Category Archives: Identity Theft

As Scammers try harder, just be more clever! (update)

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We are constantly assaulted by texts, emails and calls with people trying to access our information for their benefit or trying to trick us into sending them payments.  How do you protect yourself?

The first step:  Think before panicking and reacting; careful observation could save you from a scam!  If you have an emotional response to a message, try to assess why and wait to respond.  Scammers use deception and emotions, so be wary.  

Second step:  practice computer and internet hygiene – install all updates, run anti-virus and malware programs, avoid suspicious interactions, freeze your credit accounts and monitor your credit, use multi-factor verification, and respond to any bona fide alerts.  Also encrypt and back-up sensitive data to protect it from access.  

Final step:  never divulge personal information without first verifying the contact independently.  For a text or email, check your account on your smartphone app or website browser – but don’t use the link in the message!  If the message is a text, you can often delete and report it as junk on your phone. 

We updated some examples of recent scams – any sound familiar? – to help you calm any emotional reaction before responding:

  • Do you really think you won a lottery you never entered?  There is the old joke that says, “what, you didn’t buy a ticket?”
  • If you don’t have a credit card with Wells Fargo, why are they calling you about a BestBuy purchase?  This may make you curious and want call only to hear the recording asking you to input your debit card number – don’t provide it!  Banks and brokers will not ask you to divulge your information.  Also, you can verify the bank numbers on line. 
  • If Amazon really thinks there is fraud, why does the person answering the call say “Thanks for calling Amazon” when the call came from them?  Why do they know nothing about your account information?  If there was a fraud, they would be telling you about the transaction instead of asking for all your account details.  Check your account on your app or the Amazon website. 
  • Do you think you won a gift from Ace Hardware, Walmart or another place where you haven’t been shopping?  Check the e-mail address or text number – if it’s not from the company, then someone is trying to gain access to your information.  
  • Should I respond to this silly personality quiz on Facebook?  No, it might be phishing for personal details for identity theft.
  • Is this great job offer for me?  If you didn’t apply, why is this company reaching out to you?  Again, check the email address or phone number independently. 
  • Do you actually think you are the one randomly chosen to receive an inheritance from someone in another country who supposedly has no heirs?  The estate mentioned is often from a country you may never have visited, and the estate is an enormous amount.  As your grandmother may have told you, “if it sounds too good to be true, it is!”
  • Does your phone or computer really have this terrible virus?  How did they detect this?  Run your own antivirus scan. 
  • If you did not buy a MacBook or AirPods and no one stole your credit card, why is someone calling from the Netherlands to claim a purchase was made on your account?  Often you can tell that the callers are not from the companies they claim. 
  • Why did you receive a Docusign message or a PDF attached to an email for your salary or benefits?  And why did it come from someone’s personal email?  Clicking on the link could allow them to install malware and gain access to your financial information – don’t!
  • It may look like a Microsoft message or some other legit message, but why do you suddenly need to update your account password or sign for a matter you don’t recognize?  Check the source of the message –official-looking messages can come from dubious senders, often outside the US.  Be wary of e-mails from random accounts rather than the actual vendor.  
  • Why is someone calling about a Zelle transfer? When you listen, the case number looks suspiciously like a phone number that could allow then to gain access to your bank account. 
  • Why is the border patrol in Texas calling you and claiming that they opened your mail and need to put a hold on your social security number?  What does it even mean to “put a hold on your social security number” and how does that even relate to contraband?
  • Why is UPS or FedEx claiming the item is undeliverable because your address is wrong?  If you did place an order, you would have confirmed the address.  Check the source of the text or email and independently verify any purchases on the vendor site. 
  • You may be worried about crime in your city, but is that robo-caller really providing funds to support police? Most police departments do not solicit funds by this way so hang up and verify any charity before donating.
  • Why are they offering tax debt relief when you are current on your taxes?  Was there some new IRS program you never heard of?  Check with us before responding. 

