TAX SCAM ALERT: IRS Announcement

Scam Alert: IRS Urges Taxpayers to Watch Out for Erroneous Refunds; Beware of Fake Calls to Return Money to a Collection Agency 

WASHINGTON – The Internal Revenue Service today warned taxpayers of a quickly growing scam involving erroneous tax refunds being deposited into their bank accounts. The IRS also offered a step-by-step explanation for how to return the funds and avoid being scammed.

Following up on a Security Summit alert issued Feb. 2, the IRS issued this additional warning about the new scheme after discovering more tax practitioners’ computer files have been breached. In addition, the number of potential taxpayer victims jumped from a few hundred to several thousand in just days. The IRS Criminal Investigation division continues its investigation into the scope and breadth of this scheme.

These criminals have a new twist on an old scam. After stealing client data from tax professionals and filing fraudulent tax returns, these criminals use the taxpayers’ real bank accounts for the deposit.

Thieves are then using various tactics to reclaim the refund from the taxpayers, and their versions of the scam may continue to evolve.

 

Different Versions of the Scam

In one version of the scam, criminals posing as debt collection agency officials acting on behalf of the IRS contacted the taxpayers to say a refund was deposited in error, and they asked the taxpayers to forward the money to their collection agency.

In another version, the taxpayer who received the erroneous refund gets an automated call with a recorded voice saying he is from the IRS and threatens the taxpayer with criminal fraud charges, an arrest warrant and a “blacklisting” of their Social Security Number. The recorded voice gives the taxpayer a case number and a telephone number to call to return the refund.

As it did last week, the IRS repeated its call for tax professionals to step up security of sensitive client tax and financial files.

The IRS urged taxpayers to follow established procedures for returning an erroneous refund to the agency. The IRS also encouraged taxpayers to discuss the issue with their financial institutions because there may be a need to close bank accounts. Taxpayers receiving erroneous refunds also should contact their tax preparers immediately.

Because this is a peak season for filing tax returns, taxpayers who file electronically may find that their tax return will reject because a return bearing their Social Security number is already on file. If that’s the case, taxpayers should follow the steps outlined in the Taxpayer Guide to Identity Theft. Taxpayers unable to file electronically should mail a paper tax return along with Form 14039, Identity Theft Affidavit, stating they were victims of a tax preparer data breach.

Here are the official ways to return an erroneous refund to the IRS.

Taxpayers who receive the refunds should follow the steps outlined by Tax Topic Number 161Returning an Erroneous Refund. The tax topic contains full details, including mailing addresses should there be a need to return paper checks. By law, interest may accrue on erroneous refunds.

If the erroneous refund was a direct deposit:

  1. Contact the Automated Clearing House (ACH) department of the bank/financial institution where the direct deposit was received and have them return the refund to the IRS.
  2. Call the IRS toll-free at 800-829-1040 (individual) or 800-829-4933 (business) to explain why the direct deposit is being returned.

If the erroneous refund was a paper check and hasn’t been cashed:

  1. Write “Void” in the endorsement section on the back of the check.
  2. Submit the check immediately to the appropriate IRS location listed below. The location is based on the city (possibly abbreviated) on the bottom text line in front of the words TAX REFUND on your refund check.
  3. Don’t staple, bend, or paper clip the check.
  4. Include a note stating, “Return of erroneous refund check because (and give a brief explanation of the reason for returning the refund check).”

The erroneous refund was a paper check and you have cashed it:

  • Submit a personal check, money order, etc., immediately to the appropriate IRS location listed below.
  • If you no longer have access to a copy of the check, call the IRS toll-free at 800-829-1040 (individual) or 800-829-4933 (business) (see telephone and local assistance for hours of operation) and explain to the IRS assistor that you need information to repay a cashed refund check.
  • Write on the check/money order: Payment of Erroneous Refund, the tax period for which the refund was issued, and your taxpayer identification number (social security number, employer identification number, or individual taxpayer identification number).
  • Include a brief explanation of the reason for returning the refund.
  • Repaying an erroneous refund in this manner may result in interest due the IRS.

