A Wolf in Tax Preparer’s Clothing:  Never Sign an Unsigned Tax Return

Rick Miller, CPA

Nashville, TN, and Midland, MI

A sense of dread hung in the air as a couple sat across from my desk, their tax returns spread between us. “Something just feels wrong,” the wife said, her voice tight with anxiety. “Our tax preparer… I don’t think he did this right.”

It took only a glance at the first page of their business return to see she was right. Staring back at me was a blatantly fraudulent loss, an impossible figure more than ten times the company’s annual revenue. It was a ticking time bomb waiting to detonate in an IRS audit.

But as shocking as that was, the real tell—the clue that exposed the preparer’s malicious intent—was hidden in plain sight. At the bottom of the return, in the section clearly marked “Paid Preparer Use Only,” the signature line was empty. The firm’s name simply read: “Self-Prepared.”

They had been conned. They paid a professional, but the return was designed to look like they did it themselves, leaving them solely responsible for the fraud embedded within. They were victims of a ghost preparer.

The Vanishing Act of the “Ghost Preparer”

You place immense trust in the person who prepares your taxes, handing over your most sensitive financial data. But what if that person is a phantom, intentionally setting you up for financial disaster while they collect their fee and vanish?

This is the danger of the ghost preparer.

The IRS has an ironclad rule: any person paid to prepare a tax return mustsign it and include their Preparer Tax Identification Number (PTIN). This signature isn’t a formality; it’s a legal chain of accountability. It tells the IRS, “I prepared this return, and I stand behind its contents.”

A preparer who refuses to sign is committing a cowardly, calculated act. They are intentionally making themselves invisible to the IRS, severing the chain of accountability and leaving you to face the consequences alone.

How They Trap You

Why would a preparer do this? The motive is almost always greed, fueled by fraud. These predators lure in taxpayers with promises of massive, unbelievable refunds. They achieve this by:

• Inventing Phantom Deductions: They will claim you gave thousands to charity or had massive business expenses you never incurred.
• Claiming Credits You Don’t Deserve: They will wrongfully claim lucrative credits, like the Earned Income Tax Credit, knowing you don’t qualify.
• Hiding or Shifting Income: They manipulate your income figures to create a false financial picture that benefits them.

The most sinister ghost preparers take it a step further. In the case of the couple in my office, their preparer had not only fabricated a loss but had also set up the tax filing to route the fraudulent refund directly into his own bank account. They were not only being set up for an audit but were also being robbed.

The Weapon of Choice: Consumer Software

Another disturbing tactic is the use of consumer-grade tax software. A legitimate professional uses specialized software built for preparers, which allows them to properly sign and document their work.

Ghost preparers use off-the-shelf software like TurboTax or H&R Block’s consumer versions. This software is licensed for individuals preparing their own returns and often makes it physically impossible for a paid preparer to affix their required signature.

This is a deliberate choice. By using this software, they can print the return and have you sign it—with the preparer section ominously blank. This act of deception isn’t just lazy; it’s a strategy to place all legal and financial liability squarely on your shoulders.

The Nightmare Awaiting the Victim

When the IRS’s powerful analytics flag your return, the fallout can be catastrophic. “I didn’t know” is not a defense the IRS will accept. You are legally responsible for every number on the return you sign. The consequences include:

• A Bill for a Phantom Refund: You will be forced to repay the entire fraudulent refund, often a sum you never even saw.
• Crippling Penalties and Interest: The IRS will tack on substantial penalties and daily compounding interest, turning a manageable problem into a mountain of debt.
• Years of Audits: A fraudulent return can trigger invasive audits of not just the current year, but previous years as well, creating a multi-year nightmare.
• Criminal Investigation: In severe cases, what starts as a financial issue can escalate into a criminal investigation, threatening your freedom.

Charles R Frazier, an expert tax specialist with offices in Nashville, Tenn., Midland, Mich. and Prosper, Texas explains it as “The taxpayer is trying to find legal ways to save on their taxes while the devil in this case is someone who is close, trusted and has been paid to perform a service.  This taxpayer would have been liable for potentially thousands, perhaps over a million dollars of tax repayments, penalties and interest while providing a pathway for the fraud perpetrator to get away.  I’m glad they called Frazier Law for help as soon as they knew something wasn’t right.

Your Shield Against Deception

You are not powerless. Protecting yourself from these predators is about vigilance.

• Demand a Signature: Never, ever sign a return if the “Paid Preparer” section is blank. This is non-negotiable. The preparer must sign and include their PTIN.
• Verify Their Credentials: Ask for their PTIN upfront and use the free IRS online directory to confirm they are a legitimate, credentialed preparer.
• Question Their Tools: Ask what software they use. If it’s a consumer product you could buy at a retail store, that is a massive red flag.
• Reject Cash-Only Deals: Ghost preparers often work in cash to avoid leaving a paper trail. Insist on a receipt or invoice that documents your payment.
• Trust Your Gut: If a preparer promises you a refund that sounds too good to be true, it is. Walk away immediately.

Thankfully, the couple in my office discovered the fraud before signing and filing. They avoided a devastating financial blow, losing only the exorbitant fee the ghost preparer charged them. Many are not so lucky.

Your tax return is a legal document signed under penalty of perjury. Your financial future is on that signature line. Make sure your preparer’s is there first.

PRACTICE NOTE:  The preparer’s signature may be printed by the tax professional’s software.  The key here is that his or her name is clearly printed with all of their identifying information.  An actual signature is preferred, but may be represented by their printed name.