Summary

If something seems off, it probably is.  Try to avoid a panicked reaction when you receive a notice of an unauthorized payment, an overdue bill, a payment authorization you didn’t expect or a claim that you violated customs.  And don’t click on any link!  Go to the vendor’s phone app or website to access via a browser you trust to check before responding.  The link in a text or e-mail may appear okay but close examination may reveal some flaw.  

And here is good reminder from the IRS:

  • The IRS will never contact a taxpayer using social media or text message. The first contact from the IRS usually comes in the mail. Taxpayers who are unsure whether they owe money to the IRS can view their tax account information on IRS.gov.

The FTC suggests that you can send a screenshot to 7726 (SPAM).  This may help your wireless provider identify and block similar messages in the future.  You can also report it to the FTC at ReportFraud.ftc.gov.  And if you do become a victim, this New York Times article How to Avoid Online Scams and What to Do if You Become a Victim had information with links on what to do if you are scammed.  

Stay safe and let me know if you have any questions or comments! 

Steven

Beyond basic estate planning – helping your heirs sort it all out

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When we talk about estate planning, most people think of signing a will (some may even mention a revocable trust as well).  But having signed documents is only the beginning; not following through can still leave a mess for your heirs.  You need to go beyond the basic plan. 

The Basic Plan – means you executed a will and probably a revocable trust, updated beneficiary designations and changed ownership to match your documents to minimize estate taxes and control flow of your inheritance.  For this post, we assume you have a good plan (check out the post to be sure) and if you have not acted, please see estate planning checkup: why you don’t, why you should. 

Beyond Basic – is the focus of this post so you prepare the people who survive you so they can assemble the pieces you leave behind and make decisions.  We review this roughly in the order in which they will have to address everything and respond so nothing is left unresolved. 

Write notes or better provide a memorandum now

How do you address “beyond basic estate planning”?  One way is to have a detailed conversation or better yet to  provide a memorandum for your personal representative, trustee, children or close friend that can help them navigate all the steps required after your death.  Start by with telling them where to look for everything.  But a good “beyond basic estate planning” plan encompasses more than listing where to locate the documents you signed, it tells survivors who to notify (attorney, tax preparer, insurance agent), how to access your accounts on line or in person, and who gets what and when.  

Note:  make sure they know where your original will is located, as well as whom to contact.  Not having the original can cause problems.  Same for other originals like stock certificates and car titles. 

Notifications

When you die, the first step for your survivors will be to notify family and friends and to arrange for services.  Make sure your survivors know everyone you want them to contact or even who you don’t want attending your services.  Also, make sure they know if you want to be buried or cremated.  If you have a plot, let them know where.  If you envision a particular service, tell them. 

Beyond telling friends and family of your services, there will be more notifications:

Professionals – make sure they know your attorney and tax prep person so they can notify and they can be ready for their roles – more on this below.

Medical professionals – depending on your death, your family will want to make sure your family doctor and others are notified. 

Social Media – do you want them to post about your demise on social media? – more on this below.

Social Security – your heirs will need to inform the administration so that they stop your benefit.  Your spouse will need to sign up for the spousal benefit.  

Banks and investments – your heirs will need to let banks and brokers know so no one other than your personal representative tries to gain access. 

Board of directors or other office positions – if you are on a board or hold office, be sure survivors know whom to contact. 

Death certificate 

Soon after your death, a medical examiner will produce a death certificate.  That will be required for filing in probate, if necessary, and for access to benefits and accounts or making certain transfers.  Your personal representative will want to provide copies to your attorney but hold some copies for transferring accounts and titles.  

Internet age – social media and online accounts  

What do you want your heirs to do with your social media?  You want to avoid anyone gaining access and attempting identity theft.  Do you want them to leave your profile active for a period? 

Do you have shared accounts where you are the manager, such as a photo stream on your smartphone?  Be sure survivors know how to access and copy.  For instance, anything in an Apple photo stream disappears once the source photo is deleted so deleting your iPhone account could cause all photos taken by you to be lost and pictures you contributed to various photostreams will disappear.  Check with your provider to be sure how to archive what you want archived.

