Tax Preparer Fraud
Americans lost $12.5 billion to fraud in 2024, according to the FTC.
Quick Answer
Tax preparer fraud occurs when a tax professional intentionally falsifies information on a tax return, steals a client's refund, or uses a client's personal data for identity theft, with individual schemes causing millions in losses.
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How It Works
1
A fraudulent tax preparer, often called a 'ghost preparer,' offers to file taxes for a fee. They attract clients by promising unusually large refunds, often operating out of temporary pop-up offices or through social media advertisements.
2
The preparer falsifies the client's tax return by inventing income to qualify for credits, claiming fake deductions for business or medical expenses, or adding dependents who do not exist. They may ask the taxpayer to sign a blank or incomplete form.
3
The preparer either charges an exorbitant fee based on a percentage of the inflated refund or, in many cases, steals the entire refund by directing it to their own bank account instead of the taxpayer's.
4
The fraudulent preparer often disappears after filing, leaving the taxpayer legally responsible for the fraudulent return. The victim must then pay back the erroneously refunded money to the IRS, plus any penalties and interest that have accrued.
Red Flags
- The preparer refuses to sign the tax return or enter their Preparer Tax Identification Number (PTIN), a key sign of a 'ghost preparer'.
- Their fee is based on a percentage of your refund amount, which incentivizes them to falsify your return for a larger payout.
- They promise a large refund before they have reviewed your financial documents and personal situation.
- They ask you to sign a blank or incomplete tax form, which allows them to add fraudulent information later.
- They require payment only in cash and do not provide a receipt for their services.
- The refund is deposited into the preparer's bank account rather than directly into your own account.
- They do not provide you with a final copy of your tax return for your records.
What to Do If Targeted
- If you haven't received your refund, check its status on the IRS 'Where's My Refund?' tool.
- Immediately contact the IRS if you suspect a preparer has filed a false return on your behalf or altered your return without your consent.
- File an official complaint against the preparer with the IRS using Form 14157, Complaint: Tax Return Preparer.
- Report the fraud to the Treasury Inspector General for Tax Administration (TIGTA) if it involves IRS impersonation or misconduct.
- If your personal information was compromised, file an identity theft report at identitytheft.gov and monitor your credit reports.
- Consult a reputable, credentialed tax professional to amend the fraudulent return and resolve your tax status with the IRS.
How to Report It
- FTC — Report the fraudulent business practices to the Federal Trade Commission.
- FBI IC3 — File a report with the FBI's Internet Crime Complaint Center if the fraud occurred online.
- IRS — Report preparer misconduct and tax fraud schemes directly to the Internal Revenue Service.
- IdentityTheft.gov — Report identity theft resulting from preparer fraud and get a recovery plan.
- FCC — File a complaint about phone scams, robocalls, or unwanted calls with the Federal Communications Commission.
- AARP Fraud Helpline — Call 877-908-3360 for free support from trained fraud specialists. Available to anyone, not just AARP members.
Key Statistics
- In a single 2026 case, two fraudulent tax preparers in Indiana were sentenced to federal prison for a scheme that caused an estimated $10,577,612 tax loss to the IRS. — U.S. Department of Justice, 2026
- The number of individuals sentenced for fraud under the IRS's Return Preparer Program declined by 13% between Fiscal Year 2019 and Fiscal Year 2023. — Treasury Inspector General for Tax Administration (TIGTA), 2025
- A 'ghost' tax preparer in Georgia was sentenced to prison and ordered to pay $541,912 in restitution for filing false returns and manipulating income and deductions. — National Association of Tax Professionals (NATP), 2025
- About 60% of unique Preparer Tax Identification Numbers (PTINs) belong to non-credentialed return preparers, who are not subject to competency requirements or ethical standards. — National Taxpayer Advocate, 2024
- The IRS Criminal Investigation (CI) unit's Return Preparer program area was one of its top three priorities in FY 2023, representing a significant portion of its initiated cases. — Treasury Inspector General for Tax Administration (TIGTA), 2025
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Frequently Asked Questions
A 'ghost' preparer is someone who prepares a tax return for a fee but does not sign it or include their required Preparer Tax Identification Number (PTIN). This is illegal for paid preparers and is a common tactic used to commit fraud, as it makes them difficult for the IRS to trace, leaving the taxpayer solely responsible for the fraudulent filing.
Yes, the taxpayer is legally responsible for all the information on their tax return, even if it was prepared by someone else. If the IRS discovers fraud, the taxpayer must pay back any improperly refunded amount, plus penalties and interest. This is why it is critical to review your return carefully before signing and to choose a reputable preparer.
The IRS provides a public directory of federal tax return preparers with credentials and select qualifications. You should always verify that your preparer has a valid Preparer Tax Identification Number (PTIN). Avoid preparers who make unrealistic promises or exhibit other red flags, and instead choose credentialed professionals like Certified Public Accountants (CPAs) or Enrolled Agents.
Fraudulent tax preparers face severe consequences, including civil penalties, loss of their ability to prepare returns, and criminal prosecution. Depending on the crime, they can face years in federal prison and be ordered to pay hundreds of thousands or even millions of dollars in restitution to the IRS. For example, in one 2026 case, two preparers were ordered to pay over $15 million in restitution for a scheme that caused a tax loss of over $10.5 million. (U.S. Department of Justice, 2026)
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