It is a problem that happens every tax season. Ghost tax preparers. Who are they? They charge a fee to do your taxes, but never sign your tax return.
So what can happen if a tax preparer doesn't sign? Well, how about owing thirteen thousand in fraudulent taxes? Or paying back your refund. With interest.
Unfortunately, it happens. And by the way, not signing is also against the law.
Brandon Chanley, Chair of the California Tax Education Council (CTEC), chats with Esperanza Escobedo, a tax professional who has a true story to tell about a victim that encountered a 'ghost'. Joining her is Rebecca Landeros, part of the Franchise Tax Board Tax Preparer Enforcement Team, with insights on what she sees in the field and what to watch out for.
In California, only an attorney, CPA, CTEC registered tax preparer or IRS enrolled agent can do your taxes for a fee. Anyone who is preparing tax returns without one of those four legal designations is breaking state law. And there are thousands doing just that.
To find or verify the legal status of a tax preparer, visit CTEC.org.
Thank you for downloading taxpayer beware . This podcast was created by the California tax education council. A nonprofit organization required by the state of California to basically do one task and that's to protect you against fraud and help you find a legally qualified tax professional. Now here's your host, Brandon Chamblee .Speaker 2:
Welcome to taxpayer the way my name is Brandon Chamblee chair of the California tax education council. We're C tech for short C tech was created by the state to do primarily one task, protect you as the taxpayer against fraudulent tax preparers. Anyone who prepares your tax return for a fee must be their seats pick registered. And if they're not, I must be an attorney, a CPA or an enrolled agent, and that's really the heart of the message we're trying to get out is how to find a legal tax repair and avoid fraud. So the good news is there are plenty of legally qualified tax preparers out there to help you with your taxes. This coming season, bad news is unfortunately fraud still happens and that's especially a big problem that we've been seeing in the industry. And one that we call ghost tax preparers. So what I wanted to do and over the next couple episodes that we have here is talk about ghost tax repairs. So we can inform you guys of, of what a , what a ghost tax preparer is, what they do and what to look out for. Um, and the great news is today I have two excellent guests that are actually going to join us. So this is our first podcast where we've had two guests on at the same time. So I'm pretty excited about that. Um , we have two people joining us today. Uh, the first person that's going to join us is Esperanza Escovedo. Um , Esperanza is a current C tech board members. So she actually works with me on the C tech board currently, and she is a registered tax preparer with Ctech . Um , Esperanza, how long have you been a CRTP in California?Speaker 1:
I have been a CRTP for about 10 years now. Brendan .Speaker 2:
Excellent. Excellent. So she's, she's been registered and can do your taxes and hasn't been for 10 years, so that's awesome. I'm also on the line with us. We have Rebecca Landeros , I Rebecca's from the franchise tax board and she's part of their tax preparer enforcement team , uh , the franchise tax board or what we call them kind of in the industries , FTB , uh, they partner with Ctech to go after illegal tax prepares . In some cases they enforce penalties on them. So , um, you know, for our listeners, Rebecca is the one who actually pays personal visits to these questionable businesses to see if they're in fact legitimate or not. She has a pretty fun job. So Rebecca, I appreciate you joining us today as well.Speaker 1:
Thank you Brandon so much for having me. I appreciate it.Speaker 2:
And how long have you been with FTB? Have been the franchise taxSpeaker 1:
Board. I'm on the C type enforcement team now about eight years.Speaker 2:
Eight years. Excellent. All right . Listener . So as you can hear, we get a CRTP for 10 years and somebody in the enforcement side for eight years. So I think we have some , some pretty good guests here that can talk about these important topics. So again, thanks you for joining us. Thanks both of you for joining us. So what I kind of wanted to talk about, so , um, you know, we're, we're really focusing on ghost prepares on this episode, but we'll, you know, we'll, we'll talk, we'll bring in Rebecca to talk about some other things from the enforcement side of the FTB as well. Um, but you know, speaking on the ghost preparer side, so they're turning into a real problem and, and, you know, it's, I kind of made the joke that they're a ghost because they're gone, but that is legitimately what's happening. And the differences , you know, they , they never sign that client's tax return. That's why we call them