taxes

Tax-Related Identity Theft Complaints Increased 2300% in 2014

From the FTC, here’s what tax-related identity theft looks like:

Tax identity theft typically happens when a scammer files a fraudulent tax return using a consumer’s Social Security number in order to receive a refund. The year 2014 marks the fifth consecutive year in which tax-related identity theft topped the list of identity theft complaints, with tax identity theft accounting for nearly a third of all identity theft complaints to the FTC.

To avoid falling prey to the scam, file your taxes as early as you can. The scam won’t work if you have already filed. And be on the lookout for callers posing as the IRS. The FTC says “The IRS will never call a consumer about unpaid taxes or penalties – the agency typically contacts consumers via letter.”

If you think you were contacted by a scammer or a scammer filed a tax return in your name, file a complaint with the FTC right away.

Bancorp Didn’t Think it Was Weird to Mail 1,000+ Tax-Refund Cards to the Same Address

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When a tax-refund fraudster left a wallet with 13 debit cards issued in 13 different names — none of them his own — at a United Airlines ticket counter, it raised a few red flags. It also resulted in the bust of a huge tax-refund fraud ring, centered in Florida.

Here is how the fraud works:

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Do Taxes Really Need to Be So Complicated?

The way we file taxes has got to be the least-efficient way possible. Every year, millions of Americans dig through a year’s worth of receipts, year-end statements, and their memories to assemble millions of stacks of paperwork that are processed by hand by an army of IRS employees and contractors.

This is ridiculous, and I’m not even talking about how complicated the tax code is.

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Avoid Refund Anticipation Loans

It’s a new year, and time to start thinking about taxes. Which means it is also time for another warning about refund anticipation loans.

Refund anticipation loans are very similar to payday loans; they are short-term, high-interest loans made in anticipation of future income — your tax refund, in this case. And they are a bad deal.

The best interest rate you can expect from a refund anticipation loan is around 36% APR. That is two or three times the rate someone with decent credit can expect to get from a credit card. But APRs of 100% or more are still common. That means if you paid the loan back in one year, you would actually pay back twice the amount you borrowed.

In other words, the math doesn’t make sense. It is much better to just wait for the check from the IRS.

Gangs Add Identity Theft and Tax Fraud to Dealing Drugs

Guest post by Nussin S. Fogel.

Gangs across the country are finding white collar crime much easier than dealing drugs on street corners: they’ve learned how to profit from identity theft and tax fraud.

Florida is ground zero for the crime, but the problem is growing throughout the US.

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Alms for the Rich

It doesn’t take an economist to realize that when the rich pay less in taxes, everyone else is essentially giving their money to the rich.

Government redistributes wealth, through taxes, for the common good. If you don’t like that, go find an anarchist commune to join. Without taxes — and therefore wealth redistribution — there would be no infrastructure (roads, bridges, snow plowing, sewage), military, free education through grade 12, and many other services we take for granted. The idea is that, by redistributing wealth, society benefits as a whole.

But during the last decade or so, government has been redistributing wealth to those who don’t need it: the wealthy.

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Spending to Save: 10 Things That End Up Costing You More Than You Think You Are Saving

Whether it’s skipping checkups with your doctor, doing your own taxes, or buying in bulk, chances are good some of your attempts to save money are really just costing your more, in the long run. I’d add “going to the grocery store.” My wife and I started saving a ton on groceries when we started getting them delivered, because there are fewer opportunities to make an impulse purchase on an empty stomach when shopping online. Plus, we save gas, family time, etc.

(HT Lifehacker.)

Tax Loopholes for the Rich Weaken the Middle Class

Most “regular” Americans—those making under $100,000 per year—pay about 35% of their taxable income to the IRS. Those who earn more than a $1 million per year pay less than 30%, and the wealthiest 400 Americans pay about 18%, on average. This makes the US tax code regressive: the less you earn, the more you pay.

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Capital Gains Tax: A Reward for Not Working

Warren Buffett paid a 17.4% tax on his income last year. You probably paid about 35%. Buffett makes most of his money by moving money around. You probably make most of your money by working. So why does Warren Buffett get a tax break, and not you?

Because the capital gains tax applies to investments, which is where the rich make most of their money.

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Finding a Low-Fee 529 College Savings Plan

One of the first things you should do when you have a child—or even before—is to set up a 529 college savings account. Earnings from money in a 529 plan are not taxed as long as they go towards qualified education expenses. But the maintenance fees can add up over time. You can expect to pay .25-1.04% over ten years for Fidelity plans, for example.

The following tools can help you pick the lowest-cost plan for your child:

How to Find the Right 529 Plan With the Lowest Fees | New York Times

(photo: michaelk.sutton)