Your Taxes - Rip-off Tipoffs
By: Pam ~
It is that wonderful time of the year again! Taxes, Taxes, Taxes! In my view, it is an annual event to look at past activity to answer why I am currently in the good (or bad) position I am in now. Many folks actually go through some very real anxiety and traumas at this event. We all have our different ways to cope.
• Filing or not filing
• Use your own software or hire outside help
• Locate backup documents
• If filing, get it out correctly and on time.
• If not filing, rehearse a good story to tell the IRS, if that should come up.
On the negative side, I am never surprised at the far out stories I hear about the frauds, motives and lifestyles that occur in order to reap benefits from the US Treasury. Because behind it all, this activity usually involves the same components such as:
A perfect combination for fraud, deception and personal gain.
This article will concentrate on how to create your own path for getting the tax issue resolved, and that you feel you have presented the best return you can. Tax filing is a part of life whether you are on the right side or the wrong side of reporting.
Let’s Get Started
The following is a good article. It shows one of the reasons filers will take a high interest, short-term loan based against their anticipated refund amount. I am personally amazed!
It shows one of the reasons tax return filers will take a high interest, short-term loan based against their anticipated refund amount. I was shocked! However, it may be viewed as a “predatory practice”, is it any different from the same mindset of those who use the rapidly growing check cashing or advance on payroll services that are already established? The only difference I see is that a tax refund is basically money due to the consumer, whereas check-cashing services are loans against the consumers themselves, usually with minimal resources to repay.
Though this next link is an ad, it shows some interesting warnings on using outside tax prep firms.
Remember the question to ask yourself when using an outside firm or individual:
What is in it for me? How do they profit on this service from me? Need counseling or strategy? Remember these types of firms are using people who most likely had a course in Tax Prep 101. It is a “surface knowledge”. Meaning, if you have items and activity that are beyond a 1040-EZ or 1040-A, you are on a wish and a prayer that they will know how to deal with exemptions, depreciation, different forms of interest, income, or expenses. They just usually do not have beyond basic skills and minimal practice.
So, whether firm or individual, are they licensed? Do they have a business license? Do you find any controversy on the internet about them?
I recently saw a show that used these three ways to shop for tax preparation.
Turbo Tax or Quicken – The upside is that you provide the software and the data. It will prompt for questions. It is low cost, has good history. Your personal information stays in house (except for the IRS). You know what your refund or balance due based on formulas within the program. The downside is that you have to be personally aware of all facets of your financial activity, meaning, did you buy or sell property, change in household activities, depreciation, business based activity or write-offs.
Tax Prep Service or Individual – How current are they with changes in state or federal tax laws? What is their limit of knowledge for how to treat important items on your return? How will they charge? How long has the person who will be preparing your return had with personal taxes? I have worked with finance and accounting individuals who actually get a glaze over their eyes when looking at their own personal tax reporting needs. They send them out for preparation by a CPA or tax preparer because it is just not an activity they are proficient or comfortable with. What is the preparer’s COMPLETE FEE? Look for hidden costs such as enrollment fee, review fee, limit on talk time, etc. You want this knowledge before you hand over any documents or money. Even if they charge different fees for different Schedules, you want the total fees disclosed upfront.
CPA or Accounting Firm – This is my personal preference in the years of my life that involved multi state, a corporation, wage and divorce. I knew I was above my head in these years. Too much going on! A CPA will usually employ a bookkeeper or such that handles the prep of the documents (You should be given an Organizer to collect your documents, fill out basic information). The CPA should be current in his or her knowledge of tax laws and changes. You should feel comfortable with who you hire. Not necessarily warm and fuzzy, but comfortable enough to ask questions. You should get a price upfront, as well as the turnaround time.
This article is a recap of what we’ve discussed, but it adds a few more questions and concerns.
Some other interesting news that may apply:
During tax time, you will likely see an increase in the advertising of tax firms via the internet or cable. The rules still apply. Follow their links and phone numbers to see if they are just a “front business” looking to get your credit and personal information or even “who” and “where” are they are licensed as a professional tax preparer.
Identity theft is huge during the tax process, whether you prepare on paper, e-file, or third party involvement. Cyber security, hackers and internet predators are having a field day. I recently saw a show that profiled that hackers trying to infiltrate the IRS data banks are approximately fifty percent (50%) successfully getting filers information via the internet. So whoever you use, how secured are they? And how about your information that you provide?
Investments offering special tax breaks or free points, etc. are also booming this time of year. This gets us back to the combo of human behavior that is, “power, greed and opportunity” which we already touched on. We live in evolving times. Some items are not pleasant. So check yourself. Nothing regarding any aspect of taxes is for FREE!!