Here's the deal
More than 38,000 preparers used inactive or otherwise noncompliant PTINs on over 2 million returns processed in 2025.
Nearly 12,000 of those preparers filed only refund returns, covering about 95,000 returns and nearly $600 million in claimed refunds.
The IRS agreed to finish a data-driven strategy covering preparer outreach, penalties, employee PTINs, scheme promoters and ghost preparers.
A small ID problem became a 2 million-return problem
A preparer tax identification number, or PTIN, is the ID a paid tax preparer puts on a return. It lets the IRS connect a filing to the person who prepared it.
Here's what happened. The Treasury Inspector General for Tax Administration found more than 38,000 preparers used noncompliant PTINs on over 2 million returns processed in 2025. A noncompliant PTIN can be expired, revoked or otherwise inactive.
An inactive number does not prove that a return is wrong. But it makes oversight harder, especially when the filing pattern already looks unusual.
Nearly 12,000 of the preparers filed only returns that requested refunds. Together, they prepared about 95,000 individual returns claiming nearly $600 million. TIGTA treated that refund-only pattern as a higher risk, not as proof that every refund was improper.
The IRS can see the pattern but has fewer tools than people think
CPAs, attorneys and enrolled agents hold professional credentials and can represent taxpayers broadly before the IRS. Uncredentialed preparers do not have the same professional license or certification.
The IRS once planned competency tests, suitability checks and education requirements for all paid preparers. A 2013 federal court ruling limited that authority. Since then, the agency has leaned more heavily on letters, voluntary education and penalties.
Those tools have produced mixed results. In fiscal 2024, the IRS sent 26,432 letters to preparers with noncompliant PTINs. By June, 9,611 had obtained or renewed their numbers, but the campaigns produced no penalties.
TIGTA estimated the agency could potentially assess nearly $92 million in penalties based on returns filed without valid PTINs through October 2025. That estimate is not a forecast of collections.
Refund schemes are where the oversight gap gets expensive
The report also looked at returns with signs of an overstated withholding scheme. That scheme uses false income and withholding information to create a refund that the taxpayer may not deserve.
For tax years 2023 and 2024, 2,044 preparers filed returns with those characteristics and requested about $740 million in refunds. Eighty-four percent of those preparers were uncredentialed.
Ghost preparers added another layer of risk. A ghost preparer gets paid but refuses to sign the return or include a PTIN. TIGTA found returns with the same potentially fraudulent characteristics that were tied to ghost preparers and claimed about $179 million in refunds.
The language matters. These were returns with identified risk characteristics. The report did not say every return or preparer in the group was fraudulent.
The government's own employee list had a hole too
IRS employees generally cannot prepare tax returns for compensation, gifts or favors. Yet TIGTA found 691 IRS employees with active PTINs. More than 90 may have prepared returns for compensation, based on PTINs appearing in the paid-preparer section.
TIGTA did not independently verify whether those employees were paid. The finding still exposed a basic control gap: the IRS did not have a process that stopped current employees from obtaining or keeping PTINs.
The review also found 73 PTINs issued or renewed for deceased people and prisoners between 2010 and 2025. The IRS put that number in context: it issued more than 2.28 million PTINs during the period, making those 73 about 0.0032% of all issuances.
The agency also pointed to stronger identity checks added for the 2025 registration season. Its Secure Access Digital Identity service uses ID.me to authenticate applicants.
What should firms do now?
TIGTA made one recommendation: finish and implement a data-driven return preparer strategy. The plan is supposed to cover outreach, penalty decisions, employee PTIN rules, scheme promoters and ghost preparers. The IRS agreed.
For accounting firms, the practical lesson arrives before the federal strategy does. PTIN status should be checked during filing season, not only when someone joins the firm. Filing volume and refund patterns should also be compared with the work a preparer was actually assigned.
That will not give your firm the IRS's full view. It can still catch an expired credential, an unfamiliar preparer ID or refund claims that do not fit the client base.
Bottom line: identity verification alone will not stop bad advice. A valid PTIN can still sit on a bad return, and a ghost preparer may avoid the field entirely. The stronger control connects the person, credential and filing pattern, then investigates when those three do not match.
