Even though tax season has ended, the risk of tax preparer fraud does not disappear. Many taxpayers only realize there is a problem after their return has already been filed, a refund has been delayed or the Internal Revenue Service (IRS) contacts them about suspicious information. If you lack confidence when it comes to filing your individual or business tax return, it is likely you will seek the assistance of a tax professional. Typically, that is a good idea unless you choose the wrong preparer.
Choose your tax professional wisely or suffer the consequences
You might think that if your selected tax professional makes an error on your taxes, the government will be understanding. You would be wrong. According to the IRS, all taxpayers are ultimately responsible for the accuracy and completeness of their returns. If your preparer makes a mistake, or intentionally files a false return, you may be the one facing penalties, audits or worse.
It is imperative to thoroughly vet your tax preparer to make sure they are legitimate. One particular scam to watch out for involves ghost preparers, who are either actual tax preparers acting unscrupulously to defraud you and the government or outright fraudsters, who are not even actual tax professionals.
Ghost preparers avoid signing the return because they do not want to be held accountable when the IRS discovers false deductions, inflated refunds or other fraudulent claims.
How ghost tax preparers scam innocent taxpayers
A fraudulent tax preparer may pitch their services by making extravagant promises about their services. These include inflating refund estimates and charging you excessive fees for preparing your taxes. They then hand you a supposedly complete tax return to sign and tell you to file it yourself without including their personal signature or Preparer Tax Identification Number (PTIN), which is required of all legitimate tax preparers.
As for that large refund you were promised? It is often achieved by overstating your income and claiming tax credits for which you don’t actually qualify and then keeping the fraudulent, inflated refund for themselves. Additional illegal activities could include swiping your personal and professional financial information, such as bank account numbers, and using them to steal for themselves or to sell to other scammers. Meanwhile, the false or poorly assembled return they created leaves you facing audits and potentially devastating financial penalties.
Signs that a tax preparer might be a fraud
It is incumbent upon you to figure out whether a preparer is a legitimate tax professional or a ghost. Look for the following warning indicators during your initial selection process:
- Is the preparer demanding payment up front or based on their estimate of your refund?
- Are they making grandiose promises of refunds larger than you have ever received before?
- Do they want you to pay them in cash?
- Do they object to your request to e-file and deposit any returns directly into your bank account?
- Are they telling you that they don’t need to see your actual books or receipts?
If you have already retained a tax preparer and the following red flags start waving, cut off the relationship and do not file any return provided:
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Your income has been exaggerated
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The type and amount of tax credits claimed are suspect or outright false
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They have not, and refuse to, sign the tax return after preparation
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They tell you to sign a blank or incomplete tax return
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A bank account has been listed for direct deposit other than your own
Simple steps for vetting a tax preparer
Fortunately, tools are provided by the IRS to help you vet a tax professional. The IRS Directory of Federal Tax Preparers with Credentials and Select Qualifications is an excellent place to start. You can also look up the professional’s credentials and information on their performance history via the Better Business Bureau or your state’s Board of Accountancy.
Finally, never sign a tax return before thoroughly reviewing it yourself or having a trusted financial professional within your company review it. If something doesn’t look right or you don’t understand it, ask the preparer to explain. Double-check that your request for direct deposit has been honored and that the bank routing number and account information are accurate. Look for the preparer’s signature and PTIN on the portion of the return to be filed. If anything is out of order, do not sign the return and report the situation to the IRS.
Victimized by a ghost tax preparer? Call a tax fraud attorney
Even if a dishonest preparer caused the problem, you may still be the one facing IRS penalties, repayment demands, or allegations of fraud. If you are facing the consequences of an unscrupulous tax professional’s actions, we can help. Call Robert J. Fedor, Esq., L.L.C at 440-250-9709 and speak to one of our experienced tax lawyers about what can be done to protect you and your business. We serve clients across the US and internationally from our offices in Cleveland and Chicago.
