3 Tax Scams You Need to Watch Out For

Becoming a victim of tax scam

According to the Internal Revenue Service (IRS), there was a 400% increase in phishing and malware incidents during the 2016 tax season. And tax scams extend far beyond email and malware to include phone scams, identity theft and more.  While the April 15 filing deadline still feels far away, as Yogi Berra said, “It ain’t over till it’s over.”

Scammers use multiple ploys and tactics to lure unsuspecting victims in. The IRS publishes an annual “Dirty Dozen” list of tax scams. Sadly, while some of those scams lure people into getting ripped off, others lure people into unwittingly committing tax fraud by falling victim to fake charities, shady tax preparers and false claims on their tax returns.

The most important things you can do to keep yourself scam-free and protected this—and any—tax year are to:

  • Be wary—if it seems too good to be true, it probably is
  • Educate yourself on the most common risks out there
  • File your taxes as early as possible

When you file your taxes as early as possible, you can just politely decline scammer and you can protect yourself from taxpayer identity theft. Tax-related identity theft is primarily aimed at someone posing as you stealing your tax refund. Scammers are creative, sophisticated, persistent and move fast once they have your information in hand. Armed with your Social Security number, date of birth and other pieces of your personally-identifiable information, they can rob you. If you’ve been the victim of a data breach—learn the warning signs—your information is likely available on the dark web. With your information, all a scam artist has to do is log in to a motel’s Wi-Fi network, fill out a fraudulent tax return online and walk away with a refund that could be and should have been yours.

What Is a Tax Scam?

A tax scam is a ploy intended to steal your information and/or your money. It can take several forms. The IRS’s “Dirty Dozen” for 2018 includes these scams:

  • Phishing scams, using fake emails or websites to steal personal information.
  • Phone scams where callers pretend to be IRS agents to steal your information or money.
  • Identity theft scams where identity thieves try and steal your personally identifiable information.
  • Return preparer fraud where a dishonest tax preparer submits a fraudulent return for you or steals your identity.
  • Fake charities where unqualified groups get you to donate money that isn’t actually deductible on your tax return.
  • Inflated refund claim scams where a dishonest tax preparer promises a high refund.
  • Excessive claims for business credits where you or a dishonest tax preparer promises a high refund for claiming credits you aren’t owed, such as the full tax credit.
  • Falsely padding deductions Taxpayers where you or a dishonest tax prepare reports more for expenses or deductions than really occurred.
  • Falsifying income to claim credits where a dishonest tax preparer cons you into claiming income you didn’t earn in order to qualify for tax credits, such as the Earned Income Tax Credit.
  • Frivolous tax arguments where a scam artist gets you to make fake claims to avoid paying taxes.
  • Abusive tax shelters where a scammer sells you on a shelter as a way to avoid paying taxes.
  • Offshore tax avoidance where a scammer convinces you to put your money offshore to hide it as a source of taxable income that you have to pay taxes on.

It’s important to know that if you fall victim, you may not just be the victim. You may also be a criminal and held accountable legally and financially for filing an incorrect return.

A new scam recently hit the wires too. For this one, scammers email employees asking for copies of their W-2s. People who fall victim end up having their names, addresses, Social Security numbers and income sold online. The emails look very valid but aren’t If you see this or other emails that stink like “phish,” email the IRS at phishing@irs.gov

1. Phishing

Phishing uses a fake email or website to get you to share your personally-identifiable information. They often look valid. Know that the IRS will never contact you by email regarding your tax return or bill.

Phishing emails take many forms. They typically target getting enough of your personally identifiable information to commit fraud in your name, making you a victim of identity theft if you take the bait.

Phishing emails may also contain a link that places malware on your computer. These programs can do a variety of things—none of them good—ranging from recruiting your machine into a botnet distributed denial of service (DDoS) attack to placing a keystroke recorder on your computer to access bank, credit union, credit card and brokerage accounts to gathering all the personally identifiable information on your hard drive.

Here’s what you need to know: The IRS will never send you an email to initiate any business with you. Did you hear that? NEVER. If you receive an email from the IRS, delete it. End of story. Oh, and it will never initiate contact by way of phone call either.

That said, there are other sources of email that may have the look and feel of a legitimate communication that are tied to other kinds of tax scams and fraudulent refunds. And not all scams are emailed though. A lot of scammers will call. The IRS offers 5 way to identify tax scam phone calls.

