IRS cracks down on “ghost” tax preparers

When tax preparers hide behind the scenes, never signing returns or identifying themselves, they are often referred to as “ghost” preparers. A ghost tax preparer in Augusta, Georgia, was recently sentenced to prison for defrauding the IRS. Here’s a cautionary tale for tax professionals about ethics, compliance and the risks of non-disclosure.

The case against this “ghost” 

Kim Brown, of Richmond County, pleaded guilty to two counts of aiding and assisting in the preparation and filing of false income tax returns. The IRS found that she operated a ghost tax preparation business from her home in Augusta during 2022, preparing returns without disclosing herself as the paid preparer. She manipulated income and deductions, claimed false credits and failed to provide copies of the returns she filed for clients. 

Brown was sentenced to 22 months in prison and ordered to pay $541,912 in restitution. The sentencing underscores that ghost preparer schemes are not victimless crimes. Affected clients and the taxpayer system as a whole all suffer harm as a result.

What makes this a ghost preparer's case

“Ghost” preparers are not preparers who might fail to comply with general regulations. Instead, “ghost” preparers will actively conceal their identity to avoid being linked to their clients’ returns. In Brown’s case:

• She never signed the returns as the preparer.
• She filed returns she never reviewed with clients.
• She inflated deductions and manipulated figures to maximize refunds.
• She charged fees based on a percentage of the refund, versus a per-form fee.

These hallmarks are classic red flags of ghost return preparation, and Brown’s case demonstrates they carry real legal consequences.

Why the IRS puts ghost preparers on its radar

Ghost preparers undermine public confidence in the tax system. They often prey on taxpayers who trust them to prepare accurate returns without oversight. When mistakes or fraud emerge, the IRS must trace liability, absorb audit and correction costs, and sometimes bear loss of revenue.

IRS Criminal Investigation (IRS-CI) is particularly active in pursuing such cases. In their statement on Brown’s sentencing, they applauded the effort to root out unscrupulous preparers and protect honest taxpayers. 

By prosecuting ghost preparers, the IRS sends the message that identity matters. The law requires paid preparers to disclose their preparer tax identification numbers (PTINs) and sign all tax returns. Failure to do so is not a minor omission; it’s a violation.

How tax professionals can protect themselves

• Always identify yourself. If you prepare or assist in preparing a return, you must sign the return or include your PTIN. Never leave that field blank or hide behind a third party.
• Educate your clients. Some clients may believe it’s “normal” for preparers to remain anonymous. Help them understand their rights. You provided this service, so you need to vouch for it.
• Be cautious with contingency-based fees tied to refunds. Charging a percentage of the refund may incentivize riskier behavior. Courts and the IRS scrutinize these arrangements skeptically, especially when preparers manipulate income or deductions to increase refunds.
• Keep thorough documentation. Maintain work papers, communications with clients, documentation of deductions claimed and details of your tax software outputs. If you ever face an inquiry or audit, you’ll need more than memory to support your work.
• Be on the lookout for red flags. Tax return requests that seem “too good to be true,” clients urging inflated deductions or taxpayers unwilling to review their returns are signals that you must tread cautiously or even refuse the engagement.

Parting thoughts

The Augusta ghost preparer sentence serves as a potent reminder that hiding your identity as a tax preparer is unethical and can lead to serious legal consequences. The IRS has aggressively pursued ghost preparer cases in recent years, making them a priority within its compliance and enforcement departments. Cases like Brown’s remind the profession that ethical practices are not optional; they’re essential to ensure credibility and legal safety. For tax professionals, this reinforces the importance of signing every return, maintaining documentation and rejecting practices that compromise integrity.

This case isn’t just spooky news. It’s a call to uphold the standards that make tax professionals trusted and respected.