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Fraud Against Boomers & Seniors

  • Identity Theft & Scams​
  • Common Scams
  • How Identity Theft Occurs
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​
​Americans over 60 lost at least $2.9 billion in 2010 to financial exploitation - ranging from simple home repair scams to complex insurance swindles. Is your investment a scam? In just four questions FINRA’s Scam Meter can help you tell if an investment you are thinking about might be a scam. 
​
Click to reach the scam meter.

The IRS 'Dirty Dozen' Scams

Identity Theft

Topping this year’s list Dirty Dozen list is identity theft. In response to growing identity theft concerns, the IRS has embarked on a comprehensive strategy that is focused on preventing, detecting and resolving identity theft cases as soon as possible. In addition to the law-enforcement crackdown, the IRS has stepped up its internal reviews to spot false tax returns before tax refunds are issued as well as working to help victims of the identity theft refund schemes.Identity theft cases are among the most complex ones the IRS handles, but the agency is committed to working with taxpayers who have become victims of identity theft. The IRS is increasingly seeing identity thieves looking for ways to use a legitimate taxpayer’s identity and personal information to file a tax return and claim a fraudulent refund.
 
An IRS notice informing a taxpayer that more than one return was filed in the taxpayer’s name or that the taxpayer received wages from an unknown employer may be the first tip off the individual receives that he or she has been victimized. The IRS has a robust screening process with measures in place to stop fraudulent returns. While the IRS is continuing to address tax-related identity theft aggressively, the agency is also seeing an increase in identity crimes, including more complex schemes. In 2011, the IRS protected more than $1.4 billion of taxpayer funds from getting into the wrong hands due to identity theft.

In January, the IRS announced the results of a massive, national sweep cracking down on suspected identity theft perpetrators as part of a stepped-up effort against refund fraud and identity theft.  Working with the Justice Department’s Tax Division and local U.S. Attorneys’ offices, the nationwide effort targeted 105 people in 23 states.
​
Anyone who believes his or her personal information has been stolen and used for tax purposes should immediately contact the IRS Identity Protection Specialized Unit.  For more information, visit the special identity theft page at www.IRS.gov/identitytheft.

​Check out the IRS dirty dozen list of tax scams.

Phishing

Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information. Armed with this information, a criminal can commit identity theft or financial theft.

If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to phishing@irs.gov.

It is important to keep in mind the IRS does not initiate contact with taxpayers by email to request personal or financial information.  This includes any type of electronic communication, such as text messages and social media channels.  The IRS has information that can help you protect yourself from email scams.

Phone Scam. Do not dial 90# on your telephone If you receive a telephone call from an individual identifying himself as an AT&T Service Technician (could also be Telus, GTE or Verizon) who says he is conducting a test on the telephone lines and states that to complete the test you should touch nine (9), zero (0), the pound sign (#), and then hang up—do not do so..
​
According to all phone companies if you push 90#, you give the requesting individual full access to your telephone line, which enables them to place long distance calls billed to your home phone number.DO NOT press 90# for ANYONE.

Return Preparer Fraud

About 60 percent of taxpayers will use tax professionals this year to prepare and file their tax returns. Most return preparers provide honest service to their clients. But as in any other business, there are also some who prey on unsuspecting taxpayers.

Questionable return preparers have been known to skim off their clients’ refunds, charge inflated fees for return preparation services and attract new clients by promising guaranteed or inflated refunds. Taxpayers should choose carefully when hiring a tax preparer.

Federal courts have issued hundreds of injunctions ordering individuals to cease preparing returns, and the Department of Justice has pending complaints against many others. In 2012, every paid preparer needs to have a Preparer Tax Identification Number (PTIN) and enter it on the returns he or she prepares.

Signals to watch for when you are dealing with an unscrupulous return preparer would include that they:
  • Do not sign the return or place a Preparer Tax identification Number on it.
  • Do not give you a copy of your tax return.
  • Promise larger than normal tax refunds.
  • Charge a percentage of the refund amount as preparation fee.
  • Require you to split the refund to pay the preparation fee.
  • Add forms to the return you have never filed before.
  • Encourage you to place false information on your return, such as false income, expenses and/or credits.

Tax Return Fraud

Contact the IRS exam unit at 866.897.0161. Be sure to get a fax number or address in order to submit all of the necessary paperwork. If you have previously spoken with an IRS agent and they have suggested that you are a victim of identity theft, reference the date and time of that original call. If you have a reference number, contact name, and location of where the original call was routed that can also be a help. For more information if you are a victim of tax return or tax refund fraud click here.

By 2016, the Internal Revenue Service estimates that tax return fraud schemes will total $21 billion.  Electronic filing has made tax return fraud simple, as those who engage in fraudulent behavior only need a name, date of birth, and Social Security number to file a fraudulent return and request a refund.   

The IRS begins accepting electronic returns January 1st of each year, and generally pays within 30 days of receiving a filed return.  Employers and investment funds, including funds providing retirement income to millions of seniors, are not required to submit information verifying income until March. Refund checks are sent based on claimed income before verification, and a fraudulent return could be filed months before a legitimate return.  A taxpayer usually does not learn of tax return fraud until a legitimate e-filed return is rejected or until a written notice is sent in response to an attempted paper filing.

