How to Avoid Tax Preparer Fraud

How to Avoid Tax Preparer Fraud

It is a typical scenario. A tax preparer advertises guaranteed refunds for a small tax preparation fee. The consumer sees the advertisement, pays the fee and gets the refund as promised. No research is done on the tax preparer until the consumer gets a rude awakening—an audit.

“Refunds are never a guarantee. Tax law is what it is. There is no magic formula to get around it. Either you owe or you don’t,” said Mary Beth LaMunyon-Jones, chair of the California Tax Education Council (CTEC), a state-mandated nonprofit organization that manages the registration requirements for unlicensed tax preparers.

In the end, the tax preparer becomes untraceable and the client is forced to pay penalties.

“Those tax preparers are so frustrating because they take away business from the legit ones and make the industry look untrustworthy,” said LaMunyon-Jones.

It is because of these types of scenarios that California has set strict standards for paid tax preparers. By law, anyone who prepares tax returns for a fee in California must be either an attorney, certified public accountant (CPA), CTEC-registered tax preparer (CRTP) or enrolled agent (EA).

Individuals caught preparing tax returns illegally may face penalties up to $5,000 from the Franchise Tax Board, the enforcement arm for CTEC.

So how can consumers avoid fraud? Beware of tax preparers who:

  • Cannot be verified as either an attorney, CPA, CRTP or EA
  • Advertise “guaranteed” refunds
  • Claim they don’t have to sign your tax return
  • Do not have a Preparer Tax Identification Number (PTIN) from the IRS
  • Base their fee on a percentage of your refund

“Legal tax preparers tend to be proud of their status so verifying them should not be hard. If it is, well, perhaps that’s a red flag,” said Celeste Heritage, CTEC administrator.

CTEC is a nonprofit organization that was established in 1997 by the California State Legislature to protect taxpayers against fraud and incompetent tax preparers. To report an illegal tax preparer, visit or call (877) 850-CTEC for more information.