As people begin to have their 2025 tax returns prepared, this is a reminder to avoid unethical “ghost” tax return preparers.

A ghost preparer is someone who charges for but doesn't sign tax returns they prepare. Unscrupulous ghost preparers often print the return and have the taxpayer sign and mail it to the IRS. For e-filed returns, the ghost preparer will prepare the forms but refuse to digitally sign as the paid preparer.

By law, anyone who is paid to prepare or assists in preparing federal tax returns must have a valid Preparer Tax Identification Number (PTIN). Paid preparers must sign and include their PTIN on the return. If a preparer does not sign a return that should be a big red flag that the preparer may be looking to make a quick profit by promising a big refund or charging fees based on the size of the refund. Ghost tax return preparers usually require payment in cash to avoid paying taxes on the income and from being traced.

How do ghost preparers attract clients? They often fabricate tax deductions and tax creditsto generate unusually large refunds, and then their clients spread the word, attracting others. Here are some of the fabricated tax benefits they use to inflate refunds.

• They invent business income or adjust expenses to maximize the lucrative earned income tax credit (EITC).
• Claim fake charitable deductions to boost the size of the refund.
• Claim off-road fuel credits.
• To hide their fraudulent behavior, they’ll:
  
  o   File a tax return without letting the taxpayer review it.
  
  o   File a tax return without getting the taxpayer’s signature or consent.
• Invent income to qualify their clients for tax credits.
• Claim fraudulent home energy credits.
• Claim fraudulent education credits.
• Claim fake deductions to boost the size of the refund.
• Direct refunds into their bank account, not the taxpayer's account.

The list goes on, and then the preparer vanishes, leaving you holding the bag when the IRS comes knocking. Who are you going to call then? OK, the IRS won’t literally come knocking on your door, but you can count on receiving a return correction notice and bill from them. Paying back ill-gotten refunds, interest and penalties can empty your pockets for years to come.

In addition, ghost preparers generally don’t take continuing education, are not up to date on current tax law changes, and are not aware of lawful tax-saving strategies. Also, unlike most professional tax preparers, they do not carry errors and omissions insurance.

The One Big Beautiful Bill Act (OBBBA) made an abundant number of changes for 2025 providing substantial new tax benefits that taxpayers will not want to miss out on. Not the year to be using a ghost preparer, a novice or someone who has not kept up with the law changes. You don’t want to miss out on the following changes for 2025:

• Increased Standard Deductions
• Senior Deduction
• No Tax on Tips (actually a limited deduction for tips received, but may be advertised in such a way to make taxpayers think all tips are nontaxable)
• No Tax on Qualified Overtime (there’s a maximum amount of overtime pay that is deductible, not all overtime compensation – watch out for misleading ads)
• Vehicle Loan Interest Deduction (has many requirements and limitations so don’t believe an ad that purports to allow all taxpayers this deduction)
• Refundable Adoption Credit
• Increased Child Tax Credit
• Increased SALT Deduction Limit
• Minimum Qualified Business Income (QBI) Deduction
• Expensing Qualified Production Property
• Increased Section 179 Expensing
• Return of Bonus Depreciation
• Super Retirement Catch Up Contributions
• Prepping For Trump Accounts
• And more…

No matter who prepares your return, you should review it carefully and ask questions about anything that's not clear before signing it. You should verify the routing and bank account number on the completed tax return for any direct deposit refund. Taxpayers should watch out for ghost preparers putting their own bank account information on the returns. Also watch for Form 8888 that directs the IRS to split the refund into multiple bank accounts. These unprincipled folks frequently tell their clients the refund is an amount less than the actual amount and have the difference deposited into their bank account without raising any suspicion.  

Don’t fall victim to a ghost preparer. Trained and trustworthy preparers who sign off on returns are cognizant of the high standards of conduct they are held to and the penalties for a violation of those standards. Ghost preparers don’t know, or don’t care, about such standards, and their unscrupulous actions subject their victims to an array of problems.

Taxpayers can report preparer misconduct to the IRS by using IRS Form 14157, Complaint: Tax Return Preparer. If a taxpayer suspects a preparer filed or changed their tax return without their consent, they should file Form 14157-A, Tax Return Preparer Fraud or Misconduct Affidavit.

For more information or help cleaning up IRS trouble created by a ghost preparer, please contact this office.

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