2. Criminal Tax Preparation Scams

Not all tax professionals are the same and you must vet anyone you’re thinking about using well before handing over a shred of your personally identifying information. Get at least three references and check online if there are any reviews before calling them. Also, consider using the Better Business Bureau to see if the preparer has any complaints against them.

Here’s why: At tax-prep time, offices that are actually fronts for criminal identity theft pop up around the country in strip malls and other properties and then promptly disappear a few days later. Make sure the one you choose is legit!

3. Shady Tax Preparation

Phishing emails aren’t always aimed at stealing your personally identifiable information or planting malware on your computer. They may be simply aimed at getting your attention and business through enticing—and fraudulent—offers of a really big tax refund. While these tax preparers may get you a big refund, it could well be based on false information.

Be on the lookout for questions about business expenses that you didn’t make, especially watching out for signals from your tax preparer that you’re giving him or her a figure that is “too low.”

If you are using a preparer and something doesn’t seem right, ask questions—either directly from the preparer or by calling the IRS. The IRS operates the Tax Payer Advocate Service that can help answer your requests. The service’s phone may be unavailable during a government shutdown, but the website is always available.

Other soft-cons of shady tax preparation include inflated deductions, claiming tax credits that you’re not entitled to and declaring charitable donations you didn’t make. Bottom line: If you cheat—intentionally or unintentionally—chances are you’ll get caught. So make sure you play by the rules and follow the instructions or work with a preparer who does. Yes, the instructions are complicated. That’s why it’s not a bad idea to get honest help if you need it.

As Yogi Berra said, “You can observe a lot by watching.” Tax season is stressful without the threat of tax-related identity theft and other scams. It’s important to be vigilant, because, to quote Yogi all over again, “If the world were perfect, it wouldn’t be.”

This article was originally published February 28, 2017, and has been updated by a different author.

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What to Do When Your Credit Card Goes Missing

You’re likely to lose track of a credit card at some point—many people do. You’re standing at the checkout counter, you open your wallet and it’s not there. What you do depends on how prepared you are and whether you think the card was lost or stolen.

How to Prepare for a Lost Credit Card

Losing a credit card doesn’t have to be something that turns into a nightmare. You can manage the situation more effectively if you’ve taken these three steps to prepare in advance.

1. Choose Your Financial Institutions Wisely

Do you often think your bank could improve its customer service? Have you had past problems getting unauthorized charges removed from a credit card statement? If your bank or credit card company has failed you in the past, it’s more likely it will do so in the future when you need help the most.

Of course, it’s easier to just coast along with whichever company you have been using to meet financial goals. But it’s worth the time to think of worst-case scenarios and make a change to the financial institutions you use before you need emergency services.

Take a few minutes to think how you would rate the services offered by your banks and credit companies and compare policies for lost or stolen cards. Little things can make a big difference, such as a company guarantee to get you a replacement card within a specific time frame.

2. Keep Your Contact Information Up to Date

Imagine you need a replacement credit or debit card, but the agent tells you he can’t send it to your current address because the company has an old address on file. Or imagine trying to activate a card via text or email while you’re traveling, but you can’t get it to work because the company has old numbers and addresses on file.

Unsurprisingly, financial institutions are hesitant to make any changes to an account while it’s flagged for possible fraudulent activity. If you want to get a replacement card in hand as quickly as possible when you need it, make any updates to your contact information now.

3. Keep Your Credit Card Contact Information and Account Number Handy

This one is easy. Record the toll-free support number for each card’s financial institution in your phone’s contact book. Though you could probably track down the number fairly quickly with internet access, time is often of the essence when reporting a lost or stolen card, so make it easy for yourself. Having your account number ready can also save valuable time verifying your identity with the customer service rep.

What to Do When a Credit Card Goes Missing

In general, you should treat a lost credit or debit card as if it was stolen. There’s no major downside to reporting it stolen, other than having to replace the card.

Obtaining the highest level of protection against fraudulent use of your card is based on how quickly you report the incident. Federal law says you have zero liability for any charges made on your card after you report it’s gone, but you may be liable for charges made before you do so.

If You Think Your Card Is Lost

1. Retrace your steps.

You may be lucky. Your card or wallet might be waiting for you right where you left it.

