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When you’re filing your tax return, it can be tempting to try out a tax hack to see if you can save some bucks.
Maybe you saw someone on social media claim that you can buy a luxury SUV and write it off if you form a limited liability company. Or that your 4-pound pet Chihuahua counts as a “security system” for your business — another write-off.
These hacks can’t hurt, and the Internal Revenue Service won’t actually audit you, right?
Wrong. Following faulty tax advice can have real consequences, says Mark Gallegos, a certified public accountant and a partner at Porte Brown, an accounting firm in Chicago.
“The person that does get audited does not just get slapped on the hand,” he says. You could end up paying penalties and interest in addition to what you owe. In extreme cases, you could also be prosecuted.
This tax season, take the time to vet any tax advice you’re considering, Gallegos says. And beware of fraudsters who may try to steal your information or get you to send them money — tax imposter scams are on the rise, according to the Better Business Bureau.
Gallegos shares four questions you should ask yourself before you make any moves with your taxes.
Does it seem like everyone qualifies for this tax hack?
If someone is telling you that everyone qualifies for this “little-known tax loophole,” you probably don’t, Gallegos says. “Tax law is highly fact-specific. Credits and deductions have eligibility tests, income limits, documentation requirements and even industry-specific criteria.”
Even if you do seem to qualify, it’s best to consult a primary source — IRS.gov — or ask a qualified professional before you take any action.
Is the person giving me this advice qualified?
There are professionals qualified to give you tax advice. Those can include certified public accountants, tax attorneys and enrolled agents.
Some financial advisors, such as certified financial planners, are qualified to tell you the effects taxes can have on your financial plans, but they won’t necessarily be technical experts on the tax code.
If the person you’re getting a tax tip from is not one of the above, and they aren’t citing their sources, take their advice with a hefty grain of salt.
Does the tax hack make me play “IRS roulette?”
If the tax tip you’re considering relies on the idea that the IRS might just skip over your tax return, or that IRS agents or tax examiners might overlook it, it’s not legit.
Hoping or thinking that the IRS will just “miss” a discrepancy is like playing “IRS roulette,” Gallegos says. It’s not worth the gamble.
Does the advice ask me to act urgently?
Ever get one of those texts or voicemails from someone claiming to be the IRS and demanding payment, even threatening jail time? Yeah, that’s not the IRS.
A lot of tax scams work by making you feel like you have to take action right now — whether that’s filing by a certain date or deadline or handing over sensitive information within a specific timeframe.
Scary, ultimatum-filled language like “this is our final attempt to reach you” or “this is your last chance” is a major red flag, Gallegos says.
This story was edited by Meghan Keane. We’d love to hear from you. Leave us a voicemail at 202-216-9823, or email us at LifeKit@npr.org.
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