ghosts. You know , we don't know who they are. We don't know who did the return and it always makes you wonder, well, why are they not signing it? You know, are they trying to hide something? Is there maybe fraud that they're trying to commit? It's a scary talk topic. You know, the , the fortunate part though, however, is we have tons of legitimate tax repairs in the state of California, where even if you've had one of these ghost preparer type scenarios , um, the , you know, the legitimate tax repairs we have in the state can actually help you out and they can take a look at the return and try to work with you on it and maybe try to get to a good resolution, sometimes a good resolution sometimes not. Um, but that really brings us to our first, first guest here. So Esperanza Esperanza actually has a story she wants to share with us about this ghost ghost tax repairer situation. So Esperanza, do you want to share?Speaker 1:
Yes, of course, Brandon , that unfortunately I do have a story. Um, I probably have had a couple in the past few years, but this is the one that , um, really impacted me the most , um, because the taxpayers were really affected not only in their , with IRS and they're in , they ended up owing , they're going to end up pulling a lot of money back to the IRS, but also with their immigration paperwork. So , um, it they're really, they really were hurt by , um, a fraudulent tax preparer who misinformed them and , um , did their paperwork incorrectly for them. So that's, that's , um , that's pretty devastating. And unfortunately there's a lot of ghost preparers out there that do this and we need, that's our job to inform everybody about, you know, how to avoid this so that it doesn't happen to them.Speaker 2:
So how so if you could kind of, how, how did this all start? Like w what happened? How did they, how did they come to you or how did they reach out to you? Or how did you even find out about it?Speaker 1:
Yeah, so it was during tax season last year and sorry, last tax season, and this lady, she, she walks in into my office and , um , she had an appointment. She had called me. She said she needed to do , um, amendments for three years of tax returns. And that it was, it had been requested by, by her immigration attorney that she amended these tax returns. So I had her come in and , um, she brought three years worth of tax return for her. And three years of tax returns for her husband that she said, this, these are mine, these are my husband's . So I looked at him and I asked her, but are you and your husband, are you guys legally married? And she said, yes, we are. Um, and I said, okay, well, that's odd. Why do you guys file your tax return separately? Hers were filed as a single taxpayer and his were filed as head of household with their children.Speaker 2:
So did that, sorry, just to, so did this , um, instantly when you saw that, did that kind of put your flags up of hold on, what's going on here?Speaker 1:
Yeah. So that's , that's why I asked her , uh , right away. I asked her why, why do you guys file separately? So then that's what she told me. And I looked at the paperwork and I said, well, do you know that you're supposed to be filing married , um, as married, filing joint with your children, you know, all your whole family together, why do you do it like this? And she said, Oh, well, the lady who does my taxes, she says, we should do it separately so that we can get our full credits. So then I looked at it and the first thing I did was go to the signature page where the tax preparer should be signing the tax return. And of course I wasn't surprised there was no signature on those tax returns.Speaker 2:
So is that that's , that's probably a pretty , uh , red flag lights went off, bells started ringing. I'm sure when you say it ,Speaker 1:
Right. That's exactly what happened. And , um, the situation with this family was that , um, they had the reason that the , that the tax preparer that didn't sign the paperwork , um, filed their tax return separately was because , uh, the husband, he had , uh , an ITIN, but he had an , uh , Nitin . And , uh, and I 10 is a number that the IRS gives people who don't have valid social security numbers to use as an ID number to file their tax return. Well , um, this gentleman, he had an a nine 10 issued by the IRS, but it was an old ITIN , um, a long time ago, the would issue items with numbers that were similar to social security numbers. Nowadays they issue items and all the items begin with the number nine. Well, his didn't , it began with the number six, like a regular social security number. So when a tax return is filed with , um, a number that looks like a social security number, they are able, if, if the tax prepare allows it, they're able to claim credits like the earned income credit that they shouldn't really be , um , claiming because they don't have a valid social security