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.
In fact, we have stories to share and how you can avoid it happening to you. Brandon Chanley, Chair of the California Tax Education Council (CTEC), chats with Fernando Angell, a tax professional with a true story about a victim he helped.
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 Chanley . [inaudible]Speaker 2:
Welcome to taxpayer beware . My name is Brandon Chandley chair of the California tax education council or Ctech 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 Ctech registered. And if they're not, they 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. Today's podcast. Title is the scary truth about ghosts tax repairs. And this is part two on this topic, even though there's thousands of good tax preparers in California, unfortunately fraud still happens. And a good portion of that fraud seems to come from who we call them the industry ghost tax prepares . They set up shop every tax season, do some shady things to get big refunds, and they never signed the tax return, which is required by law. So just like a ghost poop , they do return and then they're gone never to be found again. So when the IRS comes knocking or there's an issue, you can't track them down, you can't find them. So here's the chair. Sit , share with us a true story for episode two, about ghost tax repairs is Fernando and Hill. Fernando is currently a Ctech board member and also he's a Ctech registered tax preparer. You have a story about a couple who came to you for help. Can you tell the audience about that? Great. Well, thank you. Uh, yeah, it was, it happened about a year ago. Uh , I had a new client who experienced a series of tax issues, which later I learned that they were one of, many of the individuals who were taking advantage of this ghost skiing , uh, to protect the identity of the family who , uh, I got the opportunity or had the opportunity to interview for this story. Uh, they were requested to stay anonymous . The name of the client has been changed to the Hernandez family and , um, you know, they they're very small. I mean , they are a married couple who came from Holly's go Mexico. And , uh , they entered in the United States illegally about eight years ago. Uh, the Hernandez family has four children and , um, you know, they , uh , the food children were born in the two of them were born in the United States as many undocumented immigrants. Um, you know, they were told that they needed to, you know , uh,Speaker 3:
Work and obviously they , they were able to through a family member , uh, uh, were provided some social security numbers, our office in the last couple of years, we noticed that, you know, a vast majority of tax returns are filed with iTunes and are filed by undocumented immigrants for many of the families under the situation like the Hernandez family , uh, receive, you know, from, you know, a different word from their friends and family that they must file their tax return because it shows a person is compliant under the federal law and tax laws. Also like many of the non-citizens they're striving for citizenship and they believe it can help them demonstrate good moral character and that they have the opportunity to legalize their immigration status.Speaker 2:
Yeah. So Fernando, yeah . Real quick. So they, I mean, they, they were trying to do what they felt was right, correct . Correct. And they weren't , you know , they were listening to friends and family say , this is what you need to do so that they were starting that process, right?Speaker 3:
Yes, exactly. And so in helping the families like their Hernandez, you know, they're working class constituents who are trying to provide their family and pay their taxes for several of them. Uh , you know, the, the, the tax return is like, you know, a piece of , of gold , uh, you know, the tax return records become a valuable commodity for them. And so the documents develop a work history and a presence in the U S and , um , you know, these are some of the steps that they , uh, you know, help them to be eligible for the legal , uh, legal immigration status in the future if lawmakers pass an immigration reform. So , um, you know , uh , the Hernandez family is one of many clients that we've helped , uh, with , uh, you know, they have experienced similar situations where, you know, they've been convinced about having their taxes completed by a trusted individual who didn't sign the tax return and promise huge refunds for many of the clients are forced to make cash payments only. And then , um, you know, they are , uh, they're not provided , uh , with any , uh, paid receipts. So, you know, it's really hard to understand how many of these are , uh , individuals that are being taken advantage.Speaker 2:
Right. So, I mean, kind of set the stage again for our audience here. So, you know, they, they, they thought they were doing what they needed to do. They were taking the steps that others had said, you need to do this , this , uh, so they trusted in someone to do that because they were paying them a fee. Right. They SunGard on paying them. Um, you , you mentioned it or you've talked about it, but it sounds like they did some bogus deductions or bogus things as well that you guys noticed. Can you kind of elaborate?Speaker 3:
