With Halloween quickly approaching, taxes may be the last thing on your mind. But there’s a scary thing happening as folks gear up for the end of the year and start gathering their tax info.
The issue: unscrupulous tax preparers, known as “ghost preparers,” who file false returns and scam unsuspecting taxpayers.
Recent reports show these ghost tax preparers, including several in the Black community, cheating people out of refunds and exposing them to audits or even potential criminal charges.
Consequently, it’s important to be aware of how ghost preparers operate, and the steps you can take to avoid becoming a victim.
Here’s what you need to know.
What is a Ghost Tax Preparer?
A ghost tax preparer is an individual who does not sign the tax returns they prepare. Instead, they print the words “self-prepared” on a tax return -- making it seem as if you, the taxpayer, completed the return.
A ghost preparer may prepare seemingly accurate tax returns, but they often falsify deductions, credits, or income to increase refunds. Then they illegally grab those refund checks for themselves. Some don’t file the return at all and simply pocket the money you paid for tax prep.
AARP Tax-Aide has IRS-certified experts who offer free tax prep help and more than 4,000 locations nationwide.
You’ve probably seen some of these fly-by-night tax places in the neighborhood. Many set up shop by renting storefronts early in tax season. They often promise unreasonably large refunds -- even if you have little to no documentation -- and they typically require upfront payment for services in cash only.
Unfortunately, they usually don’t even give you a receipt or signed returns, and by the time you notice an issue (such as not getting an expected tax refund), the scammer has vanished.
“Most tax professionals offer excellent advice and can really help people navigate complex tax issues. But we continue to see instances where taxpayers are “ghosted” by unscrupulous tax preparers with bad advice who quickly disappear,” said IRS Commissioner Danny Werfel, in a press release this year warning people about these con artists.
Ghost preparers count on taxpayers being unaware of the details of their own taxes.
They exploit the fact that many filers, especially in lower-income communities, have simple returns that qualify for earned income tax credits and child tax credits. By scamming dozens to hundreds of taxpayers, these predators can steal hundreds of thousands, or even millions, in fraudulent refunds.
In one recent case, a Houston area tax preparer, named Johnathan Perry of X-Pert Taxes, was accused of stealing $4.4 million while preparing more than 4,000 tax returns from 2017 to 2022. In September 2023, a federal court banned Perry from ever preparing federal taxes again.
The Department of Justice has been cracking down in recent years on fraudsters, but many ghost preparers keep going strong, or new ones routinely pop up in every state.