Accounting Today reports that the IRS is facing challenges in overseeing uncredentialed tax preparers, with a new report from the Treasury Inspector General for Tax Administration (TIGTA) identifying gaps in regulatory oversight that could expose taxpayers to fraud and improper refund claims.

According to the report, more than 38,000 tax preparers used noncompliant Preparer Tax Identification Numbers (PTINs) to prepare over 2 million returns last year. Nearly 12,000 of those preparers filed approximately 95,000 returns claiming close to $600 million in refunds, with none of their filings reporting a balance due.

TIGTA also identified potential fraud involving overstated withholding, a scheme in which preparers report inflated tax payments to generate larger refunds. During tax years 2023 and 2024, returns exhibiting characteristics of the scheme claimed approximately $740 million in refunds, with uncredentialed preparers accounting for 84% of those involved.

Additional concerns centered on so-called ghost preparers, who prepare returns without including their PTINs. Returns linked to these preparers claimed approximately $179 million in potentially fraudulent refunds.

The report also found that 691 IRS employees held active PTINs, despite restrictions on preparing returns for compensation.

TIGTA recommended that the IRS finalize its data-driven return preparer strategy to strengthen oversight, address fraudulent schemes, and improve compliance. The agency agreed with the recommendation, acknowledging the need for improvements while emphasizing its ongoing efforts to strengthen identity verification.