number, but the taxpayers didn't know, they thought, Oh, this tax tax preparers trying to help me. So , um, they filed like that for the past three years. He got, he used to clean the kids and get all the earned income tax credit. And the wife would claim single, just, you know , to file her tax return because she also had an item. So then when they went to their immigration attorney, because, you know, they're , they're processing their immigration paper to , you know, to become legal in the United States. Um, their attorney said, well, you guys are legally married, so you need to go to your tax preparer and fix these tax returns and file as married, filing joint. And that's when she came to me. And the reason she came to me is because she couldn't find the lady who had prepared her tax returns.Speaker 2:
That's , that's what I was just getting ready to ask you. So what I ask is so, the , the ghosts prepare was magically gone, right? That's unfortunate. And I think we, you know, this, this tends to be happening more and more, and that's why we're trying to educate the public and get the word out there as well. But if you're paying someone to do your taxes and they don't sign your tax return, they put self prepared. That is your number one. What am I doing? Who should I ask? And, and kind of speaking on that to Rebecca, I'd like to kinda ask you as well from the, you know, the franchise tax board side of this, you know, is that something that you see pretty common that the people are marking it as self prepared or not signing it all?Speaker 3:
Yes. Unfortunately we are seeing it. Um, and it's, it's something that we hope to be able to give taxpayers the confidence to ask the important questions, hopefully able for them to avoid what's happening in, in with this couple that , uh, Esperanza speaking about. Hm .Speaker 2:
Okay . So, I mean, there are, there are ways to fix it and at least to report it and to bring it to people's attention. Um, so Esperanza kind of going back to the, you know, kind of wrapping this story a little bit, you know, we're, you know , w what's kind of your common process. If you, if you have this scenario, what do you , what do you instantly do? Is it, you know, you jump in and try to fix the return. What's kind of the process. So in case somebody is listening and they say, Oh man, I got a letter from the IRS that says, I may have an issue. I look at my return. Holy cow, nobody signed it. I can't find the person that did my return. I should reach out and find a real tax payer . What are kind of the next step ? So what did you, what did you try to do to help them ?Speaker 1:
Well , uh , everything can be fixed in, in taxes. Everything is fixable. Um, almost everything in this case , um, fixing the tax returns incurred a large , um, debt that she needed to pay back to, to the IRS. So about, I'm going to say about $13,000 that after, after amending these tax returns, that's how much they would owe back to the IRS. But if this happens to somebody in , in you realize that your tax return hasn't been signed, the first thing you need to do is find a Ctech , registered tax preparer , and go make an appointment, go see them. And , um, they will, they can help you fix , um ,Speaker 2:
And they can do that right on the C tech, right on the C tech website. So C T E c.org. You can actually find a registered tax preparer directly on there. Yeah, I think it's good for everybody to keep that in mind and check. And if you want to check up on who did your return last year, you can go and put in their information in there, make sure they are Ctech registered as well. And that's for you. We're trying to, again, you know , protect the tax payer. Um, so yeah, that's, that's an important part. So yeah, $13,000. That's prawns a while . That's yeah . Ju just think if , if the client would have possibly went to a , a registered tax preparer from the beginning, paid them a fee, made sure they were registered, could have avoided all these issues. Right.Speaker 3:
Right. If I could also mention as well that on that same website, they can also report that tax prepare . Um, all the reports go directly to us at the franchise tax board. We take those complaints very seriously. We pursued them if possible everything is confidential. I know that there's a lot of concern about what happens. If someone finds out that I reported the person will know disclosure agreements, we can't disclose anything. So everything's confidential. We won't tell you what, if anything, we're able to do to the prepare. And we won't tell them who reported them at all. So it's C tech website websites , tech.org is important. Not only to find a good tax prepare, but also report those that aren't preparing the taxes correctly.Speaker 2:
That's a , that's a great, great call there back . I appreciate that. Yeah . Like , like Rebecca said, it's, you know, you can go there and you can report it. Um, and speaking of that, Rebecca, if you don't mind , um, you know, from the franchise tax board, I know that, you know, you go out and do some visits, maybe to some possibly questionable prepares that you receive some tips on or, or things you do. Do you want to share kind of any experiences and things that you've seen kind of in the field , um, around that or what you've, what you've heard and tips you can give our audience?Speaker 3:
Well, when we visit a tax repair, oftentimes what we're finding is individuals who , um, indicated or indicate to us that they didn't know anything about SciTech . Uh , didn't know the laws of California, that they had to be registered to have a credential. Um, so our job really is to go in and educate the tax prepare community. We don't want to go in and , um, police everyone and scare anyone. Our ultimate goal is to make sure that they understand the laws, that they complete their education and they register with Ctech , or they renew their other licenses. If they have another license, however, if they don't comply and we give them lots of time to comply, but if they don't comply, then there are penalties that we're able to issue. And , uh, the penalties are, are very stiff. And a lot of times , um , individuals get upset that the penalties are issued, but , um, it's important for the taxpayer community in California, that we do this and , and get these prepares , uh, educated and credentialed. And then also find the preparers who are not credentialed , uh , and doing these things to individuals like the ones in Esperanza story. And this is all to protect primarily the taxpayer that's , that's, who's being protected with, with enforcement of , um, Ctech and FTB .Speaker 2:
For sure. Yeah. And , and just kind of for our audience too, I mean, some of you may be new to hearing the word SciTech and what Ctech means. So , um , for somebody to be Ctech registered, so a RTP . So for example, like Esperanza, she's a CRTP. She had to take a 60 hour qualifying education course that was approved by Ctech , by a provider. So Esperanza had to take that course passed . That course , um, showed that she was capable of doing tax returns and doing them accurately. And then every year on top of that, every year, Esperanza asked to get 20 hours of continuing education every single year to keep her up to speed on tax law changes , um, ethics, state regulate, you know, state taxes, things of that nature too, but, you know , so, so for our audience as well , uh , you know, it's probably safe to say that ghost prepare an Esperanza scenario. There's a good chance that they may not have done all of these things to be as up to speed and , and help you as a consumer. So , uh , very, very important to stay up on to that. Right, right. EsperanzaSpeaker 1:
Yes. Yes. That's very important. And not only the 20 hours, I don't only take 20 hours a year. I take extra classes, extra hours that I complete throughout the year, just to , to, like you said, to be up to speed. And every year there's changes in tax law that we need to learn and be updated with in order to be able to serve the taxpayers.Speaker 2:
That's a great point.Speaker 3:
That's a great point of Speranza . Cause I do hear from some preparers who say, well, I've been in the industry for, you know, many, many years. Why do I need any more education? Well, as we all know, tax law changes all the time and there's new things that are allowed and things that are no longer allowed. And if you don't take the education, you're not aware of those changes. And therefore you're not going to be able to provide the best quality of work to the taxpayer . Exactly.Speaker 2:
I'm Rebecca. I had one other, one other question that I kind of wanted to ask you and talk about too , and just kind of goes back to where people Mark as self prepared, or maybe they don't, they don't , um, you know, write their name. And is there other things you've seen on tax returns that they've done that it's kind of a red flag for people to look at?Speaker 3:
Yes. If , um, you see on your tax return that they've put a label, you know, like sometimes when you're mailing out letters, you put your return address as a label. Well, we've seen , um, ink on copies of the taxpayers , uh , tax return, where on their return, they have a business label, it has the person's name and address. However, the tax return we get in the office has nothing it's blank or it's been marked self prepared. Um, that's not okay. So if you see a label, you make sure you tell that prepare, wait, I want to see a copy of what is actually being submitted to the IRS and to the franchise tax board.Speaker 2:
Good tip. Good tip. Because you have, but at the end of the day, you and your tax prepare are presenting something to the IRS. So you guys are presenting that tax return to the IRS. And you know , it has to be a process where you trust the person that's doing it and there you're paying them a fee. They need to be registered and , and be able to sign that and show that , that they were the ones that prepared the return.Speaker 3:
