Each year, the IRS publishes its list of the “dirty dozen” tax scams. This list is a variety of common scams that taxpayers may encounter anytime. Don’t fall prey!
Urgent appeals for aid – whether in person, over the phone, by mail, via e-mail, on a website, or through a social networking site – may not be on the up-and-up. Fraudsters pop up after natural disasters such as earthquakes and floods to try to coax people into making donations that will go into the fraudsters’ pockets – not to help victims of the disaster.
Unfortunately, legitimate charities face competition from fraudsters, so if you are thinking about giving to a charity with which you are not familiar, do your research so that you can avoid the swindlers who are trying to take advantage of your generosity. Here are tips to help make sure that your charitable contributions actually go to the cause that you support:
- Donate to charities that you know and trust. Be alert for charities that seem to have sprung up overnight in connection with current events.
- Ask if a caller is a paid fundraiser, who he/she works for, and what percentages of your donation go to the charity and to the fundraiser. If you don’t get clear answers – or if you don’t like the answers you get – consider donating to a different organization.
- Don’t give out personal or financial information — such as your credit card or bank account number – unless you know for sure that the charity is reputable.
- Never send cash. You can’t be sure that the organization will receive your donation, and you won’t have a record for tax purposes.
- Never wire money to someone who claims to be from a charity. Scammers often request donations to be wired because wiring money is like sending cash: Once you send it, you can’t get it back.
- If a donation request comes from a charity that claims to help a local community group (for example, police or firefighters), ask members of that group if they have heard of the charity and if it is actually providing financial support.
- Check out the charity’s reputation using the Better Business Bureau’s (BBB) Wise Giving Alliance, Charity Navigator, or Charity Watch.
Remember that, to deduct a charitable contribution on your tax return, the donation must be to a legitimate charity. Contributions may only be deducted if they are to religious, charitable, scientific, educational, literary, or other institutions that are incorporated or recognized as organizations by the IRS. Sometimes, these organizations are referred to as 501(c)(3) organizations (after the code section that allows them to be tax-exempt). Gifts to federal, state, or local government, qualifying veterans’ or fraternal organizations, and certain nonprofit cemetery companies also may be deductible. Gifts to other kinds of nonprofits, such as business leagues, social clubs, and homeowner’s associations, as well as gifts to individuals, cannot be deducted.
To claim a cash contribution, you must be able to document that contribution with a bank record, receipt, or a written communication from the qualified organization; this record must include the name of the qualified organization, the date of the contribution, and the amount of the contribution. Valid types of bank records include canceled checks, bank or credit union statements, and credit card statements. In addition, to deduct a contribution of $250 or more, you must have certain payroll deduction records or an acknowledgment of your contribution from the qualified organization.
Be aware that, to claim a charitable contribution, you must also itemize your deductions. It may also be beneficial for you to group your deductions in a single year and then to skip deductions in the next year. Please contact Dagley & Co. if you have questions related to the tax benefits associated with charitable giving for your particular tax situation.
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The holiday season is quickly approaching. With this, means charity donations. Little do some people know, it is also the time of year when scammers show up in force, pretending to be legitimate charities in hopes of swindling you. Even though this next few months will be busy, do not overlook the documentation needed to verify your generosity for tax purposes. Check out these tips for charitable giving:
Documentation – To claim a charitable deduction, you must itemize your deductions; if you don’t, there is no need to keep any records of your donations. There are two types of charitable gifts: monetary and property.
Monetary donations include those made by cash, check, credit card, or other means. This type of contribution is only deductible if the donor maintains a record of the contribution in the form of either a bank record (such as a cancelled check) or a written communication from the charity (such as a receipt or a letter) showing the name of the charity, the date of the contribution, and the amount of the contribution. In addition, if the contribution is $250 or more, the donor must also get an acknowledgment from the charity for each deductible donation. Keep in mind that dropping cash in a holiday donation kettle without any documentation is not deductible.
