Have you ever been ghosted by a date? Some of you may have been at some time in your life. It’s when someone cuts off all communication without explanation. They stop answering your calls and texts. Well, there’s a scam that has been on the rise in recent years, and it’s called a ghost tax preparer. Ghost tax preparers are scammers who pose as legitimate tax preparers to steal money or to gain access to your personal and financial information. They may try to lure you with a promise of a much larger return so they can charge a ridiculously high rate. The IRS, Federal Trade Commission (FTC), and Better Business Bureau (BBB) all recommend watching out for certain warning signs when selecting a tax preparer.
7 red flags of a ghost tax preparer scam
- A tax preparer who insists on cash payment only. Sounds shady, right? That’s because it is.
- You are asked to sign a blank or partially filled-out tax return or one that is filled out in pencil. Do not sign it, as you are liable for the final tax return that is submitted, even if a ghost preparer changed information after you signed.
- The promise of a much larger refund than you would expect. Crooked tax preparers will often try to lure taxpayers with the promise of an inflated refund. Once they have your attention, they will try to charge you an outrageous fee. They may even try to charge you a fee based on a percentage of your refund amount.
- They avoid signing your return. If a tax preparer won’t sign your return, that’s a big red flag. They may try to stamp it as “self-prepared.” They might also try to trick you into signing on your own, making it look like the return was self-filed. Although this may not seem like it’s too devious or dangerous, if anything goes wrong with your return, just like a ghost, the tax preparer will disappear, and you are fully responsible. You will be liable for any errors or omissions that the preparer made. The law requires paid tax preparers to sign your tax return by first and last name. Always verify that they sign the “Tax Preparer Signature” line on your state and federal tax return. Remember, no name, no signature, and no proof of existence.
- They do not have a valid Tax Preparer Identification Number (PTIN). Years ago, the IRS made efforts to increase the oversight of tax preparers to reduce fraudulent behavior and scams in the industry. They began to require all tax preparers to have a PTIN. The IRS maintains a directory of PTIN holders, which is available for the public to check. Although anyone with a PTIN can prepare a tax return for a client, the IRS directory is intended to help you make an informed choice by providing a listing of preparers in your area who currently hold professional credentials recognized by the IRS or who hold an Annual Filing Season Program Record of Completion. This site will help you better understand tax preparer credentials and qualifications. A tax preparer may be fraudulent if they refuse to give you their PTIN number. It’s important to remember that being listed in the IRS directory isn’t an endorsement, but it does confirm they are registered with the IRS and trackable.
- They try to direct a refund into a deposit account other than the taxpayer’s account. Believe it or not, this happens. A ghost preparer may say they will distribute the funds to you “later.” It’s your responsibility to be vigilant and to be sure that a tax preparer does not put anyone else’s deposit account information on your tax return.
- A tax preparer who rushes you to sign, not giving you time to thoroughly review your return. Finally, it’s important to always review your tax return and understand what’s on it before you sign it. As we mentioned before, you are ultimately responsible for your return.
If you find our tips helpful, be sure to read the Choice Words blog each month. Looking for more tax-related tips? Read our “Tax Credit Tips to Lower Your Tax Bill.”
If you have a complaint about a tax return preparer, you can visit the IRS website for information about filing a complaint.