Victims of tax return fraud should complete IRS Form 14039  to notify the IRS that tax return fraud has occurred. Details on taxable income from the affected year as well as details about the last legitimate return filed in the prior year must be included to verify identity.  

Georgia, Florida, and the District of Columbia are currently considered high-risk locations for tax return fraud, in part because high numbers of seniors live in Florida and are targeted.  Filers within these locations may obtain a PIN number to be used when filing electronically. Those with past instances of return fraud or with suspicious activity on their accounts may also obtain an electronic PIN.  A PIN is not a guarantee that no tax fraud will occur, as the IRS is sometimes lax in enforcement of PIN security and electronic filings have been accepted even for taxpayers who have had assigned PINS.

Hiding Income Offshore

Over the years, numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities, using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.

The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as the banks and bankers suspected of helping clients hide their assets overseas. The IRS works closely with the Department of Justice to prosecute tax evasion cases.

While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting and disclosure requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution.
 
Since 2009, 30,000 individuals have come forward voluntarily to disclose their foreign financial accounts, taking advantage of special opportunities to bring their money back into the U.S. tax system and resolve their tax obligations. And, with new foreign account reporting requirements being phased in over the next few years, hiding income offshore will become increasingly more difficult.
​
IRS has reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners.  The IRS continues working on a wide range of international tax issues and follows ongoing efforts with the Justice Department to pursue criminal prosecution of international tax evasion.  This program will be open for an indefinite period until otherwise announced.

"Free Money" from the IRS & Tax Scams Involving Social Security

Flyers and advertisements for free money from the IRS, suggesting that the taxpayer can file a tax return with little or no documentation, have been appearing in community churches around the country. These schemes are also often spread by word of mouth as unsuspecting and well-intentioned people tell their friends and relatives.

Scammers prey on low income individuals and the elderly. They build false hopes and charge people good money for bad advice. In the end, the victims discover their claims are rejected. Meanwhile, the promoters are long gone. The IRS warns all taxpayers to remain vigilant.
​
There are a number of tax scams involving Social Security. For example, scammers have been known to lure the unsuspecting with promises of non-existent Social Security refunds or rebates. In another situation, a taxpayer may really be due a credit or refund but uses inflated information to complete the return. Beware. Intentional mistakes of this kind can result in a $5,000 penalty.

False/Inflated Income and Expenses

Including income that was never earned, either as wages or as self-employment income in order to maximize refundable credits, is another popular scam. Claiming income you did not earn or expenses you did not pay in order to secure larger refundable credits such as the Earned Income Tax Credit could have serious repercussions.  This could result in repaying the erroneous refunds, including interest and penalties, and in some cases, even prosecution.
​
Additionally, some taxpayers are filing excessive claims for the fuel tax credit. Farmers and other taxpayers who use fuel for off-highway business purposes may be eligible for the fuel tax credit. But other individuals have claimed the tax credit when their occupations or income levels make the claims unreasonable. Fraud involving the fuel tax credit is considered a frivolous tax claim and can result in a penalty of $5,000.

False Form 1099 Refund Claims

In this ongoing scam, the perpetrator files a fake information return, such as a Form 1099 Original Issue Discount (OID), to justify a false refund claim on a corresponding tax return. In some cases, individuals have made refund claims based on the bogus theory that the federal government maintains secret accounts for U.S. citizens and that taxpayers can gain access to the accounts by issuing 1099-OID forms to the IRS.
​
Don’t fall prey to people who encourage you to claim deductions or credits to which you are not entitled or willingly allow others to use your information to file false returns. If you are a party to such schemes, you could be liable for financial penalties or even face criminal prosecution.

Frivolous Arguments

Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. The IRS has a list of frivolous tax arguments that taxpayers should avoid. These arguments are false and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law.

Falsely Claiming Zero Wages

Filing a phony information return is an illegal way to lower the amount of taxes an individual owes. Typically, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer may also submit a statement rebutting wages and taxes reported by a payer to the IRS.
​
Sometimes, fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any variations of this scheme. Filing this type of return may result in a $5,000 penalty.

Abuse of Charitable Organizations and Deductions

IRS examiners continue to uncover the intentional abuse of 501(c)(3) organizations, including arrangements that improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets or the income from donated property. The IRS is investigating schemes that involve the donation of non-cash assets –– including situations in which several organizations claim the full value of the same non-cash contribution. Often these donations are highly overvalued or the organization receiving the donation promises that the donor can repurchase the items later at a price set by the donor. The Pension Protection Act of 2006 imposed increased penalties for inaccurate appraisals and set new standards for qualified appraisals.

Disguised Corporate Ownership

Third parties are improperly used to request employer identification numbers and form corporations that obscure the true ownership of the business.

​These entities can be used to underreport income, claim fictitious deductions, avoid filing tax returns, participate in listed transactions and facilitate money laundering, and financial crimes. The IRS is working with state authorities to identify these entities and bring the owners into compliance with the law.