Exactly. And like Esperanza said, things can be fixed, but unfortunately, sometimes the way to fix it is by you ending up having to pay all your refund back plus fees and penalties, finding another prepare to fix the return, paying more money because you're legally responsible for all the information on the tax return, right? Wrong, or even fraudulent, that's your tax return. You signed it, you said everything on there was correct. So for in first, you know, our enforcement team, we can go out and we can pursue these questionable tax repairs, but at the end of the day, it's your responsibility. And any damage done to the tax return is your responsibility to fix. Um , and that can be very pricey.Speaker 2:
Sure can . Sure can. And even, you know, like we said, the fee that you're paying somebody, make sure you're paying somebody that's qualified to do it. And especially if they're, you know, a C CRTP, a CPA and EA, I mean, they, they are credentialed to be able to do this and they have the , the ability to do return accurately and to the best that they possibly can. So that's a great tip. Great tip a takeaway, something I found interesting too , Rebecca, and you mentioned that talking about labels. So at SciTech , we do, you know, we survey taxpayers quite a bit , um, uh, for different reasons to , to try to find out where's the best place to kind of advertise in the state of, you know, potential issues in those areas where to focus, to make sure people are looking at making sure their , their preparers are registered. But a couple years ago we did a survey of about 500 tax payers in the Los Angeles market. And basically we were just wanting to find a, Hey, did you see our advertisements? Um, do you know who C tech is? That sort of thing? What was interesting is about 10% of the respondents. So the people that responded to the survey , uh , they said in there that their preparer had put a business label on the tax return. So, you know, it wasn't even a question we were asking wasn't even something comes up. So, you know , it was interesting in finding out those 500 surveys, about 10% of them said that, Hey, my preparer just put a business label on the name part. So like Rebecca said, it's out there. Uh , so be aware, you know, as we, as we name this thing, taxpayer, be aware, this is one of the be aware items for sure. Alright , well that is kind of concluded our time here. So I, I think , uh, think Esperanza, I think Rebecca, thank you guys so much for coming on. I think we shared some, some good info. Um, hope you guys. Absolutely. Yeah. Sorry.Speaker 3:
No, no, no. That's okay. Thank you so much for having me. I hope that this information reaches the tax payer community. Um , I know that even the tax preparer community has been asking for this information to go out because it's important to them to have these tax repairs out of the industry so that they're not getting the taxpayer come in to their office after something bad has happened. They, it, it takes away from their business as well. When they have individuals that say, you know, w we'll promise you a large refund if you come to us and , uh, that's not what they want to see. So it's important for taxpayers ask the important questions, go in there. Don't be to ask for a credential, ask for, you know, what your service fees are , um, make sure they give you a copy of your records, your receipts. Um, and if someone says, you know, we only take cash, we promise you large refunds. They haven't looked at your documents, turn around and walk out. You know, it's, it's all these things that are going to help taxpayers avoid headaches later on. Um, so thank you so much for having me. I hope to see , uh , many more complaints that come in so that we can get these tax repairs out of the industry. And , uh, thanks again for having me appreciate it.Speaker 2:
You bet, you know , let's, let's make sure everybody's doing it the legit way. Right. It helps everybody and it helps the taxpayer for sure. Excellent. Well, thank both of you. I appreciate your guys' time. Uh , so this has been another episode of taxpayer , but where , um, those of you out there, we have a second installment going up , uh, another ghost tax repairs story that we're going to share. So Fernando, on hell's going to be with us , uh , on one of our further podcasts. Talk a little bit more about this and as always , uh , go to a C tech.org. So CTE c.org , like Rebecca said, you can, if you have an issue with the preparer or something's going on, report it there, let us know what's going on so we can, we can check it out and find out what the issues are, but I appreciate your guys' time. Thank you for joining. Have a great day.