In recent years, a growing number of illegal tax preparers have cropped up, promising clients massive tax refunds that seem too good to be true. While the lure of a large refund can be tempting, engaging in illegal tax preparation can have serious consequences for both clients and tax preparers. In this blog post, we’ll discuss the risks involved in using illegal tax preparers. We’ll also discuss the potential fallout for those who offer these services.

Client Risks

  1. Audit and Penalties: The IRS has a keen eye for spotting fraudulent tax returns, and using an illegal preparer increases your chances of audit. If you’re caught with inaccuracies on your tax return, you may face significant penalties and interest charges. These penalties and interest charges could cost you more than any extra refund you might have received.

  2. Identity Theft: Illegal tax preparers often operate without the proper security measures to protect their clients’ sensitive information. This leaves you vulnerable to identity theft, as your Social Security number, bank account information, and other personal data could be mishandled or stolen.

  3. Loss of Tax Credits: If your tax return is fraudulent, you may lose eligibility for certain tax credits and deductions. This could have a long-term impact on your financial well-being, especially if you rely on these credits and deductions to make ends meet.

  4. Legal Repercussions: In extreme cases, illegal tax preparers may face criminal charges for tax fraud or tax evasion. These charges can result in hefty fines, probation, or even imprisonment.

The Risks for Illegal Tax Preparers

  1. Criminal Charges: Preparing taxes illegally can lead to criminal charges for the preparer. Tax preparers who knowingly falsify information on a client’s tax return may be charged with tax fraud or aiding and abetting tax evasion. These charges can result in severe fines, probation, or even jail time.

  2. Loss of License: If a tax preparer is found operating illegally, they may lose their license or registration. This will have a significant impact on their ability to continue working in the field. It may be difficult for them to find employment in the future.

  3. Civil Penalties: Illegal tax preparers can be held liable for penalties and interest their clients incur due to inaccuracies on their tax returns. This can result in the preparer paying thousands of dollars in restitution to the IRS and their clients.

  4. Damage to Reputation: Being associated with illegal tax preparation can destroy a tax preparer’s professional reputation. Even if they avoid criminal charges or other penalties, the negative publicity surrounding their activities can make it extremely difficult to attract new clients or maintain existing ones.


Engaging in or utilizing illegal tax preparation services is a high-risk proposition for both clients and tax preparers. The potential fallout, including audits, penalties, criminal charges, and reputational damage, far outweighs any temporary financial gains achieved. As a federally compliant business, we encourage taxpayers to seek out reputable, knowledgeable, and ethical tax preparers. This will help them navigate the complexities of tax preparation and ensure that their returns are filed accurately and in accordance with the law.