2. Cancel your card, and request a replacement.

Even if you’re lucky enough to find your lost card or it’s returned to you by a good Samaritan, your financial information may be compromised. Someone may have copied all the information needed to process a transaction. It may be best to err on the safe side and get a new card.

If You Think Your Card Was Stolen

1. Report it immediately

Call the financial institution that issued the card using the 24-hour support phone number for fraud prevention and report the card as stolen. If your entire wallet was stolen with multiple cards and pieces of identification in it, call every financial institution as soon as possible.

2. Keep records

Make a record of the time and date of your call and who you spoke to. Since your liability for unauthorized transactions is tied to speedy reporting, plan to prove you were diligent just in case.

3. File a police report

Another way to demonstrate your due diligence and avoid any liability for unauthorized charges is to show you made an official report regarding the incident.

4. Notify the credit reporting agencies

It’s a good idea to put a security alert on your credit reports. Although this may be overkill for the loss of a single card, it can offer an extra layer of protection if the theft evolves into full-fledged identity theft. Victims of identity theft can sometimes have a hard time proving that negative credit reporting was the result of an impersonation. An immediate alert regarding the initial incident can go a long way when you want negative information removed.

5. Watch your account activity

Take advantage of online access to your account to monitor activity. Check your monthly statements immediately upon receipt and not months later. If you see anything strange or unauthorized, contact your financial institution. Don’t assume that because you canceled the card everything is under control. Thieves develop new ways to take advantage of access to even the smallest bit of your financial information all the time.

6. Update your auto payments

Try to remember to do this before the auto payments bounce back for nonpayment. Don’t let the theft of the card derail your good credit.

FAQs

What do I do if I lost my credit card?

To ensure maximum protection against having to pay for unauthorized charges, call the credit card company’s 24-hour support line and report the missing card right away at any time of the day or night. Try retracing your steps if you think you can find the lost card, but even if it’s returned to you by a third party, you may want to request a replacement card to be safe.

Can I track my credit card if I lost it?

New ways to track personal belongings are being developed all the time. Check with your financial institution to see if it has a way to locate a missing card by its internal chip. Some companies offer other features, such as the ability to turn the card on and off with an app if it’s temporarily misplaced.

How long does it take to get a replacement credit card?

Typically, it takes seven to 10 days to receive a replacement card. However, each company has its own policies regarding turnaround time, which can range from overnight to weeks.

Why is my credit card not working?

A credit card can stop working for any number of reasons, including damage to the card or a negative credit balance. Occasionally, a credit card company places a hold on a card if the security agents see a suspicious transaction or a transaction with details that lie outside of your normal spending habits. In these cases, you can usually reactivate your card by calling the credit company and verifying your identity and recent transactions.

The post What to Do When Your Credit Card Goes Missing appeared first on Credit.com.

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Should You Keep Investing At All-Time Highs?

A note from a dedicated reader inspired today’s article. It’s a question about the stock market and investing at all-time highs. It reads:

Hey Jesse. So, back in March you said that you were going to keep on investing despite the major crash. Fair enough, good call!

Note: here and here are the two articles that likely inspired this comment

But now that the market has recovered and is in an obvious bubble (right?), are you still dumping money into the market?

Thanks for the note, and great questions. You might have heard “buy low, sell high.” That’s how you make money when investing. So, if the prices are at all-time highs, you aren’t exactly “buying low,” right?

I’m going to address this question in three different ways.

  1. General ideas about investing
  2. Back-testing historical data
  3. Identifying and timing a bubble

Long story short: yes, I am still “dumping” money into the stock market despite all-time highs. But no, I’m not 100% that I’m right.

General Ideas About Investing

We all know that that investing markets ebb and flow. They goes up and down. But, importantly, the stock market has historically gone up more than it has gone down.

Why does this matter? I’m implementing an investing plan that is going to take decades to fulfill. Over those decades, I have faith that the average—the trend—will present itself. That average goes up. I’m not betting on individual days, weeks, or months. I’m betting on decades.

It feels bad to invest right before the market crashes. I wouldn’t enjoy that. But I’m not worried about the value of my investments one month from now. I’m worried about where they’ll be in 20+ years.

Stock Market Crash GIFs | Tenor

Allowing short-term emotions—e.g. fear of an impending crash—to cloud long-term, math-based thinking is the nadir of result-oriented thinking. Don’t do it.

