More than 38,000 tax return preparers used noncompliant credentials to file over 2 million federal returns in 2025, according to a Treasury Inspector General audit. The investigation also identified 691 IRS employees with active tax preparer credentials, more than 90 of whom may have prepared returns for compensation, a practice prohibited by federal regulations.
The audit examined preparers who used expired or otherwise invalid Preparer Tax Identification Numbers (PTINs), credentials the IRS requires all paid preparers to obtain and renew annually. Of the noncompliant preparers, nearly 12,000 filed approximately 95,000 individual returns claiming nearly $600 million in refunds.
The investigation revealed a significant internal control gap: the IRS has no process to prevent its employees from obtaining preparer credentials, despite regulations prohibiting the practice.
The audit also documented potential fraud schemes involving uncredentialed preparers—those without licenses as certified public accountants, attorneys, or enrolled agents. Preparers filed returns displaying characteristics of overstated withholding schemes that claimed approximately $740 million in refunds during tax years 2023 and 2024, with about 84 percent of these preparers uncredentialed. The investigation also identified unauthorized preparers, known as 'ghost preparers,' who did not disclose their involvement in filing returns. These ghost preparers claimed approximately $179 million in refunds.
More than half of individual taxpayers use paid tax preparers. According to the audit, uncredentialed preparers pose higher compliance risks, yet the IRS has limited regulatory authority over them.