IRS To Remind Taxpayers About Registered Tax Return Preparer Program For Paid Helpers
The IRS wants to inform taxpayers about a phenomenon that should interest anyone in the tax preparation industry. The subject is ghost preparers, which is a term used for people who help with preparation of tax forms without signing the return.
Most ghost preparers are friends or family members that claim to know all about taxes. They provide help for a small fee. No matter how many or few returns are prepared by these individuals, they must register with the IRS. By doing so, they are subjected to tax preparer continuing education requirements starting in 2012.
A total of 15 hours of tax CPE is mandated per year for all tax return preparers. This includes 3 hours of updates to tax laws. In some years, that is barely sufficient to address the large number changes in tax rules. Congress has tinkered extensively in recent years with tax credits and above the line income adjustments. These legal modifications have scheduled expirations or expansions.
The purpose of the registered tax return preparer program is assurance that calculations for various deductions and credits consider eligible expenses, qualified persons, and correct income limitations. Ghost preparers don’t maintain knowledge of updated tax rules. They also lack IRS tax preparer study and haven’t passed a competency exam.
The most egregious cases of ghost preparers are the ones promising larger refunds with bogus deductions and illegal filing for refundable tax credits. These blatant violators of registered tax return preparer ethics have obvious reason for failure to register with the IRS. In most instances, taxpayers are innocent dupes who have assigned their tax refunds to the ghost preparers’ bank accounts after obtaining amounts in advance from the preparation helpers.
An honest tax preparation business should warn consumers about these crooked ghost preparers. The IRS will pursue the taxpayer for any inaccurate tax calculations. Taxpayers owe the excessive refund claims even when the ghost preparers are apprehended and prosecuted. The first clue about an illegal ghost preparer is that they don’t sign the tax returns.
Every professional with an IRS RTRP license must also guard against helping ghost preparers electronically file fraudulent tax returns. These are requests to e-file returns that the ghost preparer claims are relatives, usually living in the same household. The ghost preparer will record tax information on IRS forms and introduce the alleged relatives, who will swear that they did not provide compensation for preparation of the tax papers. In these cases, a tax preparer professional should inquire of the named taxpayers about accuracy of their tax forms. Often, their responses indicate that circumstances don’t exist for claims of suspicious deductions and preferential Head of Household filing status.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.…