Don’t believe me? Here’s a fun idea. Google the term “should I invest at all-time highs?”

When I do that, I see articles written in 2016, 2017, 2018…you get it. People have been asking this question for quite a while. All-time highs have happened before, and they beg the question of whether it’s smart to invest. Here’s the S&P 500 data from 2016 to today.

S&P 500 – Past five years. Punctuation my own addition.

So should you have invested in 2016? In 2017? In 2018? While those markets were at or near all-time highs, the resounding answer is YES! Investing in those all-time high markets was a smart thing to do.

Let’s go further back. Here’s the Dow Jones going back to the early 1980s. Was investing at all-time highs back then a good idea?

I’ve cherry-picked some data, but the results would be convincing no matter what historic window I chose. Investing at all-time highs is still a smart thing to do if you have a long-term plan.

Investing at all-time highs isn’t that hard when you have a long outlook.

But let’s look at some hard data and see how the numbers fall out.

Historical Backtest for Investing at All-Time Highs

There’s a well-written article at Of Dollars and Data that models what I’m about to do: Even God Couldn’t Beat Dollar-Cost Averaging.

But if you don’t have the time to crunch all that data, I’m going to describe the results of a simple investing back-test below.

First, I looked at a dollar-cost averager. This is someone who contributes a steady investment at a steady frequency, regardless of whether the market is at an all-time high or not. This is how I invest! And it might be how you invest via your 401(k). The example I’m going to use is someone who invests $100 every week.

Then I looked at an “all-time high avoider.” This is someone who refuses to buy stocks at all-time highs, saving their cash for a time when the stock market dips. They’ll take $100 each week and make a decision: if the market is at an all-time high, they’ll save the money for later. If the market isn’t at an all-time high, they’ll invest all their saved money.

The article from Of Dollars and Data goes one step further, if you’re interested. It presents an omniscient investor who has perfect timing, only investing at the lowest points between two market highs. This person, author Nick Maggiulli comments, invests like God would—they have perfect knowledge of prior and future market values. If they realize that the market will be lower in the future, they save their money for that point in time.

What are the results?

The dollar-cost averager outperformed the all-time high avoider in 82% of all possible 30-year investing periods between 1928 and today. And the dollar-cost averager outperformed “God” in ~70% of the scenarios that Maggiulli analyzed.

How can the dollar-cost averager beat God, since God knows if there will be a better buying opportunity in the future? Simple answer: dividends and compounding returns. Unless you have impeccable—perhaps supernatural—timing, leaving your money on the sidelines is a poor choice.

Investing at all-time highs is where the smart money plays.

Identifying and Timing a Bubble

One of my favorite pieces of finance jargon is the “permabear.” It’s a portmanteau of permanent and bear, as in “this person is always claiming that the market is overvalued and that a bubble is coming.”

Being a permabear has one huge benefit. When a bubble bursts—and they always do, eventually—the permabear feels righteous justification. See?! I called it! Best Interest reader Craig Gingerich jokingly knows bears who have “predicted 16 of the last 3 recessions.”

Source: advisorperspectives.com

Suffice to say, it’s common to look at the financial tea leaves and see portents of calamity. But it’s a lot harder to be correct, and be correct right now. Timing the market is hard.

Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.

Peter Lynch

Predicting market recessions falls somewhere between the Farmers’ Almanac weather forecast and foreseeing the end of the world. It takes neither skill nor accuracy but instead requires a general sense of pattern recognition.

Note: The Farmers’ Almanac thinks that next April will be rainy. Nice work, guys. And I, too, think the world will end—at least at some point in the next few billions of years.

I have neither the skill nor the inclination to identify a market bubble or to predict when it’ll burst. And if someone convinces you they do have that skill, you have two options. They might be skilled. Or they are interested in your bank account. Use Occam’s Razor.

Just remember: some permabears were screaming “SELL!” in late March 2020. I’ve always heard “buy low, sell high.” But maybe selling your portfolio at the absolute market bottom is the new secret technique?

“But…just look at the market”

I get it. I hear you. And I feel it, too. If feels like something funny is going on.

The stock market is 12% higher than it was a year ago. It’s higher than it was before the COVID crash. How is this possible? How can we be in a better place mid-pandemic than before the pandemic?

