10 Red Flags Your Tax Preparer Is a Fraud

Protect your money and identity by choosing your tax professional carefully

Andy Markowitz and Christina Ianzito,

AARP

Comments

En español

Published January 17, 2020

/ Updated November 26, 2024

a wooden mousetrap with a 1040 tax form snapped shut in it

Jarred Briggs

Tax season can be scary enough without the specter of unscrupulous tax preparers.

Shady operators that the Internal Revenue Service (IRS) calls “ghosts” don’t have a legally required Preparer Tax Identification Number (PTIN), unlike more than 630,000 U.S. tax professionals. They also don’t sign the returns they work on, leaving their clients responsible for any filing falsehoods.

It’s more than just a paperwork problem. Ghost preparers set up shop around tax time in pop-up offices and pitch their services at community gathering places such as churches or on social media. They promise big refunds, often basing their fees on a percentage of the refund. To inflate what you get back from Uncle Sam — and what they get from you — they might invent income to falsely claim tax credits or fabricate deductions such as business, education or medical expenses.

Many scammers then disappear with your fee, and, because your name is on the return, it’s your responsibility to fix the “mistakes.” That means that, along with paying the taxes you actually owe, you’re liable for any penalties and interest that accrued while you were in arrears.

Some ghost preparers take the scam a step further, stealing refunds outright by routing them into their own bank accounts. Other perpetrators of tax prep fraud work online, sending phishing emails that appear to be from tax pros, or creating impostor websites that claim to prepare and e-file your return.

Recent tax-prep scams

The latest IRS report on tax-prep scams includes what the agency calls the “dirty dozen” — its “list of 12 scams and schemes that put taxpayers and the tax professional community at risk of losing money, personal information, data and more.” Here are a few versions of those scams:

Scammers offering to help taxpayers set up their IRS online account at IRS.gov. Their goal is to steal personal information, asking for the individual’s Social Security number and other sensitive data, says the IRS, which notes that it’s simple to set up your own account.
Self-described tax professionals promoting large refunds related to the Employee Retention Credit (ERC), a COVID-related tax credit, to people who are actually ineligible. They’ll post ads, the IRS says, that “exist solely to collect the taxpayer’s personally identifiable information in exchange for false promises. The scammers then use the information to conduct identity theft.”

Note that scammers will also pretend to be from the IRS, sending a letter, email or text suggesting you have an unclaimed refund or owe money. In a warning about these impostor scams, the IRS says it “doesn’t initiate contact with taxpayers by email, text messages or social media channels to request personal or financial information.”

When tax filing involves identity theft, the scammers will get your Social Security number and other information, submit a return in your name but without your knowledge, and get the refund delivered to them though their bank. Most often, you won’t discover the fraud until you try to file a return and IRS computers kick it back because a return for you has already been filed. Alternatively, you’ll get an inquiry from the IRS questioning fraudulent deductions.No matter who prepares your return, you are ultimately responsible for its accuracy.

10 red flags that a tax preparer is a fraud

The tax preparer:

Asks for payment in cash
Does not give you a receipt
Charges fees based on a percentage of the refund
Wants the refund deposited into his or her bank account
Marks your return as “self-prepared” or affixes a business label rather than signing the form by name
Refuses to sign the return or enter a Preparer Taxpayer Identification Number (PTIN). The IRS requires both if someone else prepares your return.
Asks you to sign a blank or incomplete tax form
Files the return without allowing you to review it
Promises a big refund without fully reviewing your financial situation
Doesn't provide you with a final copy of your tax return.

How to choose a legitimate tax preparer

The IRS says taxpayers should choose “as carefully as they choose a doctor or lawyer,” considering that they are dealing with sensitive personal and financial information. Some tips for doing so include:

Confirm that your tax preparer has an IRS-issued PTIN for that tax year. The IRS maintains a searchable directory of preparers who hold professional credentials or qualifications.
Do your homework. A PTIN doesn’t signify an IRS endorsement; it merely provides proof that a tax professional has IRS authorization to prepare tax returns. Filers should check with the Better Business Bureau to help research accountants and attorneys for possible complaints.
You can also search the Department of Justice Tax Division’s database of injunctions and criminal prosecutions of tax preparers, as well as an alphabetical list of injunctions the Tax Division has obtained against preparers and promoters in the past 12 years.

Ask lots of questions. Consulting someone who has an accounting degree or a specialty in tax law doesn’t necessarily mean you’ll get the best tax advice. Ask about their background and experience and if their skills match your needs. Other questions to ask: Can they provide references? If you are audited or your return is rejected, will they be there for you?
Determine what and how you’ll be charged. Some tax preparers bill by the hour. Others offer a flat fee, which can vary by the complexity of the return. Beware of those whose compensation is based on the size of your refund, consumer advocates say. An unscrupulous tax preparer could pad your refund by taking extra exemptions or tax credits, overstating charitable contributions and filing for deductions you don’t deserve.
Ensure that you can reach the preparer outside of tax season.
Never open attachments or click on links in emails from tax preparers you don’t know.

What to do once you’ve begun working with a tax preparer

Check that the preparer has signed your return — or e-signed, if filing digitally — and included his or her PTIN.
Carefully review the completed return and ask questions about anything that isn’t clear.
If you intend to get your refund by direct deposit, make sure the return correctly lists your bank’s routing number and your bank account number.
Only sign after reviewing the completed return; never sign if it’s blank or incomplete.
Always get a complete copy of your return and save it for your records.

More resources

Report fraudulent activity or misconduct by a tax preparer to the IRS using Form 14157 (Return Preparer Complaint). You also might need to submit Form 14157-A (Tax Return Preparer Fraud or Misconduct Affidavit). The IRS also suggests filing a report with your local police department naming the tax preparer as a suspect.
Report unsolicited email claiming to be from the IRS or an IRS-related function to phishing@irs.gov.
The IRS website has information on selecting a tax preparer and resources for checking qualifications and credentials, as well as information on the latest tax-related scams.
The AARP Foundation Tax-Aide Program offers tax-prep help via in-person or virtual appointments with trained and IRS-certified volunteers. The program is free of charge and open to all taxpayers.

%{postComment}%

Andy Markowitz is a writer and editor for AARP, covering Social Security and fraud. He is a former editor of The Prague Post and Baltimore City Paper.

Christina Ianzito is a longtime editor and reporter at AARP who covers scams and fraud for aarp.org.

10 Red Flags Your Tax Preparer Is a Fraud