Non-cash holiday contributions to organizations such as Toys for Tots and to seasonal food drives by recognized charities are also deductible. The deductible amount is the fair market value (FMV) of the items at the time of the donation, and you must document your donation with a detailed list of what was given and the name of the charity receiving the gift. Where the FMV of your gifts is $250 or more, you must also obtain an acknowledgment from the charity for each deductible donation. When gifts of property are $500 or more, there are additional record keeping requirements, so please call for details if you plan to make gifts of this value.
Watch Out for Charity Scams – To avoid scammers getting your charitable donations, make sure you are contributing to a legitimate charity and not to a bunch of crooks who work overtime during the holidays to trick you out of money.
Be wary of charities with names that are similar to familiar or nationally known organizations. Some phony charities use names or websites that sound or look like those of respected, legitimate organizations.
When in doubt, you should take a few extra minutes to ensure your gifts are going to legitimate charities. IRS.gov has a search feature—Exempt Organizations Select Check—that allows you to find legitimate, qualified charities to which donations may be tax deductible.
Disaster Scams – In the wake of significant natural disasters, such as Hurricane Matthew, it’s common for scam artists to impersonate charities to get money or private information from well-intentioned taxpayers. Scam artists use a variety of tactics including contacting people by telephone or email to solicit money or financial information, and they may even set up phony websites that claim to solicit funds on behalf of disaster victims.
Watch Out for ID Thieves – Don’t give out personal financial information such as your Social Security number or passwords to anyone who solicits a contribution from you. Scam artists may use this information to steal your identity and money. Using a credit card to make legitimate donations is quite common, but please be very careful when you are speaking with someone who called you; don’t give out your credit card number unless you are certain the caller represents a legal charity.
Don’t be a victim! Make sure you are donating to recognized charities. If you have questions, please give us a call at (202) 417-6640.
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Have scammers impersonating IRS agents called you yet? The Treasury Inspector General for Tax Administration (TIGTA) has indicated it is making significant progress in its investigation of the IRS impersonation scams that are sweeping the nation, causing reported taxpayer losses of more than $36 million and averaging more than $5,700 per taxpayer. To date, TIGTA has logged approximately 1.2 million calls reported by taxpayers, and nearly 6,400 people have reported that IRS impersonators have fleeced them.
In one instance, a taxpayer was so convinced the scammer was an IRS agent he rushed off to make a payment and was involved in a traffic accident. He was so worried about the scammer’s threats of legal action that he actually left the scene of the accident so he could promptly get the funds wired to the scammer. In this case TIGTA was able to trace the victim’s wire transfer and ultimately nabbed a ring of five scammers.
But these stories generally don’t have happy endings, so it is important for everyone to understand that the IRS never demands payment by wire, MoneyGram, debit cards or the like, and it always makes initial contact by mail.
Protect Yourself and Loved Ones from Being a Scam Victim: First, hang up on callers claiming to be IRS agents, IRS collection agents or state taxing authorities demanding immediate payments. They are not legitimate. Second, take the time to educate your loved ones, especially those who might be vulnerable, about these scams and take steps necessary to protect them from scams. Third, call Dagley & Co. if you need assurances or wish to confirm you do not have an outstanding balance with a tax authority. Lastly, report scams and attempted scams on the TIGTA website.
Protect Against Identity Theft – In addition to scammers, watch out for those ID thieves out there looking for vulnerable IDs to steal. You may think it will never happen to you, but if it does, it will become a nightmare and could take years to straighten out. So you need to protect yourself against ID theft by limiting the exposure of your personal and financial information as much as possible.
What do ID thieves need to create havoc for you? Your name, Social Security number and birth date! Here are some tips to limit your ID exposure: First, don’t carry your Social Security card – or any document that includes your Social Security number (SSN), for that matter – in your wallet, purse or briefcase. Your Social Security card combined with your driver’s license provides scammers with the three pieces of information they need. Second, don’t give out either your SSN or your birth date without questioning the need and making sure it is a legitimate request and really necessary. Third, limit the number of credit cards and credit accounts you have. Each account has your SSN, so the more accounts you have, the greater the chance you’ll be caught up in a data breach and your ID will be compromised. It is far easier to deal with one credit card company than several if your ID is breached. Fourth, be proactive and periodically change the passwords for your online accounts that include sensitive financial information. It is a pain, but it could avoid you a major headache. Fifth, although only the last four digits of your SSN are used on most financial documents, you should still pay close attention to documents that include your full SSN or birth date. Limit their duplication and distribution and ensure they are properly disposed of when you discard them. Sixth, never include your SSN, birthdate or other sensitive financial information in an e-mail or in documents attached to an e-mail.
