5 Common Money Moves That Can Get You Into Legal Trouble

By Dan Rafter on 16 March 2017 0 comments

They seem like minor fibs: We forge our spouse's name on the back of a check. We inflate our monthly income when applying for that rewards credit card. We run a small business from home, and might fib about the size of our office in hopes of getting a tax break from the IRS.

These may all seem like harmless white lies. But these seemingly innocent money moves — and others like them — can get you into serious legal trouble.

1. Signing Someone Else's Name on a Check

You want to deposit a check into your savings account. The only problem is that check is made out to your spouse, and they're not around. It seems like an easy matter to scribble your spouse's signature on the back of the check and then deposit the money into your joint savings account.

But resist the temptation. It is illegal to forge someone's name on a check, even if that person asks you to do it.

The same holds true if you want to, say, pay a bill on behalf of an elderly parent. In some cases, if you control this parent's checkbook, it might seem easier to forge your parent's name on the check instead of obtaining your parent's actual signature. This, too, is illegal, even if your motives for forging the signature are good.

The odds are high that neither of these forgeries will ever be discovered or reported to the police, of course. But why take the chance?

2. Writing a Bad Check — On Purpose

It happens sometimes: You drain your bank account while you still have bills to pay. Your bank might have overdraft protection if you unknowingly write a check for more than your balance. But if you write a bad check on purpose, knowing that you don't have enough funds in your account to cover it, that is illegal.

If you're caught, you could face a fine and maybe even jail time, depending on the severity of your crime. Even if you're not charged with a criminal act, your bank might charge you a hefty penalty for writing a bad check. And the shops that unknowingly took your bad check may no longer accept your business.

3. Lying on a Credit Card Application

That credit card might come with a tempting sign-up bonus or generous rewards program. Dreaming of all the ways you can put those rewards to use, you decide to fib a bit on your application, in hopes of increasing your odds of qualifying for the card.

Guess what? That's fraud. And it's illegal.

You might be tempted to inflate your monthly income when applying for a particularly appealing credit card. But resist this temptation. Credit card companies only approve consumers who meet certain financial requirements. If you lie about yours, your credit card provider can pursue legal action against you, including fines and possible jail time.

Sure, the odds are low that you'll face these penalties for lying on your credit card application. But avoid all of the risk by being honest about your age, income, and employment when applying.

4. Lying About Your Home Office

One of the benefits of running a small business from your home is you can take advantage of the home office deduction, which can reduce the taxes you pay each year.

There's a catch, though: You must use your home office "exclusively and regularly" as your principal place of business. And you can only deduct the exact areas that you use for business.

This means that if you use your bedroom as your office, you can't claim its entire area as a deduction, just the corner where your desk and computer sit. If you lie about the size of your home office, and the IRS finds out, you'll be hit with penalties and a higher tax bill.

5. Lying About Who'll Be Living in That Home You're Buying

It's not easy to lie on a mortgage application. Lenders will request copies of your bank statements, paycheck stubs, and tax returns to make sure that you're honest about how much money you make.

But there is one lie that's not easy for mortgage lenders to discover: A fib about who will actually live in the home.

You might be buying a home with the intention of renting it out as an income-producing property. That's fine, but you have to be honest with lenders about this. That's because lenders typically charge higher interest rates to buyers who are renting out homes instead of living in them. They also might require a higher down payment. By claiming that you will live in the home when you don't plan to, you might be able to land a lower interest rate.

This is mortgage fraud, and it is highly illegal. If you're found guilty of committing this crime, you can face hefty fines and several years in jail.

Don't take the risk. Instead, be honest and pay those higher fees if necessary.

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