re here to help you navigate the path to resolution. Your financial security is our priority.