 

IRS mailing addresses for returning paper checks

For your paper refund check, here are the IRS mailing addresses to use based on the city (possibly abbreviated). These cities are located on the check’s bottom text line in front of the words TAX REFUND:

 

Source: IRS Newswire, an IRS e-mail service.

Feel free to call us if you have any questions.

Weekly Market Notes – March 26, 2018

Weekly_Market_Notes

For the Week of March 26, 2018

The Markets

After President Trump announced plans for tariffs on up to $60 billion in Chinese goods, investors worried about a potential U.S. trade war with China. The three major indexes took their biggest weekly falls since January 2016. For the week, the Dow fell 5.67 percent to close at 23,533.20. The S&P lost 5.93 percent to finish at 2,588.26, and the NASDAQ dropped 6.54 percent to end the week at 6,992.67.

Returns Through 3/23/18 1 Week YTD 1 Year 3 Year 5 Year
Dow Jones Industrials (TR) -5.67 -4.28 16.61 11.88 12.88
NASDAQ Composite (PR) -6.54 1.29 20.20 11.75 16.60
S&P 500 (TR) -5.93 -2.76 12.52 9.41 13.03
Barclays US Agg Bond (TR) 0.03 -1.97 0.85 1.04 1.75
MSCI EAFE (TR) -2.58 -2.54 13.93 4.30 6.16

Source: Morningstar.com. *Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, Barclays US Agg Bond and S&P, excluding “1 Week” returns, are based on total return, which is a reflection of return to an investor by reinvesting dividends after the deduction of withholding tax. The NASDAQ is based on price return, which is the capital appreciation of the portfolio, excluding income generated by the assets in the portfolio in the form of interest and dividends. (TR) indicates total return. (PR) indicates price return. MSCI EAFE returns stated in U.S. dollars.

 

O Canada! — Canada was the No. 1 source of both U.S. steel imports and U.S. aluminum imports in 2017, having sold the United States 5.5 million metric tons of steel and 3.3 million metric tons of aluminum (source: Commerce Department, BTN Research).

Just Put It on the Card — Legislation signed into law by President Donald Trump on Feb. 9, 2018, suspended our debt ceiling limit until March 1, 2019, i.e., there is no statutory limit on our nation’s borrowing until then. The debt limit has been raised, temporarily extended or suspended 78 times since 1960 (source: Treasury Department, BTN Research).

Starting Date — Forty-eight percent of women and 42 percent of men begin taking their monthly Social Security retirement benefits at age 62, the earliest age possible. Just 4 percent of women and just 2 percent of men delay taking their Social Security retirement benefits to age 70 or older (source: Social Security Administration, BTN Research).

 

WEEKLY FOCUS – How Much Do You Really Need To Retire?

How much do you need to retire? Simple question – no easy answer. Everyone has their own number, and there are many ways to calculate it.

Some methods are based on your annual salary. For example, one method recommends that by age 30, you should have the equivalent of your annual salary set aside. By age 35, twice your annual salary; by age 40, three times; age 45, four times – increasing the multiplier each five years until by age 65 you have eight times your annual salary set aside.

A similar rule-of-thumb is to have the equivalent of your salary saved by age 30 and have 10 times your final salary saved (if you want to retire by age 67).  But it should be noted that unlike this method, life is not linear – for example, you may have to adjust for major life events.

Other methods are based on your anticipated annual expenses – how much you’ll need to support your retirement lifestyle. To determine that figure, you’ll need to imagine what your retirement life will look like and then establish fixed versus discretionary costs. (One of the hardest costs to project and control will probably be healthcare. In fact, it may even be the biggest expense you have during retirement.)

It might be easier to anticipate fixed costs, like rent or other living expenses, than try to come up with lifestyle costs, such as entertainment or travel. But it’s important to establish the full picture of retirement finances. Knowing how much you’ll need to withdraw annually will help establish a savings goal.

One such expenses-based method, the 4 percent rule, theorizes you need enough saved to be able to meet your annual expenses of year one of retirement by withdrawing 4 percent of your savings. It’s more of a guideline than a rule, and there are several variations that have been developed since it was first presented in 1994. Factors that affect these models include the economy, asset allocation and the kind of retirement lifestyle you want to live.

