Tax Scams: How To Recognize & Avoid Them
Refund anticipation loans (RALs) are basically a big ripoff even though they are legal. (Another one of those laws Congress didn’t take the time to think through.) If you efile your tax return, and you provide your bank account information on the tax return, then your tax refund is automatically direct-deposited into your bank account in a very short time and you pay nothing extra for this “service”. I have heard that the interest rates charged for RALs routinely exceed 100% and, in many cases, much higher. I wouldn't consider a refund anticipation loan unless your loan shark was waiting for his money just outside the tax preparer’s door.
Tax protester schemes have been around since the tax code was made law. Many of these frivolous arguments are based on many laws, court cases and even the Constitution. None of them have ever been upheld in court and the promoters of these schemes and their followers eventually end up repaying the original tax, penalties and interest. Some taxpayers even serve time in jail. It is a very bad idea to get caught up in any group that advocates taxes are illegal or you don’t have to pay them.
Fake home businesses that are advertised on TV or the radio can get you in big trouble. The slick commercials tell you how easy it is to earn thousands of dollars a month working part-time from home and all you have to do is call this number or go to this website. Do you ever notice that the website address changes ever so slightly – maybe a different number in the middle of the website address - even though it is the same commercial that has been running for weeks? Again, buyer beware and if it is too good to be true, then it probably is. When you are able to thoroughly understand what they promoting, you'll typically find that it isn't quite legal or when you do the math, there is no way for you to make a profit. Since these scams are not legal and there is no way you can make a profit, in a tax audit, IRS would disallow these deductions.
If you have any questions about any of the above scams or anything else that you are suspicious of, please contact us for our unbiased and objective opinion.