Use common sense and follow the “need-to-know” rule when disclosing your financial information. Careless safeguarding of your information can lead to big problems.
Think Your ID Has Been Compromised? You should immediately:
File a complaint with the Federal Trade Commission at www.identitytheft.gov and complete a report. In addition to taking the report, the site will develop an ID Theft Affidavit that you can use when reporting the ID theft to creditors and others. The site will also walk you through various steps to be taken depending upon the specifics of your ID theft.
Contact one of the three major credit bureaus to place a “fraud alert” on your credit records and review your credit report for fraudulent activity: Equifax, www.Equifax.com, 1-800-766-0008; Experian, www.Experian.com, 1-888-397-3742; TransUnion, www.TransUnion.com, 1-800-680-7289.
Contact your financial institutions and close any financial or credit accounts opened without your permission or tampered with by identity thieves.
Report any fraud to your local police and retain a copy of the police report to use when reporting fraud to other agencies or creditors.
You should also contact this office immediately so steps can be taken to avoid fraudulent returns being filed using your SSN. Even if someone has already e-filed a return and claimed a refund under your SSN, your refund may still be safe.
However, you cannot e-file and instead must file a paper return with the proper documentation; you will ultimately receive the refund you are due, but it will be severely delayed. Once the IRS recognizes that your SSN was used to file a fraudulent return, it will block your SSN from filing and assign you an alternative filing number for the subsequent year.
For more information on how and what to file when someone else has filed using your SSN, please contact Dagley & Co.
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It’s bad enough getting a call or email from the IRS, but it’s even worse if it’s fake. Yup, thieves use taxpayers’ natural fear of the IRS and other government entities to ply their scams, including e-mail and phone scams, to steal people’s money. They also use phishing schemes to trick people into divulging their SSNs, dates of birth, account numbers, passwords and other personal data that allow them to scam the IRS and others using someone’s name and destroy their credit in the process. They are clever and are always coming up with new and unique schemes to trick people, including you.
These scams have reached epidemic proportions, and this article will hopefully provide you with the knowledge to identify scams and avoid becoming a victim.
The very first thing you should be aware of is that the IRS never initiates contact in any other way than by U.S. mail. This means if you receive an e-mail or a phone call out of the blue with no prior contact, then it is a scam. DO NOT RESPOND to the e-mail or open any links included in the e-mail. If it is a phone call, simply HANG UP.
Additionally, it is important for taxpayers to know that the IRS:
- Never asks for credit card, debit card, or prepaid card information over the telephone.
- Never insists that taxpayers use a specific payment method to pay tax obligations.
- Never requests immediate payment over the telephone.
- Will not take enforcement action immediately following a phone conversation. Taxpayers usually receive prior written notification of IRS enforcement action involving IRS tax liens or levies.
Potential phone scam victims may be told that they owe money that must be paid immediately to the IRS or, on the flip side, that they are entitled to big refunds. When unsuccessful the first time, sometimes phone scammers call back trying a new strategy. Other characteristics of these scams include:
- Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.
Scammers may be able to recite the last four digits of a victim’s Social Security number. Make sure you do not provide the rest of the number or your birth date.
- Scammers alter the IRS toll-free number that shows up on caller ID to make it appear that the IRS is calling.
- Scammers sometimes send bogus IRS e-mails to some victims to support their bogus calls.
- Victims hear background noise of other calls being conducted to mimic a call site.
- After threatening victims with jail time or driver’s license revocation, scammers hang up. Soon, others call back pretending to be from the local police or DMV, and the caller ID supports their claim.
DON’T GET TRICKED. This is a scam. If you get a phone call from someone claiming to be from the IRS, DO NOT give the caller any information or money. Instead, you should immediately hang up. Call this office if you are concerned about the validity of the call.
