Tax season can be a stressful time and scammers know how to exploit it. One of the most common threats comes from untrustworthy tax preparers, including so-called "ghost preparers," who promise big refunds but leave you with big problems. Protecting yourself from these scams is critical to safeguarding your financial future. Here’s what you need to know.

What Are “Ghost Preparers”?

“Ghost preparers” are fraudulent tax preparers who operate under the radar, often targeting individuals during tax season. These preparers complete your tax return but refuse to sign it, leaving no trace of their involvement. They may promise larger refunds, which they obtain by illegal and fraudulent methods, such as fabricating deductions or income. Worse, they commit this fraud in your name and leave you to face the consequences.

After filing your return, these preparers take their payment as a portion of the illegally obtained refund and disappear, leaving you to deal with the legal aftermath. You could face an IRS audit, penalties or even legal action due to the fraud committed– and as far as the government knows, it was committed by you. 

Warning Signs of a Shady Tax Preparer

Spotting an untrustworthy tax preparer early can save you from headaches and financial loss. Watch out for these red flags:

1. Refusal to Sign: Legitimate tax preparers are required to sign your return and include their Preparer Tax Identification Number (PTIN). If your preparer won’t sign, that’s a major warning sign.
2. Unclear Fees: Be extra cautious of preparers who base their fees on the size of your refund or demand cash payments.
3. Fabricated Income or Deductions: Some preparers may invent income or false deductions to inflate your refund. This can lead to audits and penalties.
4. Refunding to the Wrong Bank Account: Be on guard against preparers who direct your tax refund to their own bank account instead of yours.

To avoid falling victim, always verify the credentials of your tax preparer.

The Consequences of Tax Fraud and Identity Theft

The repercussions of using a shady tax preparer extend far beyond the inconvenience of an audit. Tax fraud can lead to severe financial and legal consequences, including:

• IRS Penalties and Fines: If your return contains fraudulent information, you could be held responsible for penalties, interest and back taxes owed.
• Delayed Refunds: Incorrect or suspicious filings can cause delays in receiving your refund as the IRS investigates.
• Identity Theft: Scammers often use personal information from tax filings to commit identity theft, opening fraudulent accounts or filing additional returns in your name.

Protecting yourself starts with vigilance. Ensure your tax preparer uses secure methods to handle your information and follows ethical practices.

How to Choose a Trusted Tax Professional 

Selecting a trustworthy tax professional is essential to avoiding scams and ensuring your tax return is accurate. The IRS offers several resources to help you find a reputable preparer, but here are key steps to take:

1. Verify Credentials: Look for preparers with recognized qualifications. Use the IRS Directory of Federal Tax Return Preparers to confirm their status.
2. Check Their PTIN: Paid tax preparers are required to have a valid Preparer Tax Identification Number (PTIN). Make sure your preparer includes this number on your return.
3. Ask Questions: A good preparer will ask for documentation like W-2s, 1099s and receipts to ensure your return is accurate and complete.
4. Get a Signed Copy: Always request a signed copy of your return for your records. Ensure the preparer also signs and files your return properly.

Steps to Report Tax Fraud and Unethical Preparers

If you suspect that a tax preparer has engaged in fraud or unethical practices, it’s important to take immediate action. The IRS provides several channels to report such activity and protect yourself:

1. File a Complaint: Use IRS Form 14157 to report a preparer who has acted improperly. If you suspect that the preparer filed or altered your return without your consent, include Form 14157-A, Tax Return Preparer Fraud or Misconduct Affidavit.
2. Submit a Report for Abusive Tax Avoidance: Complete IRS Form 14242 to report any tax preparer or promoter involved in abusive tax avoidance schemes. This can be mailed or faxed to the IRS Lead Development Center.
3. Contact the IRS Whistleblower Office: If the fraudulent activity involves significant tax fraud, you can provide information to the Whistleblower Office for potential monetary awards.
4. Notify the Federal Trade Commission (FTC): For cases involving identity theft, file a complaint with the FTC and monitor your credit for unauthorized activity.

By taking these steps, you not only protect yourself but also help prevent others from becoming victims.

Protect Your Finances, Your Identity and Yourself From Audits

Staying vigilant and informed is key to navigating tax season safely. Here are some final tips to protect yourself from scams and fraud:

1. File Early: Filing your tax return as early as possible reduces the opportunity for fraudsters to use your Social Security number to submit fake returns.
2. Use Secure Filing Methods: Opt for reputable e-filing software or work with a qualified tax preparer to ensure your return is handled securely.
3. Monitor Your Financial Accounts: Regularly review your credit reports and bank statements for any signs of unauthorized activity.
4. Educate Yourself: Familiarize yourself with common scams, including phishing, spoofed calls and ghost preparers, to recognize red flags quickly.

At Ideal Credit Union, we’re committed to your financial health. Whether it’s through fraud prevention tips or personalized financial solutions, we’re here to support you every step of the way. Let us help you build a secure financial future and your Ideal life!