Don’t let a ghost preparer put a scare into your tax situation

According to an Internal Revenue Service (IRS) news release (IR-2019-09), taxpayers are warned to avoid using the services of tax return preparers who may be unscrupulous, particularly those who may be acting as “ghost” preparers.

The term “ghost preparer” means a person who prepares an income tax return for compensation but does not digitally or physically sign the tax return as a paid preparer. When a person prepares a return for compensation – a paid preparer – he or she is required to either physically or electronically sign the return.

Just take a look at the bottom of your latest Form 1040. It says, “Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct and accurately list all amounts and sources of income I received during the tax year. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge.

According to Title 18 of the US Code, Section 1621, perjury carries a possible term of imprisonment of up to five (5) years – per offense. Five years’ prison time is a powerful motivator for a dishonest person to hide the fact that they actually prepared your return. In this case, they are hiding behind you! See, having you sign the return and send it in without the signature of a paid preparer makes it appear that the return was self-prepared – possibly leaving you to “hold the bag.”

In addition to signing the tax return, a paid preparer is required to provide on the return their Preparer Tax Identification Number (PTIN). For more information on PTIN’s you can see this FAQ on the IRS website. In fact, the IRS takes the PTIN requirement so seriously, that failure to have a current PTIN could result in the imposition of Internal Revenue Code section 6695 penalties, injunction, and/or disciplinary action by the IRS Office of Professional Responsibility.

Section 6011(e)(3) of the Internal Revenue Code (IRC) requires specified tax return preparers to electronically file certain federal income tax returns that they prepare and file for individuals, trusts, or estates after December 31, 2010. A specified tax return preparer is a preparer of covered returns (see below) who reasonably expects to file 11 or more covered returns in a calendar year.

In summary, it is to your great benefit as a taxpayer to very carefully vet and choose wisely the person who is going to prepare your tax return. Most people eagerly await their tax refund and want to get the largest amount possible, but cutting corners is just not worth it. If someone is offering to prepare your tax return and does not want to sign or put their correct identifying information, that is a huge red flag and my advice is to run – not walk – away. If you are looking for a reputable tax professional, you can check out this link to the IRS website. Also, if you have any concerns about the accuracy of a return already filed or have been contacted by the IRS, please contact our firm at jmitchell@cctaxlaw.com (by email) or call 713-333-0555 for an appointment.