Avoid Tax Scams

Each year around tax time, many people lose hundreds of dollars by falling prey to scams and using services that charge excessive amounts of money. Learn about some common tax scams and how to avoid them.

1. Email messages from the IRS asking for your personal information:

The IRS doesn’t send emails asking for taxpayer’s personal information. If you receive this type of email, it may have been sent by phishers. These are Internet criminals that try to steal your identity and money by asking you to give your private information. Scams can also take place by phone, fax, websites and social networking sites. Visit the official IRS site to find consumer alerts and report scams.

Learn more about Internet safety.

2. Refund Anticipation Checks and Loans:

Tax refund anticipation checks are offered by tax preparers as an expensive loan on the tax return preparation fee they charge. Even thought refund anticipation loans may not be available in 2012 as much as in the past because of new regulations that protect consumers, you should still know what they are and avoid them. Refund anticipation loans are a way for people to get their tax refund immediately. But you will pay between 50% and 500% in interest on the short-term loan. In 2011, based on a refund of $1,500, the price of a typical refund anticipation loan was $61.22 and $29.95 for a refund anticipation check. If you file electronically and use direct deposit, you will get your refund in 5 to 10 days without paying extra fees.

3. Hidden fees charged by tax preparation companies:

If you use a tax preparation company, ask about their fees and make sure they don’t have additional charges such as “application,” “administrative,” “e-filing,” “service bureau,” “transmission” or “processing” fees.

4. Check cashing outlets:

You don’t have to pay high fees to cash your tax refund check. Instead, use direct deposit to put the money straight into your checking or savings account. You can also cash your tax refund at your bank at no charge or open an account with your refund.

Get your tax refund fast and keep all of your hard-earned money:

• File your taxes electronically: By filing online, you’ll receive your refund quicker. File your taxes online for free with MyFreeTaxes or find free tax help in person.
• Use direct deposit: Have your savings or checking account number and bank/credit union routing number handy when you file your taxes so that your refund can be deposited automatically to your account. You’ll get your refund in 5 to 10 days. If you don’t have a bank account, find out how you can open one today.

Remember, the deadline to file your taxes is Tuesday, April 17, 2012.