Crazy Pills GIFs | Tenor

One explanation: the U.S. Federal Reserve has dropped their interest rates to, essentially, zero. Lower interest rates make it easier to borrow money, and borrowing money is what keeps businesses alive. It’s economic life support.

Of course, a side effect of cheap interest rates is that some investors will dump their cheap money into the stock market. The increasing demand for stocks will push the price higher. So, despite no increase (and perhaps even a decrease) in the intrinsic value of the underlying publicly-traded companies, the stock market rises.

Is that a bubble? Quite possibly. But I’m not smart enough to be sure.

The CAPE ratio—also called the Shiller P/E ratio—is another sign of a possible bubble. CAPE stands for cyclically-adjusted price-to-earnings. It measures a stock’s price against that company’s earnings over the previous 10-years (i.e. it’s adjusted for multiple business cycles).

Earnings help measure a company’s true value. When the CAPE is high, it’s because a stock’s price is much greater than its earnings. In other words, the price is too high compared to the company’s true value.

Buying when the CAPE is high is like paying $60K for a Honda Civic. It doesn’t mean that a Civic is a bad car. It’s just that you shoudn’t pay $60,000 for it.

Similarly, nobody is saying that Apple is a bad company, but its current CAPE is 52. Try to find a CAPE of 52 on the chart above. You won’t find it.

So does it make sense to buy total market index funds when the total market is at a CAPE of 31? That’s pretty high, and comparable to historical pre-bubble periods. Is a high CAPE representative of solid fundamentals? Probably not, but I’m not sure.

My Shoeshine Story

There’s an apocryphal tale of New York City shoeshines giving stock-picking advice to their customers…who happened to be stockbrokers. Those stockbrokers took this as a sign of an oncoming financial apocalypse.

The thought process was: if the market was so popular that shoe shines were giving advice, then the market was overbought. The smart money, therefore, should sell.

I recently heard a co-worker talking about his 12-year old son. The kid uses Robin Hood—a smartphone app that boasts free trades to its users. Access to the stock market has never been easier.

According to his dad, the kid bought about $100 worth of Advanced Micro Devices (ticker = AMD). When asked what AMD produces, the kid said, “I don’t know. I just know they’re up 60%!”

This, an expert might opine, is not indicative of market fundamentals.

But then I thought some more. Is this how I invest? What does your index fund hold, Jesse? Well…a lot of companies I’ve never heard of. I just know it averages ~10% gains every year! My answer is eerily similar.

I’d like to believe that I buy index funds based on fundamentals that have been justified by historical precedent. But, what if the entire market’s fundamentals are out of whack? I’m buying a little bit of everything, sure. But what if everything is F’d up?

Closing Thoughts

Have you ever seen a index zealot transmogrify into a permabear?

Not yet. Not today.

I do understand why some warn of a bubble. I see the same omens. But I don’t have the certainty or the confidence to act on omens. It’s like John Bogle said in the face of market volatility:

Don’t do something. Just stand there.

John Bogle

Markets go up and down. The U.S. stock market might crash tomorrow, next week, or next year. Amidst it all, my plan is to keep on investing. Steady amounts, steady frequency. I’ve got 20+ years to wait.

History says investing at all-time highs is still a smart thing. Current events seem crazy, but crazy has happened before. Stay the course, friends.

And, as always, thanks for reading the Best Interest. If you enjoyed this article and want to read more, I’d suggest checking out my Archive or Subscribing to get future articles emailed to your inbox.

This article—just like every other—is supported by readers like you.

Source: bestinterest.blog

7 Ways to Invest in Real Estate Without Buying Property

This page may include affiliate links. Please see the disclosure page for more information. How do many wealthy people get that way? They invest in real estate. It is a proven way to build wealth. 90% of millionaires became so through owning real estate. So said famous industrialist (and billionaire) Andrew Carnegie. Yet only 15% of Americans…

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How To Get Free Stock: 10 Companies That Will Give You Free Shares

There are quite a few ways to get free stock. This article will look at 8 companies that are offering free shares and cash bonuses to new investors.

The post How To Get Free Stock: 10 Companies That Will Give You Free Shares appeared first on Bible Money Matters and was written by Lorraine Smithills. Copyright © Bible Money Matters – please visit biblemoneymatters.com for more great content.

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