The same may apply to other items stored on your smartphone.  You may need to maintain your account until others access and save everything.  You can also setup cloud storage and make sure they know how to access. 

How do they access your online accounts?  How do they terminate all those subscriptions you never canceled?  Your memorandum should include information for key people that are likely to survive you.  They will need IDs and passwords for all your online accounts.  You may also want to provide access to your smartphone so they can use the apps that may have reward balances. 

With access to your online accounts, they can stop recurring payments, end subscriptions, and pay bills until they have access to your assets.  If your assets are already in trust, the trustee may be able to pay bills as required.  If your assets are not in trust, the personal representative will need to transfer them to estate accounts after being appointed. 

Make sure your list of all IDs and passwords identifies key accounts and is provided to somebody you trust so they can manage access until accounts are transferred. 

Assets and accounts

When listing your online accounts, provide a detailed list of all your assets so nothing is overlooked and ends up unclaimed.  Your survivors may be able to see the accounts on line and provide statements to your attorney. 

If you are holding assets for others or promised to make a gift (see below), be sure to state this in your memorandum. 

As noted above, they will need certain originals, like your will and titles to cars.  If you hold certificates for stocks or bonds, they will need to know where to look – a safe deposit box?  If you have cryptocurrency or other digital assets, they will need to know where your wallet is and how to access your accounts. 

Specific gifts of personal items

If you have items for which you have certain people in mind, make sure your personal representative knows.  As noted above, if you are holding items for others or have promised to make gifts, be sure your personal representative knows your intent.  You may also want certain personal items to go to specific people, such as heirlooms, jewelry, memorabilia, etc.  You may have signed a tangibles memorandum with your will; if not, be sure to list items and recipients.

Life insurance and benefits

If you have life insurance, make sure they know where the policy is and who handles it.  The personal representative will need to contact them to arrange payment to the policy beneficiaries. 

The same for any pension for survivors and other benefits. 

Retirement plans

If you have qualified plans, make sure beneficiaries know they will be receiving your account.  They may need a death certificate and have forms completed by the personal representative to have the account transferred to them as an inherited IRA. 

Tax returns

Notify your tax preparer so they know to advise on what needs to be filed.  They will file a tax return for the part of the year when you were living and then an estate return for the remainder. 

Conclusion

Think through all you do now and imagine what others would require in order to be able to do those things then write it down!  Save your survivors from having to be detectives. 

In the end, your memory will survive and you will be known for your deeds and how you treated others. 

Steven

A collection of thoughts and links for 2023 tax prep season

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Tax Season Tips and Links

As we gear up for tax season, here is a collection of thoughts and suggestions:

As noted previously, the TCJA expires after 2025, so we encourage planning for all those changes.  For some ideas, see our post on turn tax planning on its head for income taxes and see this post on estate planning.

When you work on your IRS form 1040 for 2023, how do you plan to answer the question on digital assets?  That question has changed over the years and now reads:

At any time during 2023, did you:  (a) receive (as a reward, award or payment for property or services); or (b) sell, exchange, gift or otherwise dispose of a digital asset (or a financial interest in a digital asset)? 

2023 form 1040

Some tax pros think this question covers items such as a ticket for events like the Super Bowl, as these are non-fungible tokens, or NFTs, being unique and recorded in digital ledgers.  Therefore, if you purchased such an NFT, you need to answer “yes.”  When in doubt, saying yes may be the best response.

We reported that the SECURE Act 2.0 allows for unused 529 plan contributions to go into a Roth IRAs.  Here is a planning suggestion for parents and grandparents:  start early with 529 plan contributions so that there is a surplus over college costs that can be converted to a Roth later, within the limits.  

There are also some significant cases before the Supreme Court we are watching, including the Moore case on unrealized income.  

The IRS continues to deal with a huge backlog of mail to process, including many amended returns.  They say that this is due to prioritizing answering calls over processing during the Pandemic.

And the IRS warns again to be wary of phishing attempts by phone, e-mail and text.  They have a page on phishing and how to respond.

Massachusetts changed the estate tax law so we now have a true exemption of $2 million.  This may tilt more toward planning to avoid capital gains rather than estate taxes.  