Call our office today. We can help you imagine your retirement lifestyle and set a financial goal that works for you.

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* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America, Copyright March 2018. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI#2069120.1

Market Update – 3/23/18 – “Tariff Tantrum”

The financial market is now truly global in nature and favors a free-trade environment.  The imposition of tariffs raises concerns for a trade war, which would hurt all parties involved.

On March 22, 2018 the Trump administration announced tariffs on some $60 Billion of imports from China.  This set off a “tariff tantrum” in the financial markets.  Stocks sold off by almost 3%, while safe haven assets like US Treasuries and Gold rose in value.

China almost immediately responded by imposing tariffs on numerous US goods exported to China.

The uncertainty caused by these back and forth tariffs will likely lead to increased volatility in the markets over the next few days and weeks.  I would not be surprised to see stocks re-test the low from early February 2018, which is approximately 4% below the current level.

So far the selling has been orderly.  More of a message to the politicians in Washington and globally, to not mess with free-trade than an all-out panic.

Your portfolio is designed to weather these short-term bouts of volatility.  At the moment I am staying with our plan.  If the situation changes I will make the appropriate adjustments.

Please feel free to call with any questions or concerns.

 

Welcome to Spring – With Some Volatility for Good Measure

Folks,

Spring “officially” starts at 12:15pm Eastern on March 20, 2018.

Like the crazy weather we have been having recently, Spring is coming in with a new dose of volatility in the financial markets.

The causes appear to be:

  1. The potential impact of tariffs instituted by the Trump administration and the possibility that these lead to trade wars.
  2. News that personal information gathered by Facebook back in 2015, was never deleted as promised – leading to a selloff in Facebook stock which is impacting other tech companies like Google, Amazon and Netflix.
  3. Congress needs to approve a spending bill my midnight on 3/23/18 or we face another government shutdown.
  4. The first meeting of the Federal Reserve under new Chairman Jerome Powell on March 20-21, 2018.

We are seeing significant selling in the equity markets on Monday 3/19/18, with safe haven assets like US Treasuries and Gold benefiting as investors look for safety.

Like the volatility we saw in February 2018, I believe this latest turbulence is more news driven than a fundamental shift in the economy or financial markets.

The Facebook news is definitely transitory.  I don’t believe anyone, including the Trump administration, wants a trade war so that likely is avoided.  Congress still has egg on their face from the 2 government shutdowns already this year, so they likely get something passed.  Worst case they go with another short-term funding measure to kick the can down the road.

The Federal Reserve is the most important wildcard.  The market fully expects a 0.25% rate hike this week.  Even with that, interest rates remain low by historical standards and inflation remains below 2%.  The big question is what does the Federal Reserve signal about future rate hikes.  Right now the market anticipates 2 more 0.25% hikes this year. An indication of more frequent rate increases will likely be received poorly by the markets.

For now I am going to stick with the plan we implemented but will continue to monitor the situation closely.

 

Feel free to call us if you have any questions or concerns.

 

Although information herein has been obtained from sources deemed reliable, its accuracy and completeness are not asserted. All opinions and estimates included in this report constitute the judgment of the financial advisor as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

 

Investing involves risk and you may incur a profit or a loss. Diversification does not ensure a profit or ensure against a loss. There is no assurance that any investment strategy will be successful.  Past performance is no assurance of future results.

 

Please consider the charges, risks, expenses and investment objectives carefully before investing. Please see a prospectus containing this and other information. Read it carefully before you invest or send money.

 

Information provided should not be construed as legal or tax advice.  You should discuss any tax or legal matter with the appropriate professional.

Weekly Market Notes – March 19, 2018

Weekly_Market_Notes

For the Week of March 19, 2018

The Markets

It was a rocky week on Wall Street amid concerns about a potential trade war with China and personnel changes in the White House. Stocks managed to climb Friday, but the major indexes all posted hefty weekly declines. For the week, the Dow fell 1.51 percent to close at 24,946.51. The S&P lost 1.20 percent to finish at 2,752.01, and the NASDAQ dropped 1.04 percent to end the week at 7,481.99.

