Identity Theft Scams
In an identity theft scam, a fraudster, often posing as a trusted government, financial or business institution or official, tries to trick a victim into revealing personal and financial information, such as credit card numbers and passwords, bank account numbers and passwords, Social Security numbers and more. Generally, identity thieves use someone’s personal data to steal his or her financial accounts, run up charges on the victim’s existing credit cards, apply for new loans, credit cards, services or benefits in the victim’s name and even file fraudulent tax returns.
The IRS does not discuss tax account matters with taxpayers by e-mail.
The IRS urges consumers to avoid falling for the following recent schemes:
Making Work Pay Refund
This phishing e-mail, which claims to come from the IRS, references the president and the Making Work Pay provision of the 2009 economic recovery law. It says that there is a refundable credit available to workers, consumers and retirees that can be paid into the recipient’s bank account if the recipient registers their account information with the IRS. The e-mail contains links to register the account and to claim the tax refund.
In reality, most taxpayers receive their Making Work Pay tax credit, which was designed for wage earners, in their paychecks as a result of decreased tax withholding, not as a lump sum distribution from a federal fund. Additionally, consumers and retirees who are not wage earners are not eligible for this tax credit.
Inherited Funds / Lottery Winnings / Cash Consignment
In this phishing scheme, recipients receive an e-mail claiming to come from the U.S. Department of the Treasury notifying them that they will receive millions of dollars in recovered funds or lottery winnings or cash consignment if they provide certain personal information, including phone numbers, via return e-mail. The e-mail may be just the first step in a multi-step scheme, in which the victim is later contacted by telephone or further e-mail and instructed to deposit taxes on the funds or winnings before they can receive any of it. Alternatively, they may be sent a phony check of the funds or winnings and told to deposit it but pay 10 percent in taxes or fees. Thinking that the check must have cleared the bank and is genuine, some people comply. However, the scammers, not the Treasury Department, will get the taxes or fees.
Form W-8BEN
In this scam, fraudsters modify a genuine IRS form, the W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding, to request detailed personal and financial information. This could include nationality, passport number, bank account and PIN numbers, spouse’s name and mother’s maiden name, or other personal or financial information or security measures for financial accounts. The scammers may use the genuine form number and name or may make up a new form number, such as W-4100B2.
They either e-mail or fax the form or letter. If only a letter, the letter itself contains the request for the personal and financial information. The letter, which claims to come from the IRS, states that the recipient will face additional taxes unless he or she quickly faxes the required information to the number provided by the scammer.
In reality, taxpayers file the genuine Form W-8BEN with their financial institutions, not with the IRS. Additionally, the genuine W-8BEN does not request the taxpayer’s passport number, bank account number, security or similar information.
Refund Scam
The bogus e-mail, which claims to come from the IRS, tells the recipient that he or she is eligible to receive a tax refund for a given amount. It instructs the recipient to click on a link contained in the e-mail to access and complete a form for the tax refund. The form requires the entry of personal and financial information. The refund scam is the most common one seen by the IRS. Several recent variations on this scam have claimed to come from the Exempt Organizations area of the IRS. Some others have included the name and purported signature of a genuine or a made-up IRS executive.
Taxpayers do not have to complete a special form to obtain a refund. Taxpayer refunds are based on the tax return they submit to the IRS.
How to Spot a Scam
Many e-mail scams are fairly sophisticated and hard to detect. However, there are signs to watch for, such as an e-mail that:
Requests detailed or an unusual amount of personal and/or financial information, such as name, SSN, bank or credit card account numbers or security-related information, such as mother’s maiden name, either in the e-mail itself or on another site to which a link in the e-mail sends the recipient.
The IRS does not initiate taxpayer contact via unsolicited e-mail or ask for personal identifying or financial information via e-mail. If you receive a suspicious e-mail claiming to come from the IRS, take the following steps:
Forward the suspicious e-mail or url address to the IRS mailbox phishing@irs.gov, then delete the e-mail from your inbox.
The only genuine IRS Web site is IRS.gov. All IRS.gov Web page addresses begin with http://www.irs.gov/. Anyone wishing to access the IRS Web site should initiate contact by typing the IRS.gov address into their Internet address window, rather than clicking on a link in an e-mail.
