'Tis the season to beware of tax fraud

Who's filing your taxes this year?
By: Ilyce R. Glink: Inman News
Q: I have a friend who files the tax returns for some of my friends and me every year. My friends did not get their tax refunds last year. As it turns out, our accountant friend seems to have given his own address and account number for all of my friends' tax returns to be direct-deposited. Is this identity theft? What is the federal punishment for such an offense?

A: Sounds like your "friend" is no friend. The person who filed your tax returns and stole your money is likely guilty of fraud, which is a much more serious offense (not to suggest that identity theft isn't taken serious). The punishment could include making restitution, paying a fine, and jail time.

Please talk to your attorney or call the IRS. Your friends might also want to check their credit histories and scores to be sure something else unpleasant didn't happen. You can pull a free copy of your credit history each year from each of the three credit-reporting bureaus by going to www.annualcreditreport.com.

And this year, either learn how to file your own taxes (if you make less than $50,000 you can file for free with the IRS and have the funds direct deposited to your own account), or pay a licensed accountant to file them on your behalf.

Q: My two-year adjustable-rate mortgage (ARM) expires in January. My current interest rate is 6.9 percent. Based on today's rates, how much will my payment increase?

A: What kind of loan do you have? Do you have an interest-only loan? Do you have a pay-option ARM? Does your loan convert to a 1-year ARM or will you get another two years before it adjusts for another two-year period, or does your loan convert to a 28-year fixed-rate mortgage? What index is your loan tied to?

Let's assume you have a straightforward ARM where you pay principal and interest. If your ARM has a 1 percent or 2 percent interest-rate cap, then it might rise to 7.9 percent or 8.9 percent. But some interest rates have actually dropped a bit, so it's possible that your loan's interest rate wouldn't go up at all and might in fact drop some.

You might want to call your lender and ask. Then, I'd start shopping around. At press time, Bankrate.com was featuring 5-year ARMs for 5.54 percent, 15-year loans for 5.46 percent, and 30-year loans for 5.69 percent. The best rates require a top credit history and score. Some of these rates include the payment of discount points (one point equals 1 percent of the loan amount), so make sure you call around to get the best rate and the best deal for yourself.

Q: I recently purchased some land with a partner. The land is in my name because I'm financing the deal, but he is a partner because he did all the legwork. We intend to build houses on the land after getting some changes from the local zoning committee.

Here's the problem: While my partner is my friend, his character is somewhat questionable when it comes to money. He has suggested that I quitclaim the property to him so that he can talk to builders more easily without having to get approval from me. If I do this, would I lose all rights to the land? Can I quitclaim the property for a period of time, like two months, and then regain the ownership rights down the line?

It's not likely he'll mess things up, but when it comes to money, people do strange things. By the way, I do travel quite a bit, which is why it isn't that convenient for me to schedule meetings with builders.

A: This deal has trouble written all over this. How can I put it simply: Do not quitclaim the property to your partner. He doesn't need to own the land to talk to builders. You and he are partners no matter who owns the land, right?

And, if you don't trust his judgment with money, I can't see why you'd hand over a huge asset to him.

But clearly this "partnership" hasn't been fully realized. You and he haven't talked through what each person's responsibilities are, and how the deal should be handled. Have you talked about how the profits will be split? Will you be reimbursed for the cash you spend first and then what's left will be shared?

Your friend sounds nervous, and rightly so. You should talk to a real estate attorney who can help you draft up a partnership arrangement with your friend that spells out who owns what, who is entitled to what, and what responsibilities each of you has.

By the way, it's OK to be an investor, but if you're too busy to meet with builders, you're placing a lot of trust in a guy who you say has questionable judgment when it comes to money. No matter where you are in the world, you'd better be ready to spend a lot of time working on the deal and making sure that there are no side deals involved that will siphon off cash.