Returns Through 3/16/18 1 Week YTD 1 Year 3 Year 5 Year
Dow Jones Industrials (TR) -1.51 1.47 21.97 14.37 14.21
NASDAQ Composite (PR) -1.04 8.38 26.80 14.92 18.15
S&P 500 (TR) -1.20 3.38 17.86 12.08 14.37
Barclays US Agg Bond (TR) 0.22 -2.00 1.43 1.31 1.79
MSCI EAFE (TR) 0.20 0.05 16.75 6.53 6.40

Source: Morningstar.com. *Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, Barclays US Agg Bond and S&P, excluding “1 Week” returns, are based on total return, which is a reflection of return to an investor by reinvesting dividends after the deduction of withholding tax. The NASDAQ is based on price return, which is the capital appreciation of the portfolio, excluding income generated by the assets in the portfolio in the form of interest and dividends. (TR) indicates total return. (PR) indicates price return. MSCI EAFE returns stated in U.S. dollars.

Saving — Fifty-one percent of preretirees say their efforts to save for retirement are behind schedule while only 15 percent of preretirees are ahead of schedule (source: Society of Actuaries Risks and Process of Retirement Survey, BTN Research).

Simpler Return — Only 19.3 million U.S. taxpayers are expected to claim itemized deductions in tax year 2018, down from an estimated 46.5 million itemizers from tax year 2017, a result of the 2018 limitation on state and local taxes and a doubling of the standard deduction (source: Tax Policy Center, BTN Research).

Very Rich Plan — Defined benefit pension plans can be funded to produce an annual benefit at retirement as high as $220,000 in 2018, up from $185,000 in 2008 (source: Internal Revenue Service, BTN Research).

 

WEEKLY FOCUS – Should You Pay off Your Mortgage Before Retiring?

Are you thinking of paying off your mortgage before retiring? According to a Center For Retirement Research study most, but not all, households would be better off for it. Is paying it off right for you? As with many things in life and finances – it depends. To get the conversation started, ask yourself – do you want to stay in your house during retirement? Is it in the right city? Will you be able to take care of it as you age? Other key things to consider:

Risk: Will the after-tax return of paying it off exceed the after-tax cost of the mortgage payments? If you have more funds to invest in the market and you’re comfortable with the risk of stocks, carrying the mortgage could make sense.

Assets: If you’re conservative and hold most of your assets in bank accounts and CDs, paying off the mortgage could work in your favor – the interest you’re paying out probably exceeds the interest you’re earning in the bank account. If the assets are in a taxable investment portfolio and you’re earning more on the investments than you’re paying out on the mortgage, paying it off may be your best bet.

Taxes: For most people who itemize tax deductions, mortgage payments are fully deductible; the after-tax cost of the payments could be substantially less. In general, the higher your marginal tax bracket and the larger your mortgage interest payments, the greater the tax benefit of keeping the mortgage.

Retirement costs: Retirement brings its own risks, like increased medical costs. You may need a financial pool to cover them. If you have large amounts of assets, this may have little impact. But for most, it has major consequences. If you use your financial assets to pay off your mortgage, you’ll have to continue contributing to your portfolio to compensate for the withdrawal – which may be difficult, or even impossible.

Peace of mind: There are many legitimate factors to consider when thinking about paying off your mortgage before retiring – not all of them are logical. Owning your home outright and not having to worry about paying on it during retirement could be a major life goal and will provide you with a sense of security.

Call our office today. We can help you determine if paying off your mortgage is a better option than carrying it into retirement. Securities America and its representatives do not provide tax advice; coordinate with your tax advisor regarding your specific situation.

