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Did you know that according to recent IRS data, more than half of individual taxpayers used a paid tax return preparer? Because preparers play a significant role in our tax system, their compliance with tax laws is important to protect taxpayers and the integrity of the tax system.
Why did we do this audit?
Anyone who prepares federal tax returns for compensation must obtain a Preparer Tax Identification Number (PTIN) and renew it annually. The IRS uses PTINs to monitor preparers’ activities, including:
- The number of tax returns they prepare and file.
- Whether they file returns electronically or on paper.
- The number of returns with refunds or balances due.
Tax return preparers may be credentialed or uncredentialed. Credentialed preparers include certified public accountants, attorneys, and enrolled agents. Uncredentialed preparers do not hold these professional credentials and studies show that they are a higher compliance risk. However, the IRS has limited authority to regulate them.
What did we find?
In 2025, more than 38,000 tax return preparers used noncompliant PTINs (such as expired PTINs) to prepare more than 2 million tax returns. Of these preparers, nearly 12,000 filed approximately 95,000 individual tax returns claiming nearly $600 million in refunds. These 12,000 preparers only prepared tax returns requesting refunds.
Additionally, the IRS lacked a process to prevent current employees from obtaining PTINs, despite regulations and IRS guidance prohibiting employees from preparing tax returns for compensation, gifts, or favors. We identified 691 IRS employees with active PTINs, more than 90 of whom may have prepared returns for compensation.
The IRS’s limited authority to regulate uncredentialed preparers also poses compliance risks. Despite IRS efforts to educate taxpayers about tax schemes, some preparers continued to promote schemes involving overstated withholding, potentially contributing to hundreds of millions of dollars in lost revenue.
For Tax Years 2023 and 2024, preparers filed returns containing characteristics of an overstated withholding scheme that claimed approximately $740 million in refunds. About 84 percent of these preparers were uncredentialed. We also identified ghost preparers (return preparers who do not put their PTIN on the tax returns they prepare) who prepared tax returns with the same potentially fraudulent characteristics and claimed refunds of approximately $179 million.
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