For more ideas, please see “Year-end Tax Planning 2023-2024 and recent changes” to read more and let us know if you want to discuss any of the strategies. 

Let me know if you want to discuss anything. 

Thank you and be well.

Steven

Tax planning while laws are still changing – turn it on its head?

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Many of the expected tax law changes have not materialized, but legislation remains in flux.  This means we plan year-end moves while we continue to monitor new legislation.  It is safe to bet that income tax rates will rise over the next several years.  This may mean putting year-end tax planning on its head, where you increase taxable income for 2021.  The goal is to lessen income ultimately taxed in future years.  However, you may not want to delay taking deductions until 2022 (so planning not completely on its head?)  For the standard approach, see our 2020 year-end post.

  • Roth Conversion – One way to increase income now, avoiding future income, is to convert part of an IRA to a Roth IRA, converting from taxable to non-taxable distributions in the future.  Decide on the amount to convert by projecting the impact of the conversion on your marginal tax rate.  Converting to a Roth also saves you from required minimum distributions, RMDs, in future years (but non-spouse beneficiaries still face the 10-year limit from the SECURE Act on IRA distributions). 
  • Back-Door Roth – Along with converting, the “back-door Roth” is still available, at least for 2021, so you can put more retirement funds aside with no tax on future distributions.  That is, for those who cannot contribute to a Roth due to income limits, they can contribute to a non-deductible IRA and then convert that IRA to a Roth IRA. If you have other IRAs, that may affect the amount that is taxed, so review this carefully first to see if it still makes sense.
  • More income – Other ways to increase income for 2021 include billing more for your S Corp., LLC or partnership in 2021, exercising stock options, and selling ESPP shares. 
  • Capital gains – You probably do not want to accelerate capital gains, as those should still be tax at a lower rate in future years. 

On to other considerations: first, SALT deductions

The limit on state and local taxes, or SALT, may increase from $10,000 to $80,000.  Also, a number of states have created pass-through entity elections so that the S Corp., LLC or partnership pays the tax and deducts against the income of the shareholder/member/partner.  This way, their net federal taxable income is reduced, and they get a credit for the payment on their personal tax returns. 

The SALT changes may affect your itemized deduction strategy if you are bunching.  

Check the details

  • Declare Crypto – If you had any crypto currency transactions during the year, selling, buying or receiving, be sure to declare on your federal 1040 filing.
  • Unemployment tax – Remember, unemployment benefits are fully taxable for 2021, so be sure you withheld taxes or paid estimates. 
  • Charities – If you cannot itemize, you still get up to $300 as an above the line charitable deduction, and up to $600 for a married couple. 
  • Child credits – There are changes in the credits for children and dependent care.  Let us know if you have questions on the benefits and strategies for maximizing.
  • Kiddie tax – The so-called kiddie tax has been restored to pre-TCJA terms, so you may want to review filings for the last two years.  
  • Address change – You will want to file form 8822B to indicate the change of address if your corporation, LLC or partnership moves.  On that form, you can also change the responsible party so that the IRS knows whom to contact – this is quite important if you sell your business!
  • IT PIN – If you are concerned about identity theft, consider obtaining an IT PIN as discussed in our post on IRS scams.  
  • Flex and retirement accounts – Check to see if you have any flex account balances that expire; contribute the maximum to your qualified plans; and setup a new qualified plan if you have a new business. 

Before you finish, check withholdings and estimates paid

Especially if you increase income in 2021, review your total paid to the IRS and state via withholdings and estimates make sure that you meet the safe harbor rules.  If not, you could owe interest for under-withholding.

IRS disaster relief 

Have you received a penalty notice from the IRS?  The Pandemic was declared a federal disaster.  This means it may provide an exemption to the penalties if you can show that you suffered from the Pandemic. 

And remember your estate plan review

While you review your taxes, review your estate plan as well.  The federal gift and estate tax credit  is close to $12 million for 2021, but that may change in 2022.  So, if you have excess wealth, you may want to gift while you can, especially if you want to use certain trusts, like a GRAT or QPRT, that may no longer be permitted in future years.  For more on estate planning updates, see our estate planning checkup post. 

