Why It Matters
The Internal Revenue Service (IRS) cannot account for how many ghost tax preparers it has identified, investigated, or addressed because its case-tracking systems are not connected and have limitations, according to Tax Filing: IRS Should Enhance Ghost Preparer Identification and Compliance Efforts in a Comprehensive Preparer Strategy, a report released Oct. 16 by the U.S. Government Accountability Office (GAO).
Courts have ordered individual ghost preparers to pay millions of dollars in restitution to the government, but IRS officials told GAO that the total effect is likely greater because such preparers are difficult to detect, leaving taxpayers responsible for fraudulent returns and vulnerable to stolen refunds and identities.
The Big Picture
Paid tax preparers prepared more than half of all individual income tax returns in fiscal 2025, giving them an enormous effect on the IRS's ability to administer tax laws. Ghost preparers exploit that reach: They are paid preparers who do not comply with requirements to identify themselves on the returns they prepare for others, allowing them to evade accountability for errors, fraud, and refund theft.
The IRS identifies and addresses ghost preparers through data analysis, referrals, taxpayer education, and enforcement actions, including investigations, but those efforts are fragmented across six IRS offices, creating missed opportunities to share information and better address risks. The report found that a comprehensive, coordinated paid preparer strategy could help the IRS better align resources with risks and identify additional needs, but no such strategy exists.
GAO was asked to examine the IRS's efforts to address ghost preparers. The report identifies Sen. Ron Wyden (D-OR), ranking member of the Senate Finance Committee, and Sen. Catherine Cortez Masto (D-NV) as the congressional requesters. GAO reviewed federal court cases, IRS documentation and data, and interviewed IRS and Department of Justice officials and stakeholder groups, including IRS oversight and industry groups.
The IRS maintains some data on identified ghost preparers, but its case-tracking and outcome systems are not connected and have limitations that limit their usefulness. As a result, the agency cannot determine how many ghost preparers it has identified, investigated, or addressed. The IRS also has not developed measurable objectives or performance goals for this work. The report states that defining such goals could help the agency assess whether its efforts are reducing ghost preparer activity and adjust its strategy and resource allocation accordingly.
The Bottom Line
GAO made three recommendations to the IRS, and all three remain open. The IRS agreed with each recommendation and described corrective steps it plans to take or has already started taking, but GAO has not yet confirmed sufficient action to close them.
Recommendation 1 directs the commissioner of internal revenue to review the quality and usefulness of existing data and identify opportunities to enhance data collection, sharing, and analysis to inform ghost preparer efforts; the IRS agreed and described steps it plans to take or has started taking. Recommendation 2 directs the commissioner to incorporate ghost preparer efforts into a comprehensive, coordinated paid preparer strategy and identify the resources needed to implement it; the IRS agreed. Recommendation 3 directs the commissioner to define and document measurable strategic objectives and performance goals for ghost preparer initiatives, including methods and measures to assess the effectiveness of taxpayer outreach; the IRS agreed.
The IRS does not know how many ghost preparers it has identified, investigated, or addressed because its case and outcome tracking systems are not connected and have limitations. GAO's three recommendations include improving the agency's data, establishing a comprehensive preparer strategy, and developing measurable performance goals- remain open. The agency's implementation of those recommendations will determine whether it can better assess the effectiveness of its efforts to protect taxpayers from ghost preparer fraud.
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