Tax Filing: IRS Should Enhance Ghost Preparer Identification and Compliance Efforts in a Comprehensive Preparer Strategy

Ghost preparers are paid tax preparers who hide their identities on returns and avoid accountability for making errors, committing fraud, or stealing refunds. But ghost preparers are hard for IRS to identify—leaving taxpayers responsible for errors or fraud.

The IRS has started addressing this problem, but its efforts are fragmented. For example, relevant data is scattered across several databases. This makes it hard for IRS to use this information to better understand ghost preparer behavior and protect taxpayers.

IRS also doesn't have a strategy, goals, or ways to measure the success of its efforts.

Our recommendations address these issues.

A pen points to the paid preparer section of a tax return.

Ghost preparers are paid tax preparers who do not comply with requirements to identify themselves on tax returns they prepare for others. Ghost preparers may intentionally leave identifying information off to get away with filing fraudulent income tax returns, stealing taxpayers’ refunds, and stealing taxpayers’ identities. Courts have ordered individual ghost preparers to pay millions in restitution to the government, but according to Internal Revenue Service (IRS) officials, the total effect of ghost preparers is likely greater, in part, because ghost preparers are difficult to detect.

IRS maintains some data on identified ghost preparers, but the systems IRS uses to track ghost preparer cases and outcomes are not connected and have limitations that impede their usefulness. As a result, IRS does not know how many ghost preparers it has identified, investigated, and addressed. Better understanding existing data, including its limitations, would help IRS direct enforcement resources and protect taxpayers from fraudulent returns or stolen refunds.