Update: the annual exclusion for gifts rises from $15,000 per person, per year to $16,000 next year.

  • If you do review your estate plan documents, also review beneficiary designations and asset ownership to make sure everything is current and flows correctly. 

Summary

As you review your 2021-2022 tax planning, consider the impact of future tax rate increases: will bringing future income into 2021 avoid taxes on future income?  Then follow through on the details. 

Let us know if you have any questions. 

Good luck and best wishes for happy and healthy holidays!

How not to fall for Phishy IRS calls and other Scams

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These days, nearly all of us get calls, e-mails and text messages trying to gain access to our finances.  You have probably seen or heard of the call “from Amazon” about a new iPhone order, the call “from Social Security” indicating that your number has been suspended, which requires your immediate action with someone on the phone, the e-mail with a “voicemail message” attached for you to click on to hear, and the e-mail with an “invoice” for you to approve.  There are many more forms and styles, and more keep coming.

This post focuses on the calls purporting to be from the IRS, and the purpose of this post is to help make you more wary so you do not fall victim to any of these scams. 

The IRS recently posted its dirty dozen for 2021, a list of scams that focuses on Pandemic-related scams, like unemployment claims, but also fake charities, urgently seeking donations, and offer in compromise scams, claiming to have ways to reduce your taxes owed.  There are other scams that target elderly or people for whom English is a second language.  And some scams offer to file conservation easements and improper business credit claims for you.   

Calls “from the IRS”

The call insisting that you owe the IRS and need to pay is a scan that has been around for some time.  The IRS website, and the recorded message when you are on hold contacting the IRS, says:

  • The IRS won’t initiate contact by phone, email, text or social media asking for Social Security numbers or other personal or financial information. 
  • The IRS generally first contacts people by mail – not by phone – about unpaid taxes.
  • The IRS may attempt to reach individuals by telephone but will not insist on payment using an iTunes card, gift card, prepaid debit card, money order or wire transfer.
  • The IRS will never request personal or financial information by e-mail, text or social media.

Furthermore, the IRS will ask you to confirm your identity before discussing any tax matters with you. 

Protect your tax filings

To help insure that no one can file under your social security number, the IRS suggests obtaining an ID PIN for filing your tax returns.  The PIN is now available to all taxpayers; you include it when you file your tax returns so that the IRS can verify that it is you filing.  This prevents others from filing bogus refund claims under your social security number. 

You can also include your driver’s license when filing, so the IRS and state revenue departments can verify that it is you filing, not an imposter. 

Be Vigilant

To protect your finances, you need to be vigilant.  Before you answer the phone, what does the caller ID say?  Is it a legit company or “unknown”?  Before you respond to an e-mail, does the address look like a real customer service company site or something random?  Is the grammar or content in the call or message off?  If it seems off, it probably is. 

Usually, you can find safe and easy ways to confirm the information in question by placing your own call or logging onto the related website online, rather than responding directly. 

The IRS recommends setting up multi-factor identification to access your financial information.   The IRS suggests more steps here:

  • Using anti-virus software and set it for automatic updates. Anti-virus software scans existing files and drives on computers – and mobile phones – to protect from malware.
  • Using a firewall to shield digital devices from external attacks.
  • Using backup software/services to protect data. Making a copy of files can be crucial, especially if the user becomes a victim of a ransomware attack.
  • Using drive encryption to secure computer locations where sensitive files are stored.  Encryption makes data on the files unreadable to unauthorized users.
  • Creating and securing Virtual Private Networks. A VPN provides a secure, encrypted tunnel to transmit data between a remote user via the Internet and the company network. Search for “Best VPNs” to find a legitimate vendor; major technology sites often provide lists of top services.

Conclusion

If something smells “phishy,” it probably is.  So be cautious, even suspicious of interaction asking for personal and financial information.  Set up two-factor verification and an IRS PIN.  And let me know if you have questions or concerns.  I will try to help.