IRS E-Mail Scam
Always remember, the first contact you will receive from the IRS will be by U.S. mail. If you receive e-mail or a phone call claiming to be from the IRS, consider it a scam.
Do not respond or click through to any embedded links. Instead, help the government combat these scams by forwarding the e-mail to email@example.com.
Unscrupulous people are out there dreaming up schemes to get your money. They become very active toward the end of the year and during tax season. They create bogus e-mails disguised as authentic e-mails from the IRS, your bank, or your credit card company, none of which ever request information that way. They are trying to trick you into divulging personal and financial information they can use to invade your bank accounts, make charges against your credit card or pretend to be you to file phony tax returns or apply for loans or credit cards. Don’t be a victim.
Scammers become very active toward the end of the year and during tax season.
What they try to do is trick you into divulging your personal information, such bank account numbers, passwords, credit card numbers, Social Security numbers, etc.
You need to be very careful when responding to e-mails asking you to update such things as your account information, pin number, password, etc. First and foremost, you should be aware that no legitimate company would make such a request by e-mail. If you get such e-mails, they should be deleted and ignored, just like spam e-mails.
We have seen bogus e-mails that looked like they were from the IRS, well-known banks, credit card companies and other pseudo-legitimate enterprises. The intent is to trick you and have you click through to a website that also appears legitimate where they have you enter your secure information. Here are some examples:
- E-mails that appeared to be from the IRS indicating you have a refund coming and that IRS official need information to process the refund. The IRS never initiates communication via e-mail! Right away, you know it is bogus. If you are concerned, please feel free to call this office.
- E-mails from a bank indicating it is holding a wire transfer and needs your bank routing information and account number. Don’t respond; if in doubt, call your bank.
- E-mails saying you have a foreign inheritance and require your bank information to wire the funds. The funds that will get wired are yours going the other way. Remember, if it is too good to be true, it generally is not true.
We could go on and on with examples. The key here is for you to be highly suspicious of any e-mail requesting personal or financial information.
What’s in Your Wallet?
What is in your wallet or purse can make a big difference if it is stolen. Besides the credit cards and whatever cash or valuables you might be carrying, you also need to be concerned about your identity being stolen, which is a far more serious problem. Thieves can use your identity to set up phony bank accounts, take out loans, file bogus tax returns and otherwise invade your finances, and all an identity thief needs to be able to do these things is your name, Social Security number, and birth date.
Think about it: your driver’s license has two of the three keys to your identity. And if you also carry your Social Security card or Medicare card, bingo! An identity thief then has all the information he needs.
You can always cancel stolen credit cards or close compromised bank and charge accounts, but when someone steals your identity and opens accounts you don’t know about, you can’t take any mitigating action.
So if you carry your Social Security card along with your driver’s license, you may wish to rethink that habit for identity-safety purposes.
What You Should NEVER Do:
Never provide financial information over the phone, via the Internet or by e-mail unless you are absolutely sure of with whom you are dealing. That includes:
- Social Security Number– Always resist giving your Social Security number to anyone. The more firms or individuals who have it, the greater the chance it can be stolen.
- Birth Date– Your birth date is frequently used as a cross check with your Social Security number. A combination of birth date and Social Security number can open many doors for ID thieves. Is your birth date posted on social media? Maybe it should not be! That goes for your children, as well.
- Bank Account and Bank Routing Numbers– These along with your name and address will allow thieves to tap your bank accounts. To counter this threat, many banks now provide automated e-mails alerting you to account withdrawals and deposits.
- Credit/Debit Card Numbers– Be especially cautious with these numbers, since they provide thieves with easy access to your accounts.
There are individuals whose sole intent is to steal your identity and sell it to others. Limit your exposure by minimizing the number of charges and credit card accounts you have. The more accounts have your information, the greater the chances of it being stolen. Don’t think all the big firms are safe; there have been several high-profile database breaches in the last year.
Phishing (pronounced “fishing”) is the attempt to acquire sensitive information such as usernames, passwords, and credit card details (and sometimes, indirectly, money) by masquerading as a trustworthy entity in an electronic communication.