Yeah. So our, our, our , our client works for a small construction company and which, you know, sometimes they get paid cash or they, they get paid through a W2 work with a working social security. And depending on how long they , it takes them to get an ITIN number , uh, you know, it varies within the year. Um , as far as the deductions, you know , uh, what I noticed in the tax returns, it was , uh, you know, several inflations that they did on their income to qualify for certain credits. So , um, you know, the state of income that, you know, as, as they have to report, you know, the income that they're paid cash didn't match the income that was on the actual tax return. And so that was something that , uh , uh , they didn't know, or they weren't told that, you know , their income was inflated for some , for those reasons.Speaker 2:
So, so in saying that, you know, it sounds like these scenarios happen all the time, right. So, you know , they're , they're trying to do the right thing. They're paying someone, that person that's doing the return thinks, Oh, I can just get them all kinds of money back. They're really going to love me, and everything's going to be great. I don't have to sign my name to it. I'm going to wipe my hands clean and move on. So how did, how did the Hernandez family even come to find out that there was something that could be wrong or there was an issue?Speaker 3:
Well, you know, for their tax returns in 2017 and 2018, they started receiving numerous , uh, IRS letters , uh, that, you know, there were some verifications of , of certain deductions that they had made , uh, you know, in , in 2017 , uh, they had added , uh, additional , uh, uh, a schedule C that really didn't make sense for this individual to have, he didn't even have a 10 99 to provide any proof of that income. And in various deductions of, of, since he was into the field of construction , uh, they were , uh, tools and things that were quite , uh, inflated or, you know, increased . So there was a large amounts of deductions in that schedule CSpeaker 2:
Okay. So they, they got a letter from the IRS, which I'm sure is terrifying, right. The letter no one wants to get. So they get the letter, they find out there's potential issues with their tax return. And I assume they begin to panic. Right. And try to try to find the person that had done the return, or what kind of steps did they do there.Speaker 3:
Yeah. W with that, they, they tried to reach out to the , uh, tax repair. Uh, they actually went to the location and unfortunately that location , uh, the tax preparer was no longer there. Um, you know, so , uh , it was very difficult for them to reach out to them. They did reach out to their family member later on to learn that the , the, the tax preparer had moved to another location and they were able to get the new number. Um, our tax client was able to reach out to that tax preparer. And unfortunately the tax preparer , uh, gave them , uh, you know, the comfort that he would take care of it. And he would , uh, work on his tax return and later on , uh, really deflected the, the real issue by taking care of them. So he kept postponing their actual time where they would, they , they would , could come into the office and , and for them to take care of that , uh, issue. Wow. Wow.Speaker 2:
So that know something we, we hear from the Ctech side, from the franchise tax board, who does our enforcement , um, in the state of California, we hear the same similar story, time and time again, right. Just like we said, why are they called ghost prepares ? Because usually, they disappear. So it sounds like the Hernandez rain into that exact same scenario, they get a letter they're scared, they're reached back out to the person person's gone vanished . And now, now what do you do? Right. So, so what's the scenario. So I assume in this scenario, this is where you guys got involved and tried to help them .Speaker 3:
Yeah. When they came to our office , um, you know, we tried to gather as much information about the , the tax preparer that, you know, cause we, we had a lot of questions regarding the tax return. Uh , unfortunately, you know, when you sign that tax return, the tax pay , uh, the payee is the responsible for that tax return. And , um , you know, a lot of the decisions that were made as far as , uh, constructing a tax return, they had no knowledge. Unfortunately they didn't really understand , uh, all the various tax laws and tax credits that they were really , um, uh , it didn't understand if they were really qualified for them. So it was really difficult for them, us, for us and for them to provide any guidance at that time. But , uh, we were able to work , uh, some of the things out with the tax return, we reviewed, it made some of the amendments that were needed. Uh, unfortunately they did end up paying some of those , uh , part of the refunds , uh, and some of the penalties, but, but you know, this is a learning lesson that, you know, it was difficult to understand, especially when , uh, these , uh , ghost prepares are constantly moving and changing locations and, and especially having your number blocked. Uh, that was one of the things that, where it was very surprising to have our client , you know, once , uh , you became more of a pest to the tax preparer to prepare that, you know, they were trying to get their, their, their issue resolved.Speaker 2:
Wow. I mean, so this , you know, this sounds like a, kind of an overwhelming situation I'm sure for , for our listeners here that have never had to deal with this, but , um, you know, what, with that being said, I mean, there's simple things that they can look for, right. I mean, was your prepare , you know, what is your tax return signed by the actual prepare? I mean, that's the number one thing to look for from the beginning. If you're paying somebody, they need to be signing it, it's the law to require it . Um, you know, and , and that's really, that's what we're trying to do in these podcasts is really to educate, you know, to make sure they're making the right decisions. Uh, they're trying to trust a tax prepared , but we need to make sure we're trusting the correct tax preparers and putting our faith in them. So I just assume that's the case that happened here too. Right. They just, I mean, was the return signed by anybody or what did it look like?Speaker 3:
Yeah, there was nothing, no information that was provided on that tax return other than the , uh, you know, our tax client , uh , that has signed it. Um, you know, and as I mentioned , uh , you know, we, we did do a search through the CT tech , uh , website too . And to see if this individual was even registered and there was no record of that person. And, you know, through the experience that we've seen through all the years that we've been doing taxes, you know, that is the number one thing that many of these , uh, individuals that are preparing their taxes , um, you know, need to be registered under C tech , uh, you know, to show some validity that they're , uh , they're doing the right thing.Speaker 2:
Yeah, yeah. And that, you know, that, that's what I w we want to get to our listeners as well. I mean, you know, again, things to look for, remember, they're required by law to sign that tax return. You know, it needs to have their P 10 number on it. So prepare a tax identification number because that's what identifies them with the IRS as well. Um, you know, they have a C tech number that they registered and have as well, but that P 10 needs to be on the tax return, especially if it says self prepared and you're paying someone for it, that's illegal, plain and simple. That's illegal. You know, if you're charging, they're charging you a fee to do your taxes. They're the one that needs to be, be signing that tax return. And, you know, we , we had , uh , an earlier podcast, you can go back and to listen to as well called a tax preparers legal responsibilities to you. It gives you a little more information about this, this topic that we're talking about , um, gives you more. But the thing of it is the sad story, right? And we hear it often, you know, most news stories and ads. We tell people to get recommendations from friends and family. Um , but then something like this happen . So we just want to make sure everybody listening out there knows to take the steps necessary, especially, you know, that's the great thing with the state of California. There are parameters and things that are put in place of who can be doing a tax return for you that is taking a fee from you to do that. So, no, no. The information is out there. See tech.org is a great site for you to check out. So let me kind of switch gears to , um , Fernando real quick. And, and you had mentioned you do, you've been doing taxes in the Los Angeles area for a long time. And I know that, you know , the FTB, a franchise tax board that does our enforcement for C tech and for the state they've, they've said from , from day one that Los Angeles really has been on their radar is as rape it fraud , uh , at fortunately in and goes, prepare as being in that. Uh, so could you kind of talk about that and things you've seen?Speaker 3:
Yeah. You know, like I like the number of ghost preparers stories are , you know , are nothing short of staggering in Los Angeles County. It's the learning that primarily the bulk of the victims are non-IT citizens based on what we've seen in , in, in our preparation of taxes for the last couple of years that we've been doing , uh , more of that increase. But, you know, I think these are just targeted senseless misconduct that is happening in our, in our neighboring cities. And, you know, although there's plenty of advertisement and broadcast messages , uh , to the tax preparer , uh, taxpayers , um, you know, one thing that should be done is reporting the abuse. Um , many of these individuals don't report it, you know? And so I think the numbers could be a lot more than, than what is reported , uh , by the FTB. Um , you know, in addition, you know, often these cases are never , uh, you know, never solved, you know, we have the same tax preparer , uh, going from one city to another and re establishing , uh , their, their, their client base. And some of this is by word of mouth. Uh , you know, when, when you're preparing these tax , uh, these , uh , taxes , um, you know, they, they charge a very small fee. And so many of these individuals get accustomed of paying that fee. And so when you go to a legitimate establishment and the cost is a little bit higher, you tend to, you know, go where your friends and family go to complete that. So I, you know, in the , in our city, we've seen an increase of that, and it's just, it's unfortunate, you know, when you have offices that are opening up for just tax season, and then they close at the end of the tax season, and you have , uh , an influx of, of clients that come in with issues. And so , um, it is difficult to see.Speaker 2:
Yeah, I think you hit on something key there too. I mean, the , sometimes the folks that this happened to, you know, they're going to this prepare because it's cheap. Right , right. You know , it's , Hey, I can go here and get it done for 50 bucks. Well, sometimes you , sometimes you're getting what you paid for, unfortunately. And sometimes that can, that can really escalate into many things, but I guess the good thing is if somebody falls into this situation and you touched on it, but you could amend the return for them . Right. I mean, you know, they can reach out to a trusted professional at that point.Speaker 3:
Oh yeah. Definitely. I mean , uh , you know, we've done that in many of these cases where we had to amend it. Uh , of course they don't like the results because sometimes they end up paying , uh , penalties and , and an increase of some of the money that they've received as a refund. They have to return it back. Uh, but you know, a lot of them have made those changes because , uh, as I mentioned in the beginning, you know, a lot of them are striving for , uh, you know, citizenship. So they, they want to make sure that their documents are in order to be able to have that document ready for , uh , submission when their processes ready, our immigration processes going through.Speaker 2:
Yeah. For Nina . And I think, I guess the key to it, you know , we've seen it , um, I've heard about it as well. The great thing is you were able to help the client. You're able to get them into , like you said, they may not like the result of it. However, you know, rather than having the IRS chasing you down and on your Ted Hill, it's better to get it done and get it done right from the beginning. Um, you know, I've loved listening to your story and hearing the stories that I've heard from others. You know, it that as a taxpayer, you sometimes get nervous at , well, I don't want to, I don't want to get any pushback from the person I went to or , um, you know, I , um , I'm worried I'm going to get in trouble. If I say something or, you know, how , how can I report this person without me getting in trouble as the taxpayer? And unfortunately that , it's a , it's a common thing that's happening. There's a one don't, you know, you're not alone in this process. This goes, prepare story that you , that you shared is, is happening all over and things, you know, things are happening and people are getting taken advantage of. And, and it's unfortunate know that's the great thing with SciTech . And what we're charged to do is to make sure that you're being taken care of and protected as that taxpayer . So, you know , there are ways that you can reach out to us , um, tech.org . So CTE c.org , if you go on there, that page on the very opening page on that website, down at the bottom, you'll see a , a little block that said , did your preparer sign? And it has a question, Mark, if you click on that next thing that comes up, it goes into some information about why they should be signing your return, how they should be you're signing it, who's authorized to do a return, but also on there, there's one that says report tax preparer fraud. And that's where we would need you to go if this, if this has happened and you need somebody to take a look at it and find out what to do, that's the best starting point. Okay. And just know , I mean, you're not going to get in trouble for reporting these people. Um, you know, we, unfortunately we can't stop this fraud from happening unless we know about it, unless we're able to help. And, you know , being able to report some of these ghost tax repairs that are out there that are doing , uh , unfortunately some fraudulent things and some bogus things , uh , really puts everybody at risk. So it kind of consider us Fernando , right? We're the Ghostbusters, you're see texts , the Ghostbusters, right? FTB , Reportive, Reportive, send this up to us , uh, let us get it over to FTB so they can investigate and try to find out what's going on, hopefully help you out. And the good thing too, you know, like Fernando said, luckily they came and found him and he was able to get their return amended. Um, those opportunities are out there for you as well. So if you have the scenario and you've been contacted by the IRS, there are many professionals in the state of California that can help you , um, get that taken care of at least look out for you. So , uh, Fernando, I appreciate you , uh, I thank you for coming on today.Speaker 3:
Well, thank you very much for having me. And I , like I said , uh, this is , uh, an issue that , uh, you know, we're hoping that it can be resolved, but, you know, obviously with, with getting the word out there and , and, and ensuring that the individuals get this type of information is important. And hopefully that , uh, you know, that more people get , uh , an opportunity to report these cases.Speaker 2:
For sure. Yeah . The more reporting and the help we get from the public, the better chance we have of kind of putting some of these to rest and making sure everybody's getting a great service when they get their taxes done. So I thank you much. I appreciate it. Thank you. Thank you everybody for joining us. Um , if you've missed any of our other episodes, please be sure to visit the C tech website. So C tech.org . Uh, we have many other podcasts that are on there. You can listen to tips on choosing a tax repair and avoiding fraud and more to come. So thank you all. Thanks for joining us and hope everyone has a great day.