A government audit found that the Internal Revenue Service has gaps in how it identifies and pursues tax preparers operating without a licence — particularly those who omit their signatures from filed returns, a step that can expose clients to fraudulent activity. Locating these preparers after the fact presents a persistent challenge, rooted in the methods they use to operate.
A Government Accountability Office review laid out the tools available to the IRS upon suspecting that a return was filed without a legitimate paid preparer's signature, along with the graduated responses the agency may deploy against those preparers once identified — from financial penalties at the lower end through to the opening of a criminal investigation at the upper end.
The audit found that the agency has room to bolster protections for taxpayers against fraudulent filings and stolen refunds. The report separately flagged paid preparers who omit their identifying information from returns — a tactic that allows them to avoid accountability for errors, fraudulent activity, or refund theft — as a population the agency has difficulty locating, a gap that can leave taxpayers exposed to the consequences.
Steps taken by the IRS have been uneven, with no single coordinated approach yet guiding the work. Pertinent information is distributed across multiple separate databases rather than consolidated in one place.
The audit determined that the agency has not established defined objectives, measurable benchmarks, or an overarching plan for addressing preparers who operate without proper registration — a gap that, according to the report, also hampers the agency's ability to draw on available data when analysing that population's conduct and identifying where taxpayer protections fall short.
Paid preparers who handle returns on behalf of clients are required by law to include their identifying information on those filings; those who omit it are operating outside that obligation. Omitting identifying details from a return is one method used to submit false income tax filings, divert refunds meant for other taxpayers, and obtain personal information without authorisation.
Restitution orders running into the millions have been secured against individual unlicensed preparers, yet the IRS has indicated that the broader revenue impact of this practice likely runs considerably higher — a gap attributed in part to how rarely such preparers come to the attention of investigators.
Data on ghost preparers does exist within IRS records, yet the separate internal systems responsible for logging those cases and recording their eventual outcomes operate in isolation from one another, a structural gap that undermines the practical value of what is collected. No data exists within the IRS on how many ghost preparers have been flagged, investigated, and acted upon.
According to the report, a sharper understanding of what the available data reveals — and where its limits lie — would better position the IRS to direct enforcement resources and guard taxpayers against fraudulent filings and refund theft. The report identified data analysis, taxpayer outreach, referrals, and enforcement measures — including formal investigations — as the toolkit the IRS draws on when tracking down and acting against ghost preparers.
Responsibility for those efforts is divided among six separate offices, leaving gaps in information-sharing and allowing risks to go unaddressed. According to the report, addressing unlicensed preparers as part of a broader, unified plan for tax return oversight would position the IRS to direct its resources toward the areas of greatest risk while identifying where gaps in capacity remain.
According to GAO findings, commercial tax preparers filed more than half of all returns during fiscal year 2025, a share of the workload that the agency indicated carries substantial bearing on how well the IRS can carry out its tax administration responsibilities. No quantifiable targets or benchmarks for performance have been put in place by the IRS.
The report noted that establishing metrics, milestones, and activity benchmarks would provide the IRS with a foundation for assessing how well enforcement efforts are reducing unlicensed preparer activity and for directing resources toward higher-priority areas.
Three areas drew attention in the watchdog body's report, with auditors calling on the IRS to strengthen how it collects, shares, and draws insights from data tied to unlicensed preparer activity, fold that work into a broader and coordinated strategy covering paid preparers generally, and establish concrete targets against which progress can be measured.
The tax agency's response to the oversight body's findings included an outline of planned and already-initiated corrective steps. IRS Commissioner Frank Bisignano stated in a formal reply that ongoing efforts to identify preparers who file returns without disclosing their identity would be strengthened through a broader agency-wide strategy encompassing data integration, governance, risk-based case selection, performance tracking, and coordination across divisions.
Separately, legislation put forward in late September proposed raising the per-incident penalty for paid preparers who omit a valid Preparer Tax Identification Number on a return or refund claim from $65 to $250, and lifting the annual penalty ceiling from $33,000 to $75,000. A fine of $250 would take effect whenever the PTIN in question turns out to belong to someone else, carries no valid record, sits in an inactive or lapsed state, or has been formally withdrawn, suspended, or revoked.
Under the proposed legislation, any compensated tax preparer who deliberately omits or submits a fraudulent PTIN — acting with the purpose of circumventing legal obligations — would face criminal liability. Those found in breach of the provision would be subject to a felony charge carrying a prison term of as long as three years, along with monetary penalties reaching $50,000 — a ceiling that doubles to $100,000 when the offending party is a corporation.
