How do I make sure I’m not filing a false tax return with the IRS?

Ralph Estep Jr.:
00:00

All right, let me ask you this. Would you risk trading in your comfy bed for a cot and a roommate named Spike just to save a few bucks on your taxes? Don't worry, I'm not sending anyone to the slammer today. But we are talking about how to stay on the right side of the law and avoid those tempting tax traps that can land you in hot water with the IRS.

Ralph Estep Jr.:
00:29

Hey everyone, welcome back to the Ask Ralph show. You know it wouldn't be Wacky Wednesday without a question that makes you go, "I never thought about it like that." And boy, do I have a doozy for you today. We're doing a deep dive into the world of taxes. But don't worry, we're keeping it legal and, most importantly, we're keeping it ethical. We're talking about how to file your taxes honestly, how to avoid shady schemes that promise the moon but land you in hot water with the IRS, and how our faith plays a vital role in all this. Because let's face it, nobody wants a one-on-one meeting with an IRS auditor, right?

Ralph Estep Jr.:
01:06

But before we get into today's juicy topic, let's rewind to yesterday's episode real quick. We explored faith-based investing, how to make your money grow while staying true to your Christian values. You can find all of our episodes at AskRalphPodcast.com.

Ralph Estep Jr.:
01:27

Speaking of treasures, it looks like we got a treasure trove of questions from one of our listeners. This one comes from Mary in Missouri. And Mary writes this:

Ralph Estep Jr.:
01:36

"Dear Ralph, I recently attended a financial seminar at my church where the speaker talked about some, let's just say, creative tax strategies. He claimed we could drastically reduce our tax burden by claiming certain deductions and even get a hefty refund. Well, it sounded tempting, but something sure felt off to me. I didn't want to do anything illegal or compromise my faith. How can I make sure I'm filing my taxes honestly and avoid getting into trouble with the IRS?"

Ralph Estep Jr.:
02:04

That was signed, sincerely, Mary.

Ralph Estep Jr.:
02:07

Mary, you hit the nail on the head. That's a question weighing on the minds of many of us. And I commend you for seeking guidance. It's refreshing to see someone prioritize honesty and integrity, especially when it comes to finances.

Ralph Estep Jr.:
02:25

Now, before we unpack this further, let's turn to the Good Book for some timeless wisdom. The book of Proverbs chapter 11 verse 1 tells us, "The Lord detests dishonest scales, but accurate weights find His favor."

Ralph Estep Jr.:
02:39

This verse reminds us that God values honesty and integrity in all aspects of our lives, including our finances and how we handle our taxes. So, how do we ensure we're filing honestly and staying on the right side of the law? Well, let me break it down for you.

Ralph Estep Jr.:
02:59

First things first, Mary, let's address the elephant in the room—those too-good-to-be-true tax schemes. You know the ones I'm talking about, Mary: claiming absurd deductions, hiding income in offshore accounts—the works. These schemes might sound tempting, promising to save you a bundle, but trust me, they're a recipe for disaster. Not only are they illegal, but they can land you in serious trouble with the IRS, including hefty fines and even jail time. You don't want to land yourself in jail, Mary.

Ralph Estep Jr.:
03:29

Remember this, Mary: integrity is not negotiable. As Christians, we're called to live by a higher standard. We should be known for our honesty and transparency, not for cutting corners or trying to outsmart the system. So, Mary, let's talk about some common tax frauds that are often disguised as legitimate strategies. One common one is inflating charitable deductions. While giving generously is a wonderful thing, fabricating or exaggerating donations to reduce your tax liability is not only unethical but it's illegal. Mary, it's important to always ensure you have the proper documentation for any charitable contributions you claim.

Ralph Estep Jr.:
04:09

Now, another red flag to watch out for, Mary, is claiming improper business expenses. You didn't mention if you had a business or not, but while legitimate business deductions are perfectly legal, trying to write off personal expenses as business-related is a big no-no. Keep your business and personal finances separate, and accurately track all of your business and personal expenses separately.

Ralph Estep Jr.:
04:32

And here's a big one, Mary: participating in tax shelters. I think this is what you were talking about when the speaker at your church spoke. These complex schemes are often marketed as legal ways to reduce your tax burden, but they often involve illegal activities like hiding income or claiming false deductions. If it sounds too good to be true, it probably is. Honestly, Mary, I think this is what you were feeling after that presentation at your church. I advise you to steer clear, or at least consult with a tax professional like myself. And look, I get it. Taxes can be confusing and let's be honest, nobody enjoys paying them. But there's a right way and a wrong way to go about it.

Ralph Estep Jr.:
05:12

So, Mary, here are some actionable steps you can take to ensure you're filing your taxes honestly and, as I talked about, ethically. Number one: educate yourself. Familiarize yourself with the tax laws and regulations relevant to your particular situation. The IRS website is an excellent resource for this. Mary, watch out for those shady tax websites that promise to significantly reduce or eliminate your taxes. They are all over the internet. Those are the ones you want to steer clear of.

Ralph Estep Jr.:
05:41

Number two: seek professional guidance. Consider consulting with a qualified tax professional, especially if you have a complex financial situation. This is what I do for a living. We can provide personalized advice and help you navigate the complexities of the tax code. Mary, this is where you might need to spend some money and find someone who is professional and will guide you on an appropriate path in an ethical manner.

Ralph Estep Jr.:
06:06

Number three: keep accurate records. This is vitally important. You need to maintain thorough records of your income, your expenses, and any supporting documentation for deductions or credits you plan to claim. You need to have these ready to go when you file your tax return. Mary, this is critical and it's the basis for handling your taxes.

Ralph Estep Jr.:
06:28

Number four: be honest and transparent. When in doubt, err on the side of caution and honesty. Mary, it's so important to disclose all of your income and only claim deductions you're legally entitled to. Look, I'm by no means saying that you can't take legitimate deductions. The truth is, tax avoidance is perfectly legal and it's appropriate. But tax evasion is going to land you behind bars.

Ralph Estep Jr.:
06:53

And finally, number five, this one is probably the most important: remember your faith. Let your faith be your guiding principle in all of your financial dealings, including your taxes. As Christians, Mary, we're called to be good stewards of our resources and to live with integrity. This needs to be the core of how we handle our taxes and our financial decisions in general. It's what sets us apart from everyone else. Remember this, Mary: filing your taxes honestly is not just about avoiding legal trouble. It's about living a life of integrity and reflecting God's character in all we do.

Ralph Estep Jr.:
07:29

Now, I know I've covered a lot today, but here are the key takeaways: when it comes to taxes, honesty is always the best policy. Don't fall prey to those get-rich-quick schemes or try to outsmart the system. As we talked about, seek professional guidance, educate yourself, and most importantly, let your faith be your compass.

Ralph Estep Jr.:
07:47

Well, folks, that's all the time we have for today. But before I let you go, I want to remind you that your questions fuel the show. So if you've got a burning financial question or a topic you'd like me to cover, don't hesitate to reach out. You can visit our website at AskRalphPodcast.com. You can send us an email at Ralph@AskRalph.com or connect with us on social media. And hey, while you're at it, why not join our email list to get a free copy of my book, Mastering Your Finances, chock full of practical tips and biblical wisdom to help you achieve financial freedom. And don't forget to tune in tomorrow—we're going to have another exciting episode where we'll be tackling a question that's on so many of our minds: how do I reduce my taxes when I take money from my 401(k) or other retirement accounts? It's one you don't want to miss. So as I always say, stay financially savvy, and God bless you today.