Communications purporting to be from popular social websites, auction sites, banks, online payment processors or IT administrators are commonly used to lure the unsuspecting public. Phishing e-mails may contain links to websites that are infected with malware. Phishing is typically carried out by e-mail spoofing or instant messaging, and it often directs users to enter details into a fake website that looks and feels almost identical to a legitimate one.
In the meantime, imagine trying to file your return and it gets rejected as already filed. You attempt to get a copy of the return but can’t because you don’t have the ID of the other unfortunate taxpayer who was used as the other spouse on the return. All the while, the scammers are enjoying their ill-gotten gains with impunity.
If you received a phone call or email from the IRS and you have questions about it, please don’t hesitate to get in touch with us at Dagley & Co.
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As the end of the year approaches, you will probably be besieged by requests from charitable organizations for contributions. The holiday season is the favorite time of the year for charities to solicit donations.
But you should be aware that it is also the time of year when scammers show up in force, pretending to be legitimate charities in hopes of deceiving you into giving them your hard-earned money.
When making a donation, you should take a few extra minutes to ensure your gifts are going to legitimate charities. IRS.gov has a search feature, Exempt Organizations Select Check, which allows people to find legitimate, qualified charities to which donations may be tax-deductible.
Here are some tips to make sure your contributions are going to legitimate charities.
- Be wary of charities with names that are similar to familiar or nationally known organizations. Some phony charities use names or websites that sound or look like those of respected, legitimate organizations.
- Don’t give out personal financial information, such as Social Security numbers or passwords, to anyone who solicits a contribution from you. Scam artists may use this information to steal your identity and money. Using a credit card to make legitimate donations is quite common, but please be very careful when you are speaking with someone who called you; don’t give out your credit card number unless you are certain the caller represents a legal charity.
- Don’t give or send cash. For security and tax record purposes, contribute by check or credit card or another way that provides documentation of the gift.
Another long-standing type of abuse or fraud involves scams that occur in the wake of significant natural disasters. In the aftermath of major disasters, it’s common for scam artists to impersonate charities to get money or private information from well-intentioned taxpayers. Scam artists can use a variety of tactics. Some scammers operating bogus charities may contact people by telephone or email to solicit money or financial information and may set up phony websites that claim to solicit funds on behalf disaster victims. Unscrupulous individuals may even directly contact disaster victims and claim to be working for or on behalf of the IRS to help the victims file casualty loss claims to get tax refunds.
Scammers may also attempt to get personal financial information or Social Security numbers that can be used to steal the victims’ identities or financial resources. Disaster victims with specific questions about tax relief or disaster-related tax issues may call a special IRS toll-free disaster assistance telephone number (1-866-562-5227) for information.
Don’t be scammed; make sure you are donating to recognized charities. Deductions to charities that are not legitimate are not tax deductible. If you have questions, please get in touch with us at Dagley & Co.
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‘Tis almost the time of year for gift giving: friends, family, and of course, charitable giving. Before you write those charity checks, though, you should also be aware that there are fraudsters out there who solicit on behalf of bogus charities or who aren’t entirely honest about how a so-called charity will use your contribution.
Solicitations for aid that you get in person, by phone or mail, by e-mail, on websites or on social networking sites may not be who they say they are. Fraudsters also pop up whenever there are natural disasters such as earthquakes, floods, etc., trying to coax you into making a donation that will go into their pockets, not to help victims of the disaster.
Unfortunately, legitimate charities face competition from fraudsters. If you are thinking about giving to a charity with which you are not familiar, do your research to avoid swindlers who try to take advantage of your generosity.
Here are tips to help make sure that your charitable contributions actually go to the cause you support:
• Donate to charities you know and trust. Be alert for charities that seem to have sprung up overnight in connection with current events.
• Ask if a caller is a paid fundraiser, who he/she works for, and what percentage of your donation goes to the charity and to the fundraiser. If you don’t get a clear answer – or if you don’t like the answer you get – consider donating to a different organization.
• Don’t give out personal or financial information – including your credit card or bank account number – unless you know for sure that the charity is reputable.
• Never send cash: you can’t be sure the organization will receive your donation, and you won’t have a record for tax purposes.
• Never wire money to someone who claims to be a charity. Scammers often request donations to be wired because wiring money is like sending cash: once you send it, you can’t get it back.
