IRS Issues Urgent New Warning About "Shady" Tax Return Preparers

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Believe it or not, Tax Day is just a week away, and if you haven't gotten around to filing, you might be looking for some last-ditch options. There's always TurboTax and other online providers, but unless you're familiar with the filing process, you may prefer to consult an expert. However, this is where you need to proceed with caution, according to the Internal Revenue Service (IRS). In an April 5 press release, the agency warned about "shady" tax return preparers who could end up scamming you out of your refund—and even more.

Per the IRS' warning, certain "unscrupulous tax preparers" may encourage you to file false tax returns and also steal your personal information in the process.

"Ghost preparers and other shady return preparers form a real threat every tax season to well-meaning taxpayers," IRS Commissioner Danny Werfel said in the release. "By trying to make a fast buck, these scammers prey on seniors and underserved communities, enticing them with bigger refunds by including bogus tax credit claims or making up income or deductions. But after the tax return is filed, these ghost preparers disappear, leaving the taxpayer to deal with consequences ranging from a stolen refund to follow-up action from the IRS."

Werfel concluded, "We urge people to choose a trusted tax professional that will be around if questions arise later."

The agency notes that this is something they see annually, with preparers charging a large percentage fee of the refund or even stealing victims' return entirely. They may also try to steal taxpayers' identities, leaving them to deal with the consequences in the aftermath.

There are a few warning signs to look out for, including shady service fees. Unreliable preparers will likely ask for a cash-only payment and won't provide a receipt. In addition, they may try to invent a false income for you to secure additional tax credits or claim fake deductions to increase the refund. They may also encourage you to have your refund deposited into their bank account as opposed to your own.

Another giveaway of a shady preparer is if they don't sign the tax return. The IRS notes that paid preparers are required to sign and include their preparer tax identification number (PTIN) on each return they complete. A ghost preparer doesn't sign a complete paper return or a digital form, the agency warns.

"Good preparers ask to see all relevant documents like receipts, records and tax forms. They also ask questions to determine the client's total income, deductions, tax credits and other items," the press release explains. "Taxpayers should never hire a preparer who e-files a tax return using a pay stub instead of a Form W-2. This is also against IRS e-file rules."

This warning is even more important because you, as the filer, are responsible for the information on your return. And because the preparation of tax returns is unregulated, anyone can file a tax return, upping the risk for vulnerable taxpayers to fall for these kinds of schemes.

The IRS provides different resources to help with the filing process, as well as a Directory of Federal Tax Return Preparers with Credentials and Select Qualifications to help you search for and choose a reliable preparer.

If you are a victim of a scam or fraud, the IRS asks that you report the scheme or tax preparer via an online form or through the mail (including any supporting material and documentation).

Best Life offers the most up-to-date financial information from top experts and the latest news and research, but our content is not meant to be a substitute for professional guidance. When it comes to the money you're spending, saving, or investing, always consult your financial advisor directly.

Abby Reinhard Abby Reinhard is a Senior Editor at Best Life, covering daily news and keeping readers up to date on the latest style advice, travel destinations, and Hollywood happenings.Read moreFiled UnderFinancial Advice • News • TaxesSources referenced in this article