Mar 13, 2024
Welcome back. This week’s newsletter: Tax Scams and Fraud Prevention. We all know that it’s one thing to put some time and research into seize upon an ideal tax and investment strategy. It’s altogether a different matter to be aware of the scammers. There are a lot of them out there. This issue will highlight a few that we have come across. We will also be discussing a few timely changes in the tax law.
TAX Frauds and Scams: Recognizing What is Good and What is Too Good to be True
Don’t we all want to know? Yes! The world we live in is full of intrigue, smoke and mirrors. Let’s dive in to expose some of these to the light of day.
Employee Retention Credit Scam - The credit is real, however, aggressive promoters are misrepresenting who can qualify for it. This can be caught early by looking out for these warning signs: aggressive marketing, large up-front fees, fees based on the amount of refund, and the statement that eligibility can be determined within minutes. If you see any of these tale-tale signs—run away! Learn more about how the IRS is handling this scam in our Tax Updates below.
Charity Fraud Awareness - Taxpayers should be wary of solicitors posing as legitimate charities when they are not. So, not only will the donations not go to the organization, but you will not be able to actually claim it as a deduction. Even worse, these fraudsters can actually use your information to steal your identity. To protect yourself from this scam, you can use the Tax Exempt Organization Search Tool on the IRS site to verify the organization’s legitimacy. Also, never give more information that you need. Also, never pay with a gift card or a wire.
Ghost tax preparers - This is actually a thing! There are people who will prepare your return. You think you are paying for the assurance of quality, right? But, no! They prepare the return but refuse to actually sign it. This makes them not culpable. Unscrupulous tax return preparers may also: Require payment in cash only and not provide a receipt, Invent income to qualify their clients for tax credits, Claim fake deductions to boost the size of the refund, direct refunds into their bank account, not the taxpayer's account. It goes without saying that choosing the best tax professional will save your hide, prevent some major headaches, and help you sleep well at night. You can find a list of registered tax preparers here.
CRAT Sleight of Hand -Appreciated property is transferred to a Charitable Remainder Annuity Trust (CRAT) and scammy taxpayers claim that the transfer gives those assets a step-up in basis to fair market value. The CRAT later sells the property and does not recognize the gain (due to the step up) and then uses the money to buy an annuity. The beneficiary reports as income only a small portion of the annuity received.
These are just a few examples of scams that are out there. Taxpayers would do well to put themselves in the hands of reliable, licensed tax professionals. Finding someone you trust will help you keep you up to date with changing tax laws and protect you from the unscrupulous scammers.
Click here to schedule an appointment with one of our specialists.
TAX LAW UPDATES:
In our last newsletter we mentioned The Tax Relief for American Families and Workers Act of 2024 passed the Ways and Means Committee. In the last week of January, the House passed it by a 357 to 70 vote. This includes 100% bonus depreciation, as well as research and development expenses, and an expansion of the Child Tax Credit.
House GOP members are now considering moving a second tax bill in parallel with the The Tax Relief for American Families and Workers Act of 2024, providing relief from the $10K state and local tax deduction cap. This bill, called the SALT Marriage Penalty Elimination Act, retroactively doubles the SALT cap for just tax year 2023 for married filers with an aggregate gross income below $500K.
Payback for erroneous ERC scams - The IRS has announced that they have introduced a new voluntary disclosure program for paying false ERC claims. It works like this: for those who falsely claimed the credit, if they disclose their mistake, they only have to pay back 80% of the credit. Coincidentally, this is happening at the same time that the IRS sent out 20,000 letters notifying taxpayers that their ERC claim for credit is disallowed.
DON’T FORGET
Check out these upcoming important tax deadlines:
March 15, 2024 - Returns for partnerships and S-corps are generally due. If you request an automatic extension, these will be due on September 15.
April 1, 2024 - Required minimum distributions are due if you turned 73 in 2023
April 15th - Last day to make a contribution to your IRA, HSA, or Coverdell education savings account for the prior year.
April 15th - Mail your individual or corporate income tax return by this day. If you are requesting an automatic 6-month extension, you still need to pay any taxes due by April 15th.
April 15th - First quarter 2024 estimated income tax payments are due by April 15th.
ANNOUNCEMENTS
33 days until Tax Day! The countdown continues.
IN THE SPOTLIGHT -
Sarah Faulkner is in the Spotlight for this edition of our newsletter. Sarah acts as one of our Executive Assistants and her skills in finding a way to make things happen are crucial to keeping things running smoothly for all. Her eagerness to serve and her efficient management of details begs the question— what did we ever do without her? Each day Sarah delivers a heaping helping of thoughtful and efficient detail management. And she does it all with a smile and a laugh.
WHAT SHE’S WATCHING:
I enjoy Our Rich Journey, which focuses on FIRE and the steps it takes to get there. I like this one because it gives perspective and shows that early retirement is possible. I love the idea of having more freedom with how you invest your time in causes you care about. This is a personal goal of mine to have more freedom to invest in a life that honors my values.
WHAT SHE’S READING:
“I’m currently reading The Servant by James C. Hunter, which is a book on leadership. It explains that before you can truly lead, you must understand and take action to serve. It seems like a simple concept, but the concept of servant leadership is easily understood and less often put into practice. I love this because it applies to every person-who leads in some capacity whether they are conscious of it or not.
I’m also reading The Body Keeps the Score:Brain Mind and Body in the Healing of Trauma by Bessel Van Der Kolk, M.D. This book goes into depth about trauma and how the body stores and processes it. The struggles and perseverance of his patients are awe-inspiring, he brings such a depth and big picture understanding to trauma beyond the scientific and obvious details through his documenting of real world cases.
TAKE A BREAK
This should be fun. Fill in the blanks to these truisms to create humorous or insightful financial resolutions. Submit your answers and we will feature some of the best in the next newsletter.
Everyone knows that to make money you have to ________________________________.
If you skipped getting a Starbucks everyday for a year, ____________________.
One really clever way to get ahead financially is ____________________.
One thing I’ve learned the hard way is that making money requires _________________.
Charity begins ______________________________________.
It doesn’t cost much to raise a houseful of children, you only have to ___________________.
Submit your answers to info@wdwealth.com. We’ll choose the best answer and let you know in the next newsletter.
Last Week’s TAKE A BREAK asked for captions from our readers.
Here are a few of our favorites? Which one do you think does it right?
Who is going to win this tug of war?
It’s mine and you can’t have it.
Every year this tax guy is getting stronger and the tax bag is getting heavier.
I need to start working out more.
If only I had WD Wealth to help me in this fight.
Want to chat?
See you next time!
If you missed last week’s newsletter, click here to catch up.
Comentarios