It’s critical to be careful when choosing a tax preparer

October 31, 2016 : Annelise Wiens

Don’t let a ghost preparer haunt your tax return

A ghost preparer is someone who charges clients to prepare a tax return but does not have a preparer tax identification number (PTIN) with the IRS. That may not sound menacing enough to send a chill down one’s spine, but a ghost preparer can do more damage than just violate IRS regulations. One sure fire way to tell if you have a ghost preparer is if they include their PTIN along with their electronic signature when e-filing.

“Without a PTIN, ghost preparers can operate with anonymity. And that anonymity provides cover for all kinds of abusive and criminal activity that victimizes taxpayers,” said Jackie Perlman, principal tax research analyst at The Tax Institute at H&R Block.

Kelly Phillips Erb, a tax attorney and reporter with Forbes, describes some of these abusive and criminal activities:

Black market preparers set up shop around tax time, usually as a short time rental in a busy area. … They tout “big and fast” tax refunds to taxpayers…. Fees are advertised as very low to get taxpayers in the door but the costs for other services – like refund loans – quickly add up to thousands of dollars. And since many of these taxpayers can’t afford to pay high fees for returns, the preparers do them one more “service” by tying tax prep and loan fees to the size of the anticipated refunds. The result? Incentive after incentive to cheat.

Then, when the IRS discovers a discrepancy between a tax return and the information documents it has received, or flags an unusual tax benefit, it will send a notice or start an audit.

“The IRS is very good at identifying inconsistencies between what is on a tax return and the information it has from other sources. The IRS systems can send a notice automatically, which means the taxpayer’s return could be changed, resulting in additional tax, penalties and interest,” said Perlman.

And when the IRS comes knocking, the ghost preparer is nowhere to be found. The taxpayer has to take responsibility for any errors or omissions the ghost preparer made, including underpayment and negligence penalties as high as 20 percent. They could even be banned from claiming certain tax credits in the future.

Related story: Six times to call a tax pro after April 15

Taxpayers can protect themselves from ghost preparers and other abusive tax preparers by choosing a tax preparer who:

  • has a PTIN and includes it in the completed tax return,
  • provides a copy for the client’s personal records,
  • guarantees their work,
  • is available year-round and
  • receives ongoing training and education.

The IRS also provides some tips in choosing a tax preparer and keeps a registry of federal tax return preparers with credentials and select qualifications.

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Annelise Wiens

Former Editor and Producer

As the former newsroom editor, Annelise Wiens was interested in more than just tax and industry news, but the stories of H&R Block's 80,000 associates, their communities and H&R Block's world headquarters in Kansas City, Mo. Wiens joined H&R Block in 2014 from a public relations agency, where she worked with clients in the financial services industry. Before that, she worked as a communicator for a senior member of the United States House of Representatives. She graduated from Biola University in La Mirada, CA with a bachelor's degree in history.

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