Tax Preparer Red Flags and Scams: How to Protect Yourself
Warning signs of ghost preparers, inflated refund schemes and tax-related scams, plus what the IRS says to watch for and how to report a bad preparer.
The biggest red flags are a preparer who will not sign your return, a fee based on your refund, a promise of an unusually large refund, a request to deposit your refund into the preparer's account and a demand for payment by gift card or wire transfer. If you see any of these, walk away. The IRS publishes warnings about these practices each filing season, and you remain responsible for what is on a return even when someone else prepared it.
This guide lists the main red flags, describes common scams, and explains what to do if you think you have been targeted.
Red flags in a preparer
They will not sign
Anyone who is paid to prepare a federal return must sign it and include a PTIN. Unsigned returns are the mark of so-called ghost preparers, who prepare returns but tell the client to sign as self-prepared. The reason is usually that the preparer wants to avoid accountability.
Fees based on your refund
For ordinary original returns, rules for practitioners restrict outcome-based fees. A preparer who quotes a percentage of your refund, or who will "only get paid if you get a refund," deserves scrutiny. A fair professional quotes a price for the work.
Promises of a big refund
No honest professional can promise a refund before reviewing your records. A guarantee can mean they plan to claim credits or deductions you do not qualify for, or invent income or expenses.
Asking you to sign a blank or incomplete return
Never do this. You are responsible for the information on the return you sign.
Refund sent to the preparer's account
Your refund should go to an account in your name. A preparer may offer to use a refund transfer product, where a bank account is used briefly to pay the fee from the refund, and then the rest is sent to you. That is a different arrangement from asking you to let them keep a share of the refund informally. Read the disclosure and ask who owns the account and what the fee is.
Cash only and no receipt
A professional gives a receipt or invoice. Cash-only operations that appear only during the filing season can be hard to find if something goes wrong.
Inflated deductions or credits
Be careful with a preparer who tells you to claim items you did not incur, such as made-up business expenses, fuel credits you did not earn or dependents who do not qualify. The taxpayer is responsible for the claim.
Common scams to know
| Scam | How it works | What to do |
|---|---|---|
| Ghost preparer | Prepares your return but does not sign or share a PTIN | Use only preparers who sign |
| Inflated refund claims | Preparer claims false credits to boost your refund and fee | Review each credit and deduction |
| Phishing emails or texts | Messages pretending to be the IRS ask for personal information or send you to fake sites | Do not click; go to IRS.gov directly |
| Phone calls demanding immediate payment | Threats of arrest or deportation unless you pay by gift card or wire | Hang up; the IRS first contacts by mail |
| Identity theft refunds | Someone files a return using your Social Security number | Report it and use the IRS identity theft process |
| "Employee retention credit" or similar claim mills | Promoters encourage claims that may not be valid and charge a contingent fee | Get a second opinion from a trusted CPA or EA |
| Fake charities or tax-relief companies | Promise to settle tax debts for pennies on the dollar for a large fee | Check IRS options directly; compare with an EA, CPA or attorney |
Keep in mind that the IRS generally begins contact by mail, not by phone call or text, and it does not demand payment by gift card.
Tax-relief and debt-settlement companies
If you owe back taxes, you may see ads for firms that promise to settle your debt for much less. The IRS Offer in Compromise program exists, but acceptance depends on your ability to pay, income, expenses and asset equity, and most people do not qualify. Before paying a firm, get a free eligibility screening on IRS.gov, consult an EA, CPA or tax attorney, and ask for the fee in writing. Be cautious about large upfront fees.
Protecting your identity
- Use strong, unique passwords and multifactor authentication on your IRS Online Account and other financial accounts.
- Consider an Identity Protection PIN from the IRS. Check IRS.gov for current eligibility and instructions.
- File early if you can, since a fraudulent filer can submit a return in your name before you do.
- Do not share documents through unsecured email.
- Shred paper records you no longer need after the retention period.
Check before you hire
Verify the person's PTIN and credentials. Use the IRS preparer directory, state boards of accountancy and state bar sites, and search for complaints with state consumer offices. Our hiring checklist and step-by-step hiring guide cover these checks.
What to do if you suspect a problem
- Stop sending information and do not sign anything new.
- Get copies of everything you gave the preparer and anything they filed.
- Review the return and compare it with your documents. If anything is false, consider an amended return with a qualified professional.
- Report the preparer. The IRS has a form for reporting abusive tax preparers (Form 14157). State boards and attorneys general also take complaints.
- Report identity theft to the IRS, the FTC and your state if your information is misused.
- Contact a professional about correcting the return and managing penalties.
If a return was filed with false information at your direction, you may still be responsible. That is why reviewing the return and asking questions matters.
Frequently asked questions
Does the IRS call people to demand payment?
The IRS generally starts with a letter. Scammers call and threaten arrest or demand gift cards. If you are unsure, hang up and contact the IRS using a number from IRS.gov.
Is a preparer who does not sign always a scammer?
Not always, but you should assume it is a serious red flag. Paid preparers are required to sign and include their PTIN.
Can I be penalized if my preparer lied?
You can be. The IRS holds the taxpayer responsible for the return. Preparers can also face penalties, but that does not erase your responsibility.
Where do I report a scam?
Report tax scams to the IRS and fraud to the FTC. State attorneys general and consumer protection offices also take complaints.
Sources
- Internal Revenue Service — scam alerts, preparer complaint form and identity protection
- Federal Trade Commission — report fraud and identity theft
- Taxpayer Advocate Service — help when you cannot resolve a problem with the IRS
Scam tactics change. Check IRS.gov for current alerts, and seek professional advice about your situation.
