Beware of Ghost Tax Preparers: Protecting Yourself from Fraudulent Practices

Tax season is upon us, and while many taxpayers seek professional assistance to navigate the complexities of tax filings, it's crucial to be vigilant about who you trust with your personal and financial information. One significant concern is the rise of ghost tax preparers—individuals who offer tax preparation services but engage in unethical or fraudulent practices. Understanding who these preparers are, recognizing the signs of their deceit, and knowing how to protect yourself can save you from potential financial and legal troubles.

What Are Ghost Tax Preparers?

Ghost tax preparers are individuals who prepare tax returns for a fee but refuse to sign them as paid preparers. By law, all paid tax preparers must sign the returns they prepare and include their Preparer Tax Identification Number (PTIN). Ghost preparers avoid this requirement by leaving the signature field blank, making it appear as though the taxpayer filed the return independently. This tactic not only absolves the preparer of responsibility but also places the burden of any errors or fraud squarely on the taxpayer.

Real-Life Consequences: The Case of Tijan Mboob

While ghost tax preparers often remain anonymous and avoid the limelight, their actions can result in severe consequences for taxpayers and themselves. One notable example is Tijan Mboob, a tax preparer from Charlotte, North Carolina, who was involved in fraudulent tax return preparation and was eventually convicted for his illegal practices.

Mboob's scheme involved preparing false tax returns for clients by inflating refunds, claiming unqualified tax credits, and fabricating income and deductions. For several years, he operated under the radar, offering what appeared to be legitimate tax services to local taxpayers. He would complete the returns without signing them, a common tactic used by ghost preparers to avoid accountability. When the IRS started to investigate, Mboob was found to have submitted dozens of fraudulent returns that resulted in inflated refunds for his clients, many of whom were unaware of the discrepancies.

In 2020, Mboob was sentenced to 24 months in prison and one year of supervised release after pleading guilty to preparing false tax returns. He was also ordered to pay restitution to the IRS for the amount of the fraudulent refunds he had claimed. The case served as a stark reminder of the risks taxpayers face when they unknowingly engage with ghost preparers.

What makes Mboob’s case even more troubling is that some of his clients didn’t even realize they had been duped until they were contacted by the IRS. They found themselves in a difficult situation, dealing with unexpected tax bills, penalties, and the possibility of an audit due to the discrepancies in their returns. Some of Mboob’s clients faced criminal investigations themselves, which is a common consequence for those who are unknowingly involved in tax fraud.

This case highlights a crucial point: when you work with a ghost tax preparer, the consequences can extend far beyond just the immediate financial loss. The IRS holds the taxpayer responsible for any fraudulent activity on their tax return, even if the preparer is the one who committed the fraud. This means that you, as the taxpayer, are at risk of penalties, interest, and even criminal charges if the preparer’s actions are deemed fraudulent.

In this case, the clients who had used Mboob’s services were left to deal with the repercussions. They not only had to pay back the improperly claimed refunds but also face the stress and potential embarrassment of having their financial affairs scrutinized by the IRS. Mboob’s actions tarnished the reputations of his clients, leaving them with long-term consequences that could have been easily avoided with a legitimate, responsible preparer.

Red Flags: How to Identify Ghost Tax Preparers

Being aware of the warning signs can help you avoid falling victim to these fraudulent practices:

1. Refusal to Sign the Return: Legitimate tax preparers are required by law to sign the returns they prepare and include their PTIN. If a preparer refuses to do so, it's a clear indication of potential fraud.

2. Promises of Inflated Refunds Without Reviewing Financials: Be wary of preparers who guarantee large refunds without thoroughly examining your financial records. This is often a tactic to lure in unsuspecting taxpayers.

3. Fees Based on Refund Size: Charging fees based on the size of your refund creates a conflict of interest and is a common practice among ghost preparers. Ethical preparers charge fixed or hourly fees.

4. Direct Deposit to the Preparer's Account: Some fraudulent preparers have refunds deposited into their own accounts before forwarding them to clients or disappearing with the funds.

   
   

Protecting Yourself: Steps to Take

To safeguard your financial well-being:

• Verify Credentials: Ensure your tax preparer has a valid PTIN, which can be verified through the IRS website.

• Review Your Return: Always go over your tax return carefully before signing. Ask questions about any entries you don't understand.

• Demand a Signed Copy: Obtain a copy of your signed tax return for your records. This ensures you have documentation in case of future disputes.

• Be Cautious of Unusual Fees: Avoid preparers who charge fees based on your refund amount or who suggest dubious deductions.

  
  

Reporting Fraudulent Preparers

If you suspect you've fallen victim to a ghost tax preparer:

• Report to the IRS: File a complaint using Form 14157 (Complaint: Tax Return Preparer) and Form 14157-A (Return Preparer Fraud or Misconduct Affidavit). These forms are available on the IRS website.

• Amend Your Return: If you believe your tax return was filed incorrectly, submit Form 1040-X (Amended U.S. Individual Income Tax Return) to correct any errors.

• Monitor Your Tax Account: Keep an eye on your IRS account for any unusual activity or notices. Promptly address any discrepancies.

  
  

Final Thoughts

Engaging with a ghost tax preparer can lead to significant financial loss, legal issues, and prolonged headaches. Always exercise due diligence when selecting a tax professional. Verify their credentials, understand their fee structures, and ensure they adhere to ethical standards. Remember, when it comes to your taxes, it's better to be safe than sorry.

For more information on avoiding tax scams, watch the following video:

Tips to Avoid Tax Scams in 2025 | 'Ghost' Preparers