Misuse of Trusts

For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts. While there are legitimate uses of trusts in tax and estate planning, some highly questionable transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. Such trusts rarely deliver the tax benefits promised and are used primarily as a means of avoiding income tax liability and hiding assets from creditors, including the IRS.

IRS personnel have seen an increase in the improper use of private annuity trusts and foreign trusts to shift income and deduct personal expenses. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering a trust arrangement.

What to watch for so you don’t get scammed and what to do if you think you have been scammed. On a state by state basis you can call the North American Securities Administrators Association 202-737-0900 or check any of these resources;
  • Financial Industry Regulatory Authority www.saveandinvest.org/55Plus/index.htm  
  • Securities and Exchange Commission www.sec.gov/investor/seniors.shtm  
  • North American Securities Administrators Association www./nasaa.org/investor_education

Hotel Scams (check-in & ordering food)

You check in at your hotel and the phone in your room rings. The “front desk” is calling to tell you that your payment card was declined. They ask you to confirm your account number, or provide another card. You do so but when your monthly statement arrives you find the “front desk” wasn’t associated with the hotel at all; it was a scammer. If you get a call from the front desk to verify your credit card, hang up and call them back or go down to confirm your payment method in person.

There’s a restaurant order menu either on or near the door to your room. You order and give them a credit card number. You wait for your food but nothing arrives. When you call again, there’s no answer because this is a scam and there is no restaurant.  Always call the front desk to verify the menu is not a scam.

Protect Your Finances from Fraud, Scams, & Theft

We advise all investors to do their homework before investing. If you purchase a security solely because an analyst said the company was one of his or her “top picks,” you may be doing yourself a disservice. Especially if the company is one you’ve never heard of, take time to investigate. The following are things you should immediately approach with caution:
  • Unsolicited Financial Promises or Loans
  • Unsolicited Emails & Mail via the U.S. Postal Service
​Known as “Phishing,” scammers prey on victims through email and/or the U.S. Postal Service. They represent themselves under countless seemingly “reliable” entity guises to trick you into forfeiting your money. For example, some represent themselves as government’s officials or other countries’ officials to either gain access to your bank account or swindle you out of hundreds and sometimes thousands of dollars. More recently some scammers have been representing themselves as the being with the IRS.
 
Some common scams of this type:
  • IRS scams
  • Nigerian Letter Scam
  • Phone Call Solicitation
Telemarketing scams are very common; and take place when scammers call your home offering you deals that seem too good to be true. Here are some "pitches" the FBI has identified that can help you identify telemarketing scams:
  • "You must act 'now' or the offer won't be good."
  • "You've won a 'free' gift, vacation, or prize." But you have to pay for "postage and handling" or other charges.
  • "You must send money, give a credit card or bank account number, or have a check picked up by courier."
  • "You don't need any written information about their company or their references."
  • "You can't afford to miss this 'high-profit, no-risk' offer."
Representing themselves as your bank or another common and reliable entity, scammers will ask you to give them your account information, fill in missing information, or confirm information. The sender of such emails generally tends to be from the “System Administrator” Common Scams of this type involve people representing themselves as:
  • Your Bank; banks who have had serious issues with this include Citibank, Bank of America, and Wells Fargo. Note: Your bank will never ask you for your password, pin number, or any other personal information through your email. The only time that your bank will ask you for personal information is in person at the bank, on a phone call that you’ve initiated with your bank, or are on your banks official website.
  • Scammers also prey on online shoppers through fake or fraudulent websites. Be very cautious when purchasing products or services from a website you aren’t familiar with. Also be cautious of purchasing products from online auctions sites, such as EBay, where scammers may send you a fake product or no product at all.

Common Scams That Affect Senior Citizens

  • Health Care and Insurance Fraud & Scams
  • Counterfeit Prescription Scams
  • Funeral and Cemetery Fraud
  • Fraudulent "Anti-Aging" Products
  • Telemarketing Fraud
  • Internet Fraud
  • Investment Schemes
  • Fake Medical IDS
  • Misdirected Social Security
  • Fire-sale pensions

​Reverse Mortgage Scams

Protect Yourself from Debt Consolidation and Reverse Mortgage scams:
  • Never give anyone you don’t know your personal information, even if they represent themselves as your bank, cable provider, gym, the government, etc.
  • If it seems too good to be true, it probably is.
  • Absolutely nothing is free. Be wary of those that claim it is.
  • Never give money to anyone you don’t know, even if it seems like a great opportunity or someone who claims they really needs the money.
  • Be wary of any unsolicited investment, insurance policy, etc. promises or opportunities.
  • Do your research; always gather background information on any business or institution prior to giving them money.
  • If you find that you are having second thoughts about giving money to someone or a business, get a friend or family member’s second opinion or consult a professional..
  • Never make uninformed or quick decisions, even if the deal is only for a limited time; always know what you’re getting yourself into.
This information was provided by Allison Dean who writes regularly on this subject for medicalmalpracticelawyers.org

Some good websites which provide helpful information are on fraud and scams are:
  • www.justice.gov/criminal/fraud/
  • http://www.fbi.gov/scams-safety/fraud
  • http://www.ftc.gov/bcp/index.shtml

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