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* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America, Copyright March 2018. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI# 2061860.1

Weekly Market Notes – March 12, 2018

Weekly_Market_Notes

For the Week of March 12, 2018

The Markets

On Friday, investors responded positively to February’s jobs report, which revealed the biggest gain in new jobs since the middle of 2016, along with a small wage increase, which eased inflation concerns. The three major indexes ended the day almost 2 percent higher, and the NASDAQ closed at a record high. For the week, the Dow rose 3.34 to close at 25,335.74. The S&P climbed 3.59 percent to finish at 2,786.57, and the NASDAQ climbed 4.17 percent to end the week at 7,560.81.

Returns Through 3/09/18 1 Week YTD 1 Year 3 Year 5 Year
Dow Jones Industrials (TR) 3.34 3.02 24.33 14.94 14.76
NASDAQ Composite (PR) 4.17 9.52 29.49 15.22 18.44
S&P 500 (TR) 3.59 4.63 20.18 12.58 14.80
Barclays US Agg Bond (TR) -0.12 -2.22 1.69 1.36 1.80
MSCI EAFE (TR) 1.86 -0.15 19.86 6.36 6.75

Source: Morningstar.com. *Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, Barclays US Agg Bond and S&P, excluding “1 Week” returns, are based on total return, which is a reflection of return to an investor by reinvesting dividends after the deduction of withholding tax. The NASDAQ is based on price return, which is the capital appreciation of the portfolio, excluding income generated by the assets in the portfolio in the form of interest and dividends. (TR) indicates total return. (PR) indicates price return. MSCI EAFE returns stated in U.S. dollars.

 

Same House After Sixty Years — Warren Buffett lives in the same home today in Omaha, Nebraska, that he purchased for $31,500 in 1958. Buffett, 87 years old, is worth $78 billion (source: Forbes, BTN Research).

Improving Trend — American banks repossessed 292,000 homes in 2017, 379,000 homes in 2016 and 450,000 homes in 2015 (source: ATTOM Data Solutions, BTN Research).

Long Life — Life expectancy at birth in the U.S. was 51.7 years in 1916. Life expectancy at birth was 78.6 years in 2016. Thus, life expectancy has increased by 10 years every 37 years (source: National Vital Statistics Report, BTN Research).

 

WEEKLY FOCUS – Ready for a Retirement Reversal?

Retired – but looking for work? You’re not alone. A 2016 Federal Reserve study found one-third of retirees at all income levels change their mind and return to full- or part-time work1 – that’s nearly double 1985 figures, and the number is expected to keep rising.2

There’s more than one reason to pick up a job after you retire. Retirees in lower-income brackets often return to work for supplemental income. But returning to work isn’t always based on need. The study revealed the majority of retirees who reverse course and return to work do so because retirement life doesn’t prove as appealing as imagined.

Life expectancies now average 15 years beyond retirement age. With that much time, it’s easy to become bored with retirement leisure and feel disengaged since work is a source of identity and purpose. And when money is no longer a pressing issue, options open up, especially in today’s economy.

Today’s gig economy is characterized by the rise of independent contractors and freelancers making money through apps and social media on their own schedule. While the lack of a steady income might not be the most reliable when planning for retirement, it can work out well if you’re already in retirement. Retirees can take advantage of the benefits of the gig economy, most notably, freedom and flexibility, while avoiding its potential pitfalls, such as financial uncertainty or lack of time.

The most common example of a gig is driving for Uber or Lyft. A beautiful day to drive some golf balls – or a great day to drive for extra cash? As a retiree, you get to decide.

The opportunities for work are many. Tired of the career you had preretirement? Indulge in the job you wanted that didn’t make the pay cut. Follow your passions, old or new, such as performing in a band or writing a blog. Did you love your career? Leverage your skills, expertise and contacts as a consultant. Or use what you learned at your old company to start your own small business. With so many options, the question might not be whether or not you should pick up a side-gig in retirement, but which one should you choose.

It’s never too late to pursue your dream job, and retirement might just be the best time to do so. Call our office today. We can help you decide whether reversing your retirement is right for you.

1 https://www.federalreserve.gov/econresdata/feds/2016/files/2016053pap.pdf

2 https://www.bls.gov/careeroutlook/2017/article/older-workers.htm

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* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America, Copyright March 2018. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI# 2055036.1