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Tax Byte

38,000 Preparers Filed Over 2 Million Returns With Lapsed PTINs

Sharon Kreider, CPA

The IRS is now processing 2027 PTIN applications and renewals, and every 2026 PTIN expires December 31. The fee is $18.75, and you can apply or renew online here. A new TIGTA report shows why the IRS should be paying closer attention to who skips this step.

Two Million Returns, No Valid PTIN.

Anyone who prepares a federal return for compensation must hold a current PTIN, renew it annually, and put it on the return under §6109(a)(4) and Reg. §1.6109-2. TIGTA found that through October of Processing Year 2025, more than 38,000 preparers filed over 2 million returns using PTINs that were expired, revoked, suspended, retired, or otherwise inactive. The IRS does not reject these returns, and it has not used the §6695(c) penalty. TIGTA puts the potential penalty at about $92 million. Nearly 12,000 of these preparers filed roughly 95,000 Forms 1040 claiming close to $600 million in refunds and not one balance-due return, a profile TIGTA considers higher risk.

Deceased, Incarcerated, and IRS Employees

From 2010 through 2025, the IRS issued or renewed 67 PTINs for individuals Social Security records listed as deceased. At least six incarcerated preparers prepared 371 returns claiming nearly $2.1 million in refunds during 2025, and IRS management told TIGTA that a felony conviction affects only Annual Filing Season Program participation, not PTIN eligibility, which does not square with the Form W-12 instructions. TIGTA also found 691 IRS employees holding active PTINs, and more than 90 whose PTINs appeared in the paid preparer section of accepted returns, even though federal regulations bar IRS employees from preparing returns for compensation, gift, or favor.

Overstated Withholding and Ghost Preparer

The costliest finding involves the Dirty Dozen overstated withholding scheme: write-in Form 1099 withholding that no payer reported. For tax years 2023 and 2024, 2,044 PTIN holders prepared 78,530 returns with those characteristics claiming more than $740 million in refunds. About 84 percent were uncredentialed, but 336 were CPAs, attorneys, or enrolled agents. Ghost preparers, who leave the preparer section blank, filed returns with the same pattern claiming another $179 million. TIGTA ties the problem to the IRS’s limited authority over uncredentialed preparers after Loving v. IRS, 742 F.3d 1013 (D.C. Cir. 2014). Its one recommendation is that the IRS finalize the data-driven return preparer strategy that the new Tax Professional Management Office (formed in June 2026 from the Return Preparer Office and OPR) has begun drafting. The IRS agreed. Pending legislation, the Taxpayer Assistance and Service Act of 2026, would strengthen preparer penalties and PTIN revocation authority.

Tax Practitioner Planning

Renew your own PTIN now and confirm that everyone in the firm who prepares returns for pay, including seasonal staff, has a 2027 PTIN before filing season starts. The §6695(c) penalty applies per return, and the strategy TIGTA wants expressly covers penalty considerations. Be careful with new clients whose prior-year returns show large Form 1099 withholding with no matching information return, or that came from a preparer who did not sign. The IRS has already sent about 20,000 letters to taxpayers it suspects used ghost preparers, and some of those taxpayers will be looking for a new preparer. Circular 230 §10.34(d) and the reasonable inquiry standard of Reg. §1.6694-1(e)(1) do not let you carry forward numbers that do not make sense.