The Importance of a Qualified Tax Professional as the IRS Warns of Ghost Preparers
With tax season approaching, many taxpayers are looking to use the services of a tax preparer. The most common professional to provide this service is a CPA, but there are other professionals such as EAs and CTECs who are licensed and qualified to file tax returns. Even with all these options, sometimes taxpayers may look for more affordable or convenient options.
In our practice, it is not uncommon to see a friend or coworker offer to prepare a tax return for someone for a small fee, with the understanding that they will not (because they can’t) sign the tax return but the taxpayer will sign it themselves. The reason we see these from time to time is because we are tax attorneys and it is also not uncommon for these situations to not work out well. The IRS has labeled these people that prepare returns they do not sign as “ghost” preparers. Even if this ghost preparer has good intentions, at the end of the day you cannot be sure of their qualifications and if anything goes wrong you are the filer of the tax return. You will not be able to say you relied on a professional or took precautions to make sure the return was done correctly. This is a major factor if you are penalized and try to dispute the penalties. To be licensed and able to sign the return, they must have a preparer tax identification number (PTIN). You can verify if someone is licensed to file returns on the IRS website, but if they aren’t willing to sign the return that should be a red flag. Another red flag is if the ghost preparer offers to prepare the return for free as a favor, which can sometimes mean they have other bad intentions. However, it doesn’t end with hiring someone who is willing and able to sign the return.
For some taxpayers, a basic tax return preparer is sufficient. Possibly even a company such as H&R Block is good enough. This is not for everyone though. Taxpayers with more complex returns should seek an individual qualified to handle their situation. For example, if you have international bank accounts and operations you should hire a tax preparer that has experience in these areas. Frequently, when we defend a taxpayer from penalties or IRS enforcement they will ask why the taxpayer chose that professional. Why did they think they were qualified? What credentials did the preparer offer? Who recommended them? Questions like these are what the IRS will ask; therefore, they should be the same questions taxpayers should be asking themselves when picking someone to prepare their returns.
If it wasn’t obvious before, this warning from the IRS regarding ghost preparers should make it clear that this is not a good situation. Beyond that, taxpayers should choose someone licensed to file returns and that they feel is competent to handle all aspects of their taxes.
To assist in choosing the right tax professional, the IRS has provided the following guidance: Click here