In June 2009, the IRS initiated a study to analyze the state of the return preparer industry, with the primary focus of understanding the impact the return preparer population has on the taxpaying public and assessing the consistency and quality of services provided by paid preparers. The Return Preparer Review Final Report (Pub 4832) was published in December 2009 and made numerous recommendations, including a mandatory registration requirement for paid tax return preparers.

A PTIN must be obtained by all return preparers who are compensated for preparing, or assisting in the preparation of, all or substantially all of any U.S. federal tax return, claim for refund, or other tax form submitted to the IRS unless the form is specifically exempted. All Enrolled Agents are also required to obtain a PTIN.

The RPO Compliance director is responsible for oversight of the identification, investigation, and treatment of ghost preparers.

The Compliance Ghost Group manager is responsible for supervising the analysts who investigate and treat ghost preparers.

Compliance Ghost Group analysts are responsible for investigating ghost preparer leads, administering treatments, and documenting case determinations and actions.

All employees must act in accord with the Taxpayer Bill of Rights while carrying out duties related to the ghost preparer program. For additional information, see Policy Statement 1-236 and the Taxpayer Bill of Rights.

Workload inventory (i.e., leads) for the Ghost Group originates with sources outside the group, such as with RPO Compliance-Complaint Referrals or RPO Compliance-Compliance Planning and Direction.

Other than case revisits described in IRM 25.20.2.4, the Compliance Ghost Group manager approves all ghost preparer case closures.

Permission to edit the Ghost Inventory Tracking System is granted as needed.

Ghost Inventory Tracking System – The Compliance Ghost Group uses a module in the Return Preparer Database to document ghost preparer activity,

Ghost Preparer – For purposes of this IRM 25.20.2, a ghost preparer is a compensated tax return preparer who does not comply with the PTIN requirements in IRC 6109 and Treasury Regulation 1.6109-2. On returns they prepare, a ghost preparer will:

Preparer Tax Identification Number – A unique number issued by the IRS to a return preparer that must be included in the Paid Preparer Use Only section of tax returns prepared for compensation and filed after December 31, 2010. Only PTINs issued under the Tax Professional PTIN System are valid. PTINs are in the format of P followed by eight numeric characters.

Return Preparer Database – A consolidation of a wide variety of information on return preparers designed for use by IRS compliance and enforcement employees.

Tax Professional PTIN System – The system through which the IRS has issued and administered PTINs since September 28, 2010.

Acronyms used in this IRM include:

Besides this IRM, other resources include:

Review the lead to determine:

Deconfliction is performed to ensure an identified ghost preparer’s case is not being worked by another IRS business unit.

Use the IDRS Command Codes IMFOLI and IMFOLT to look for a -Z Freeze Code (CI). If the freeze code is present, contact the CI controlling agent. Offer to provide a copy of the case file. If the offer is accepted, provide the case file without performing additional research and close the case as a transfer to CI. If the offer is declined, close the case with no further action. In either case, document the communication with the agent in the Compliance Analyst Activity Record and the Return Preparer Database notes.

Use the IDRS Command Codes IMFOLI and IMFOLT to look for a -L Freeze Code (SB/SE Examination). If the freeze code is present, contact the SB/SE group manager. Ask if RPO Compliance treatment will interfere with the examination and offer to provide a copy of the case file. If treatment will not interfere, proceed with the treatment. If treatment will interfere, close the case as a transfer to SB/SE with no further action. In either case, document the communication with the group manager in the Compliance Analyst Activity Record and the Return Preparer Database notes and provide a copy of the case file if requested.

Use the Return Preparer Database to determine whether the LDC has a case open on the ghost preparer. If so, contact the controlling employee. Ask if RPO Compliance treatment will interfere with the investigation and offer to provide a copy of the case file. If treatment will not interfere, proceed with the treatment. If treatment will interfere, close the case as a transfer to the LDC with no further action. In either case, document the communication with the LDC employee and provide a copy of the case file if requested.

Use the Criminal Sanction/Civil Injunction module of the Return Preparer Database to determine if restrictions/prohibitions have been imposed on the ghost preparer. If so, contact the RPO Compliance Fraud Analyst for guidance on next steps and case closure.

Use the following resources to identify the ghost preparer, confirm PTIN noncompliance, and determine if return preparation income is commensurate with the number of returns prepared:

As part of case research, analysts may communicate with third parties, other IRS units, and/or the return preparer. Comply with the requirements in IRM 25.27.1, Third-Party Contact Program.

Include copies of correspondence in the case file and log telephone calls in the Compliance Analyst Activity Record and the Return Preparer Database notes.

If a ghost preparer is identified during case research, follow IRM 25.20.2.3.2 , Deconfliction.

Evaluate the results of the investigation, formulate a conclusion, then recommend a course of action.

There are four possible conclusions:

Analysts must exercise professional judgment when deciding on the appropriate treatment. Options are:

To determine the appropriate treatment, consider the following factors (there may be additional factors):

The potential referral recipients are:

If a case is referred to another unit, explain in detail on the Research Activity and Conclusion lead sheet why the case meets the referral criteria.

If a case does not meet the criteria for referral to another unit, but the analyst believes a referral is warranted, they will discuss the case with the Compliance Ghost Group manager.

Include the following in the completed case file:

Referral case files will include the following:

For SB/SE income tax examination referrals, include the items from (2) and:

For SB/SE IRC § 6695(c) penalty examination referrals, include the items from (2) and:

For OPR referrals, include the items from (2) and:

If no action is required on a case:

If referring a case to another unit:

If a letter is the appropriate treatment:

Regardless of a case’s outcome, create a case record in GITS.

Conduct the research needed to determine if the ghost preparer has come into compliance. See IRM 25.20.2.3.3, Research and Investigation.

Evaluate the research and decide on the appropriate action. See IRM 25.20.2.3.4, Analysis and Determination.

If additional treatment is warranted, ensure the ghost preparer’s case is not open in another unit. See IRM 25.20.2.3.2, Deconfliction. Administer treatment according to IRM 25.20.2.3.5, Treatment.

Update the case file with information and documentation from the case revisit. Refer to IRM 25.20.2.3.6, Documentation.

Update the case file to meet the requirements in IRM 25.20.2.3.7, Completion and Submission, then submit it for review and processing.

Follow the procedures for the first case revisit but use the Closed Case 2nd/3rd/4th Revisit Lead Sheet in place of the previous revisit lead sheet.