CONSUMER NEWS RECALLS COMPLAINT FORM SCAM ALERTS
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CONSUMER NEWS RECALLS COMPLAINT FORM SCAM ALERTS |
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There's No Escaping TaxesBut Tax Scams and Outrages Are Another Matter |
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By James R. Hood February 27, 2006
Besides, while the final kick of the bucket is pretty decisive for everyone, the severity of the tax bite is variable, so it's worth doing a little planning to minimize how much you spend on taxes and tax return preparation. The good news is that if you have a hefty tax bill, it means you have funds flowing in from employment, investments, annuities and business ventures. It's time, as they say, to give a little back. If you're fortunate enough to be in such company, it's well worth your time to find a reputable, respected accountant to help you with your taxes. The more income you have, the more you can save by getting good tax advice from a knowledgeable professional. The best way to find such a person is through networking -- ask others who are in your income bracket for referrals. Remember, you're obligated to pay what you owe -- no more, no less. If you're a generous soul, save it for the offering plate or neighborhood soup kitchen. Don't waste it on the government. If, on the other hand, your budget is groaning under the weight of a low-salaried job, a large family, catastrophic healthcare costs, job loss or other personal disasters, it's doubly important to seek out good, low-cost or free advice while avoiding tax scams and rip-offs. Slime on the Pond: "Instant Refund" LoansNothing is more despicable than stealing from the poor but, unfortunately, it's a growth industry these days. Payday loans rip off the poor all year around but at tax time, it's the Rapid Anticipation Loan that really brings home the beans for H&R Block and other shameless perpetrators. Also known as "instant" returns, quick-refund loans are a predatory sham of the highest order. The cost is astronomical -- 1700 percent or more -- and that's not including the extra fees that are tacked on by the most unscrupulous practitioners of this white-collar version of armed robbery. Although these usurious loans carry virtually no risk to the lender, every year we hear from taxpayers who are told after the fact that they did not qualify for the loan. They're then stuck waiting weeks for their refund. Refund loans are not only a rip-off, they're unnecessary. You can get your refund almost as quickly by preparing your return early and filing it either by mail or online. Earned Income Tax CreditThe Earned Income Tax Credit has been around since 1975 but is still misunderstood and overlooked. It's intended to encourage Americans to work, partly by compensating for the Social Security taxes withheld from the paychecks of lower-income workers. In some cases, families earning less than $37,000 can receive refunds of up to $6,000 at tax time from federal, state and local governments. The IRS offers a free online tool that will help you determine if you qualify. File Early, File CheaplyThe #1 rule for law-abiding taxpayers is to file on time. Even if you don't have your return ready by April 15, you can get an automatic extension simply by filing a form available at any post office or at www.IRS.gov. The second rule is to avoid spending one cent more than necessary preparing your return. If you are a wage earner without a lot of investment or small-business income, you can almost certainly prepare your own tax return. Again, the forms are available online and there are numerous non-profit and volunteer organizations that will help you at no charge. If your return is straightforward, there is no reason to give your hard-earned money to a commercial tax preparer. Not only are fees rising every year, so are the frustrations of dealing with commercial tax preparers who hire seasonal help that often knows little more than the client. Our advice: Pick a day now when you can devote your full attention to doing your return. Mark it on the calendar and assemble your W-2s and 1099s and get all the federal and state forms together. They are boringly presented but if you simply do one step at a time, chances are good you'll be finished in an hour or two. Don't get stressed out. No one ever went to prison for an honest mistake on their return. In most cases, the IRS will not penalize you for honest mistakes. If you feel you need help, call your city council representative, legal aid office, religious community or other trusted source and ask for free or reduced-cost help. If you feel you must hire a tax preparer, review the complaints on our site, so you'll know what to watch out for. Think Twice About Filing OnlineIf you have your own computer and are comfortable working with TaxCut and TurboTax, there's no reason you can't prepare your return electronically and file it through your tax preparation program. However, if you are a little shaky about the Internet, our advice is to avoid services that claim to provide free filing of your federal and state return -- including the companies listed by the IRS on its Free Filing page. We are in the minority on this, but each year we get a boxload of complaints from consumers who thought they were getting a free IRS-approved service, only to wind up paying big bucks or finding out that their returns somehow got lost in the shuffle. It's worth noting that electronic returns are accepted only by 37 states and the District of Columbia. If you live in one of the other 13, you'll have to file a paper return. The IRS gets downright bubbly when it emotes about the companies it shills for. Says the taxman:
This, of course, is absurd. If the IRS can't set up its own online system to enable the taxpayers of America to file their returns free of "nominal fees," there is something wrong. Pardon our French, but what the hell is the tax collector doing if it's too busy to collect taxes? Eschew CreativityYes, it is indeed depressing to look at the pigpen called Congress, an institution whose sole occupation (and its passionate avocation) is spending money. But the place to do something about that is at the polling place, so bite the bullet and resolve to render unto Caesar his due, while perhaps dreaming of the fast-approaching Ides of March. Avoid, at all costs: • "Creative" Tax Preparers No question some tax preparers will get you a bigger refund than the others, by exaggerating deductions, understating income and so forth. One big problem with this: these guys eventually get caught and when that happens, the IRS starts pawing through the returns they prepared for their clients. At the very least, you will be hit with back taxes, interest and penalties. Worst case? Criminal charges, ruinous legal costs, prison food, ankle bracelets. • Taking Religious Orders There are any number of fast-talking promoters selling schemes that claim you can incorporate yourself as a church and become tax-exempt overnight. In reality, you can become a felon overnight and find thyself living a life that is perhaps more monastic than you had anticipated. About That RefundIf you spend 10 months of each year salivating about the big tax refund you'll be getting, you're doing something wrong -- you're having too much withheld from your paycheck. To put it another way, if you're getting a big tax refund, you're giving the government too much money each payday. You should adjust your withholding so that less is taken out of your check. As with everything governmental, there is a form that will help you do this -- Form W-4. It is available free online or from your employer. Using this form -- which is actually quite simple and straightforward -- you calculate how many deductions you qualify for and, therefore, how much should be withheld from your paycheck. Most working people have too much withheld from their checks. This means you are letting the government use your money for nothing until you finally get around to filing your tax return and getting back what was yours to start with. Get it right and you can put money in your pocket and bread on the table, feeding your family while starving the tax preparation beasts. That's not revenge, that's justice. Report Your Experience
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