• If a donation request comes from a group claiming to help your local community (for example, local police or firefighters), ask the local agency if they have heard of the group and are getting financial support therefrom.
• Check out the charity with the Better Business Bureau’s (BBB) Wise Giving Alliance, Charity Navigator, Charity Watch, or GuideStar.
One of the upsides of being able to give to a cause you care about is having the ability to deduct that charitable contribution on your tax return. In order to do this, it must be a legitimate charity. Contributions to religious, charitable, scientific, educational, literary, and other institutions that are incorporated or recognized as organizations by the IRS may be deducted. Sometimes these organizations are referred to as 501(c)(3) organizations after the code section that allows them to be tax-exempt. Gifts to state and local government, the federal government, qualifying veterans and fraternal organizations, and certain nonprofit cemetery companies also may be deductible. Gifts to other kinds of nonprofits, such as business leagues, social clubs and homeowner’s associations, as well as to individuals, cannot be deducted.
To claim a cash contribution, you must be able to document the contribution with a bank record that includes the name of the qualified organization, the date of the contribution, and the amount of the contribution or a receipt (or a letter or other written communication) from the qualified organization that shows the same information. Bank records may include a canceled check, a bank or credit union statement, or a credit card statement. In addition, to deduct a contribution of $250 or more, you must have an acknowledgment of your contribution from the qualified organization or certain payroll deduction records.
Be aware that, to claim a charitable contribution, you must also itemize your deductions. It may also be beneficial for you to bunch your deductions in one year and skip the next. Please contact Dagley & Co. if you have questions related to charitable giving tax benefits associated with your particular tax situation.
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Dagley & Co. has worked with and around money for over a decade now, and I believe that the vast majority of Americans are honest, hard-working people. However, it never ceases to amaze me what unscrupulous people in our world will do for a dollar. My industry has its fair share of unethical characters, and some have dominated the news in past years.
At Dagley & Co, we won’t sell our reputation for a dollar. We have had clients give bad reviews and insult our competence simply because we wouldn’t compromise our ethics in order to get them more money. It stinks, but we believe our long term reputation is worth far more than a little extra business by bending the rules.
Why do I bring this up? The IRS has issued another warning recently about phone scammers. Highlights from the warning include 90,000 complaints, 1,100 victims, and losses exceeding $5 million. Taxpayers should remember their first contact with the IRS will not be a call from out of the blue, but through official correspondence sent through the mail. A big red flag for these scams is an angry, threatening call from someone who says he or she is from the IRS and urging immediate payment. This is not how the IRS operates. If you receive such a call, you should hang up immediately.
Additionally, it is important for taxpayers to know that the IRS:
• Never asks for credit card, debit card, or prepaid card information over the telephone.
• Never insists that taxpayers use a specific payment method to pay tax obligations.
• Never requests immediate payment over the telephone.
• Will not take enforcement action immediately following a phone conversation. Taxpayers usually receive prior written notification of IRS enforcement action involving IRS tax liens or levies.
Potential phone scam victims may be told that they owe money that must be paid immediately to the IRS; or, on the flip side, that they are entitled to big refunds. When unsuccessful the first time, sometimes phone scammers call back trying a new strategy. Other characteristics of these scams include:
• Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.
• Scammers may be able to recite the last four digits of a victim’s Social Security number. Make sure you do not provide the rest of the number or your birth date – that is information ID thieves can use to make your life miserable.
• Scammers spoof the IRS toll-free number on caller ID to make it appear that it’s the IRS calling.
• Scammers sometimes send bogus IRS e-mails to some victims to support their bogus calls.
• Victims hear background noise of other calls being conducted to mimic a call site.
• After threatening victims with jail time or driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.
DON’T GET DECEIVED…it is a scam. If you get a phone call from someone claiming to be from the IRS, DO NOT give the caller any information or money. Instead, you should immediately hang up. Of course the best thing that you can do is hire Dagley & Co. to handle your taxes. When you choose to do business with us, we can assist you with any communications that you have with the IRS. That way, you can simply reach out to us and we can take care of it and you can be assured that you won’t be scammed.