Originally Posted by michaelk
The people creating Montana business entities aren't lying or cheating, merely taking advantage of a legal loophole. Bad Karma perhaps, but not illegal.
I'm not so sure about that....most states have laws that should cover such game playing. Will see as I am sure this article in the Miami Herald will bring attention.
With respect to your brown roof neighbor...I'm sure that isn't the only thing on his tax return that is improper, eventually he'll win the audit lottery.
I was at an outdoor mall last year and some guy was on his phone with someone and he was going on and on about all the refundable tax credits he is claiming. If you don't know what a refundable tax credit is, you'll be shocked to find out it is a credit (not a deduction - huge difference as credits are a dollar per dollar credit against taxes owed whereas a deduction deducts from income and hence just a % of each deducted dollar reduces your taxes based on your tax bracket) and refundable means that you can get a "refund" from the IRS above anything you paid or had withheld in taxes.
For example, say you owed $2100 but paid in $2500 in withholding. You would normally just get a $400 refund. But with credits it is a further reduction dollar per dollar. Say you also had $1000 in regular tax credits that would mean even though you owed $2100 you end up really paying $1,100 as you will get that addition tax credit amount as a refund making your refund $1,400. But say you also qualified for the several REFUNDABLE tax credits that are available (and really not audited as they are "small") and the REFUNDABLE tax credits you claim are $5,000. Well, those REFUNDABLE tax credits don't just reduce your taxes to ZERO, nope they are REFUNDABLE meaning it is a form of government welfare that most people don't know about. So, instead of the $1,100 you would pay in taxes, your REFUNDABLE tax credit of $5,000 means the federal government will be PAYING you $3,900 and you pay ZERO tax. That's right, but simply claiming a REFUNDABLE tax credit on your return, a lot of people who pay ZERO federal income tax actually get THOUSANDS paid to them for filing a tax return (albeit many times fraudulent) as normally if you owe no tax or aren't claiming a refund from withheld taxes you just don't file, now you do and get paid thousands if you're willing to fill in a few lines to claim a REFUNDABLE tax credit - yes, people are now being PAID to file a tax return instead of filing one to pay their taxes. That is why there are all those tax prep stores in questionable areas. It is an open secret as these stores show people how to do it and they take there cut. REFUNDABLE tax credits (along with free cell phones and doubling of food stamps, etc.) have proliferated over the last 6 years. No joke. It is what it is no matter what political party you are aligned with. It is one thing to give assistance to people, it is another to have an open system that incentives people to do criminal acts while the "authorities" turn a blind eye and encourage it. People aren't getting audited for this stuff unless they do a blatant and stupid mistake on their return that otherwise attracts attention...it just isn't being checked and audited and it is an open secret which 95% of Americans would have no clue about.