SACRAMENTO, California – There is a problem that continues to obsess those responsible for monitoring compliance with federal and state laws every fiscal season: ghost tax advisors. These are people sheltered behind the facade of an accounting office that receive countless taxpayers and disappear just after the deadline for filing returns.
“Without a doubt, these people know how to disappear, but they usually leave a trail. We still have victims who can report them,” said Susie DiMaggio, president of the California Tax Education Council (CTEC), a non-profit organization that works by state mandate and is responsible for administering the registry of 40,000 tax advisors without a license.
“It’s an issue that even the IRS struggles to keep under control,” DiMaggio added.
Here we explain how phantom advisors operate: they print tax returns for their clients, ask them to sign and send them by mail. Many taxpayers do not realize that the tax refund does not include the advisor’s signature. In the case of electronically filled out forms, the name of the advisor does not appear either. These returns are presented to the authorities as “prepared by the taxpayer themselves”.
“They should not do that. The legend elaborated by the taxpayer himself indicates that only the taxpayer prepared their return. The law requires paid advisors to sign their clients’ forms,” said DiMaggio.
Other common forms of fraud consist of …
- Paste a commercial label on the tax return instead of signing it and writing your name. Customers receive the copy with the “tag”, which appears to have been signed; however, a blank copy without any commercial label is presented to the authorities.
- Advisors who say “they have forgotten” to sign the return and promise to sign it once payment has been received.
“The other big problem is that these returns are usually full of false deductions and balances in favor. Taxpayers may well feel that the money paid to the advisor was worth it because it seems that they will receive a large tax refund, but they end up spending more in audits, penalties and higher taxes, “said Esperanza Escobedo, a tax advisor registered in California and a member of the CTEC board.
Taxpayers can file complaints on ctec.org. Anonymous complaints are also received. All complaints go directly to the California Tax Board, which is the compliance monitoring section of the CTEC.
Taxpayers in California should always verify the legal qualifications of tax advisors. State law requires that everyone who charges for preparing tax returns be a lawyer, certified public accountant (CPA), tax advisor registered with the CTEC (CRTP) or registered agent (EA).
The CTEC is a non-profit organization that was founded in 1997 by the California State Legislature for the purpose of protecting taxpayers from fraudulent and incompetent tax advisors.