Steer Clear of Tax Cons (Even the Legal Ones)

Itching to get your due from Uncle Sam? There are plenty of folks -- legit and otherwise -- who will happily help you get a faster or bigger refund. My advice? Don't fall for any of the come-ons. The best-case scenario: You'll pay triple-digit interest rates to borrow your own money for a few weeks. Worst-case: You'll share a jail cell with the con who promised to sweet-talk the IRS on your behalf.

The most common tax-time pitch is the "instant refund," which gives you access to your refund money to tide you over until the IRS sends the official check. In 2004 (the most recent stats available), one in 10 taxpayers got a short-term refund anticipation loan (RAL), according to the Consumer Federation of America and the National Consumer Law Center.

Although RALs are offered by legit businesses, the loan terms rival those of the neighborhood loan shark. Small fees ($30 here, $59 there) add up. On the average refund this year ($2,150), forking over $100 to cover loan costs puts your effective APR at 178%. (No, that's not a typo.) Add in admin fees (like the ones H&R Block got busted for a few years ago), and you're looking at a 235% APR. (Again, not a typo.)

For a fast (and interest-free) refund, file your taxes electronically, which boasts a turnaround of three weeks or less. If you prefer the hard-copy filing, you can shave off several days of waiting by having your refund electronically deposited into your bank account.

Scams, shenanigans, frauds, and fiends

The tax-related con artists come out in full force this time of year. The most popular ploys falsely promise to reduce or altogether eliminate your tax bill. (See also: "I've got some valuable swamp land in Florida I'm willing to part with for a song.") The "Zero wages" and the mysterious "Form 843 tax abatement" ploys, for example, encourage filers to falsify information on legitimate IRS forms in the hopes that a blizzard of paperwork will distract the Feds.

Other scams encourage taxpayers to illegally hide income in an offshore bank or brokerage or move money into a tax-exempt supporting organization or a donor-advised fund while still maintaining control over the money. (Both no-nos.)

Also beware of phishing scams where ne'er-do-wells pose as IRS agents or other legitimate financial institutions (notifying filers of an audit or outstanding refund) to get taxpayers to reveal personal financial information. Click "delete" ASAP. The IRS doesn't email. Anyone. Ever.

If headaches, fines, prison, and steep penalties are your idea of fun, then go ahead and sign on the shady dotted line. If you do fall prey to any of these scams or suspect tax fraud, report it to the IRS via form 3949-A.

Mailbox mayhem

And, finally, this entry comes from the "just because you're paranoid doesn't mean they're not after you" file. Christmas for fraudsters starts in January. That's when information-rich tax-related documents begin to snake through the postal system. According to CNET, about 8% of identity theft cases are linked to mailbox breaches.

Keep a watch on lock-pickers by keeping a running list of everyone who pays you (employer, banks, brokerages, etc.). Check off the names as soon as you receive a copy of what they filed to the IRS. Track down docs that are missing in action by mid-February by contacting the original source.

Dayana Yochim honed her street smarts on the mean streets of her childhood stomping grounds in Lawrence, Kansas. She teaches financial offense and defense at www.GreenLight.Fool.com. Wax on. Wax off.