Posted by Elisabeth Leamy, Fri Mar 24 2006, 08:52pm

I doubt you need me to remind you that tax day is right around the corner

I doubt you need me to remind you that tax day is right around the corner. But I DO want to remind you about some problems you could face because of other peoples' greed or your own mis-steps.RAPID REFUNDS
If you're one who doesn't mind tax time because you love getting a refund, a word of caution. Many accountants and tax preparation firms offer what they call "rapid refund loans" or "refund anticipation loans." They sometimes put the word "loan" in smaller print. These companies hype the fact that you can get your refund money in twenty-four to forty-eight hours. But they downplay the fact that it'll cost you a lot of money. You see, when you participate in one of these programs, the money you're getting is not coming from the IRS. It's a loan from the tax prep company. With fees and interest, this loan can cost you up to thirty percent of your refund. Expressed as an annual percentage rate or APR, it's as much as 116%! Say you're expecting a $1500 refund. That's $450 that you're giving away for no real reason. That's just the cost of the loan. The price of preparing your return is not included in that!

Sometimes it's best to stick with specialists for your various financial needs. One state has just filed suit against a nationwide tax prep firm, saying the company steered its tax clients into expensive IRAs (Individual Retirement Accounts). The lawsuit says the IRAs were bound to lose money because of hidden fees and low interest rates and that 85% of customers' accounts have gone down in value so far. Listen, it's a GREAT idea to use your tax refund to start a retirement account, but carefully research the financial advisor and type of account before committing.

For years we've all received "phishing" emails that look like they come from banks and ask us for our personal financial information. If you fell for it, the bad guys used your data for identity theft. Of course, if you didn't have an account at the bank named in the email, you were bound to be suspicious. So now scammers have hit on the perfect solution for themselves: they're sending fake emails that look like they're from the IRS! After all, we ALL have to pay taxes. Once again, they're asking for sensitive financial info. And to folks who have filed their taxes online, an email from the IRS seems pretty plausible. Now here this! The IRS says it does NOT communicate with citizens via email. Period.

I admit it. In a sick sort of way, I enjoy getting my tax stuff together. I don't actually do my taxes. No, no, no, no, no. That's a special form of torture that I leave to the professionals. I'm talking about gathering together all the receipts and bills and paystubs I need to claim every possible deduction I'm entitled to. It's my version of clipping coupons. Or bargain shopping. A wise accountant once explained it to me this way: Say you're in the twenty seven percent tax bracket. If you itemize, then for every hundred dollars of deductions you can claim, you save twenty seven dollars on your taxes! Of course, not everybody HAS stuff to itemize, but if you do and you aren't shame on you!

If you think being taxed is a drag, being audited is devastating. It's unpleasant even for people who have nothing to hide. You usually have to hire accountants and lawyers to help you prove your innocence. That's expensive. And even if you're cleared, the IRS doesn't reimburse you for the time and money you were forced to spend! Whatever happened to innocent until proven guilty? The IRS is the largest law enforcement agency in the U.S. –bigger than the police departments of New York City, Los Angeles, Chicago, Detroit and Philadelphia combined. That's what you're up against.

The IRS is warning that some unscrupulous tax preparers may claim they can save you money on your taxes if you agree to participate in some shady strategies. Run the other way if you hear the following claims: "The income tax is unconstitutional because the 16th amendment was never ratfied." "Wages are not taxable." "You can start your own religion and avoid taxes." And on and on. The worst part is, even if you get bad advice, YOU could be prosecuted for tax evasion. More info at:,,id=154293,00.html