In an earlier post I discussed the various types of paid tax professionals and at the end I mentioned that, at an absolute minimum, your preparer needs to hold a valid preparer tax identification number (or PTIN). Ghost preparers are paid preparers who do not hold PTINs. They are often (but not always) small, independent, tax season only preparers using software meant for personal preparation (such as TurboTax) to illegally prepare returns for other individuals for pay.
Update (February 8, 2019): Read what the IRS has to say about ghost preparers here.
The main difference between a true ghost preparer and, let’s say, your aunt who files your return using her copy of TurboTax and you slip her $50 bucks for her help is that ghost preparers hold themselves out as actual tax professionals, often to family and friends, but often to others as well.
The problem with ghost preparers (and for that matter your aunt) is that they have absolutely no accountability to the IRS or to you, the taxpayer, for their work. They do not have to comply (or even pay attention to) safeguarding your personal information from disclosure or theft. They do not have to abide by any ethics rules. And they do not have to help you (often they are not allowed to help you) if you receive a notice from the IRS for an audit or any other issue that pertains to your tax return. Their responsibility ends once your return is filed whether correctly or incorrectly or, worse still, fraudulently.
So how do you avoid using a ghost preparer to prepare your income tax return? Before you give the preparer any information make sure s/he has a PTIN. If the preparer doesn’t know what you’re talking about run, don’t walk, to another preparer. The IRS Return Preparer Office has a searchable directory that you can use to determine if your preparer has a PTIN but it does not include those who do not have not obtained any professional credentials or qualifications. If you’re still unsure, check out this article by The TaxGirl (Kelly Phillips Erb).
Think you’ve seen a ghost preparer? The easiest way to tell is to look at the signature area of your tax return. Under the signature block there is an area that says “Paid Preparer Use Only”. That block should have your preparer’s name and contact information. Older returns may have the preparer’s PTIN; newer returns often have the PTIN masked. If it says “self prepared” your preparer is a ghost preparer. Remember, if your return preparer used your return to commit fraud his or her name isn’t anywhere on the return. You effectively own that fraud.
So please, be careful when choosing a #taxpro. Of all the options available you should be able to find one who both meets your needs with respect to the level of complexity of your return and your price requirements. Remember you are entrusting this individual with your identity and most if not all of the details of your financial life (and many of the details of your personal life). It’s too important a decision to make quickly or based on price alone.