Ghost preparers take your money to prepare your tax return but never sign it, making them untraceable if things go awry.
Ghost preparers not only take your money upfront for preparing your return, but they may claim unsubstantiated deductions or credits to inflate your refund and then, steal it by directing the money to go into their bank account instead of yours.
“Anytime there’s an opportunity for financial gain, you’ll see the most activity,” said Paul Martini, chief executive of cybersecurity firm iboss. That makes tax season, especially with less than three weeks to the April 15 deadline, ripe for scammers. Here are red flags that your preparer is a fraud and how to avoid the scammers:
◾ Refusing to sign the tax return (legitimate tax preparers must sign the return and include their IRS preparer tax ID number).
◾ Asking people to sign a blank return.
◾ Asking for a cash-only payment without providing a receipt.
◾ Inventing false income to try to get their clients more tax credits.
◾ Claiming fake deductions to boost the size of the refund.
◾ Directing refunds into their bank account, not the taxpayer's account.
Also, be skeptical of every text, email, and advertisement, even ones in your local community center or church, Martini said.
“People have an immediate tendency to trust that information because of the way they received it,” but you shouldn’t, he said. Scammers have ways of adding personal context to make you trust the information.
“Information about you is widely available,” Martini said. Some of that availability is a side effect of all the data breaches that have hit various companies and scammers will use those personal details when they contact you to build credibility, he said.
How can I avoid a ghost preparer?
Don’t respond to any text, email, voice message, or flyer from anyone offering to prepare your taxes, Martini said.
“Once you respond to that, even if you jump on the phone with that individual, you will unknowingly provide more personal information to that person who will use it to double down on building your confidence,” he said. “Do not even validate with answering certain questions. Don’t use a text message number. It’s easy to spoof a caller ID or anything in a flyer.”
He even warns you not to take recommendations from people you know because some unsavory preparers may do a few small, easy returns to build your faith in them. Avoid anyone who doesn’t have a business address or telephone number and only operates virtually.
Instead, research any tax preparer you’re considering. Here are some things to know:
◾ Look up the tax preparer in the IRS database or search to find a legitimate one in your area. Tax professionals are required to have an IRS Preparer Tax Identification Number (PTIN) to prepare federal tax returns and should be listed. The database is updated regularly and is current as of March 19. It may take up to four weeks after the IRS receives an update for a tax return preparer's information to be added or revised in the directory.
◾ With all tax preparers, even legitimate ones, you should always read the return carefully to ensure the numbers are correct and review them with the preparer before you sign it. You are ultimately responsible for the return, even if they prepare it for you.
Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.