Suspicious e-Mails and Identity Theft
How to Report and Identify Phishing, E-mail Scams and Bogus IRS Web Sites
OnGuardOnline.gov, for tips from the federal government and the technology industry
How You Can Avoid Nicholas Cage’s Tax Problems
By Stacie Clifford Kitts, CPA
Okay, here’s the thing – what IS the deal with Nicholas Cage and not paying his income taxes?
From what I’ve read, it sounds like Mr. Cage might need some tax planning, or maybe a lesson on budgeting his money, or simply a new accountant.
Nevertheless, if the New York Daily News is correct and Mr. Cage is making $12 million a movie, he should have the money to pay his taxes.
But then again – maybe not – it’s been reported that in 2007, Cage earned $24 million for his role in two movies, yet still failed to pay his income taxes in the amount of $6.2 million. Now he is scrambling to fire-sell his Hollywood home to pay the debt.
Apparently, this isn’t the first time Cage has had to fight off the IRS. In tax years 2002-2004, Cage apparently deducted some questionable “personal expenses” and forgot to report about $1.5 million in additional income he earned for staring in the movie “National Treasure.” These oversights resulted in the IRS hitting him with an additional $1.8 million in taxes, penalties, and interest. Although he was able to fight the IRS in court and get the amount reduced to approximately $660,000, his tax problems seem to be hanging on.
Although I am sure that Mr. Cage will ultimately resolve his tax issues, the question is: Have you considered how you would meet your tax obligation if faced with an unexpected bill from the IRS? If not, here’s some tips to help avoid a fire sale of your home:
1) Hire the right accountant. Accountants have niches just like other professionals such as attorneys and doctors – if you were getting a divorce [god forbid], you would hire a family law attorney, not a tax attorney. Well, the same rule applies with your accountant. Your accountant should have experience working with clients in your particular industry -this will ensure that he or she understands and applies the correct tax laws.
2) Do some tax planning. No matter the size of your income, it never hurts to have your accountant look at your tax picture -BEFORE- yearend, estimate your income tax liability, and then suggest ways to mitigate the taxes. Once your tax liability is known, you can plan for how you will meet your obligation.
3) Always consult with your accountant before making large cash purchases. Sometimes life brings us a fabulous financial windfall… we sign a new contract, we get an unexpected bonus, we get $12 million for starring in a movie, or we win the “Showcase Showdown” on the Price is Right. Regardless of the windfall, before you spend all the money, you should check with your accountant to make sure that your windfall doesn’t include with it some income tax consequences.
4) Live within a budget. If you haven’t already, you should sit down with your accountant and figure out how much is available to spend. It’s just that simple. Don’t spend what you don’t have. Moreover, don’t spend what you “expect” to have before you have it.
5) Always, and I mean always, have money set aside for emergency’s. How much to set aside is really relative to your income and your annual expenses. Generally, you should set aside enough money to pay at least 6 to 12 months of living expenses. Now – keep in mind – Setting aside doesn’t mean investing it in some crazy volatile investment where you might lose it all. That would defeat the purpose of the emergency fund. No – put it somewhere safe like in a certificate of deposit. This will ensure that you have the cash available in the unlikely event that you do receive an unexpected tax bill or need to be represented before the IRS in the case of an audit.
6) Have a plan B. Planning for the possibility of a life-changing event is never fun. Nevertheless, people need to face that these things happen. Things such as the death of a spouse, the loss of a career, or a disabling illness will affect your ability to meet your financial obligations. Therefore, you should sit down with your accountant and your attorney to discuss your “what if” plans. A plan “B” can be as simple as having a life insurance policy, or indicating who will raise your children in the event of your death.
7) Be involved. Okay so a celebrity might not have the time to be completely “in the know” about every financial dealing. But frankly, that’s too bad. Ultimately, the taxpayer is responsible for what is reported on his or her tax return. Consider this, you are signing your return under penalty of perjury. Therefore, handing off all of your financial information – for someone else to deal with -without any personal oversight is a risky endeavor that just might cost you 6.2 million dollars. Ouch!
Stacie's Tax Stuff 