The Southbourne Tax Group: Beware tax preparer fraud, other ‘dirty dozen’ scams

If you’re rushing to get your tax return in the mail, take care when choosing your tax preparer. If you don’t, you could lose your refund and face fines or jail time if your preparer files a fraudulent return.

Tax preparer fraud was the focus of a March 1 alert from the National Consumers League (NCL).

“Getting caught up in a tax preparer scam will not just cheat you out of your refund and scam you into paying bogus fees, it can also expose consumer victims to other liabilities,” John Breyault, an NCL vice president, said in a statement. Those liabilities include hefty fines and even imprisonment associated with the criminal offense of filing a fraudulent tax return.

In February 2017 alone, tax preparers in New York, Nebraska and Louisiana were charged with tax fraud. And in 2015, the U.S. Department of Justice closed more than 35 tax return preparers’ operations because of fraud.

Tax preparer fraud also makes the Internal Revenue Service’s list of the “dirty dozen” tax scams for 2017.

How the scam works: Often, the tax preparer will falsify your earnings, claim credits for you that you didn’t earn or steal your refund by having it deposited into someone else’s account, according to the NCL.

To protect yourself, the NCL and IRS offer tips when choosing a tax preparer, including:

• Check for his or her Preparer Tax Identification Number (PTIN). The IRS offers a tax preparer directory so you can check his or hercredentials.

• Refuse to sign a blank tax return.

• Steer clear if your preparer doesn’t require you to submit your W-2s.

• Avoid preparers who charge fees based on a percentage of your refund, or who claim they can get bigger refunds than other preparers.

• Avoid giving your Social Security number or tax documents when you’re just inquiring about a tax preparer’s service. Otherwise they might file a fake tax return in your name.

• Be sure to review your return before it’s filed, and make sure you get a copy of your return.

You also may cut your risk of fraud by getting free tax preparation help sanctioned by the IRS. If you make less than $54,000 a year, you likely qualify for free, in-person guidance through Volunteer Income Tax Assistance programs.

If you make less than $62,000 per year, you can get free online help through the IRS Free File program.

Tax preparer fraud isn’t the only thing to be on your guard against this year. Also making the “dirty dozen” are phone scams, in which fraudsters call up and impersonate IRS agents. These fraudsters claim you owe taxes and try to get you to cough up cash.

Between October 2013 and January 2016, the Treasury Inspector General for Tax Administration received nearly 900,000 reports of such calls, and more than 5,000 victims paid more than $26 million to the scammers.

The fake agents often threaten to sue, arrest or deport you if you don’t pay using prepaid debit cards or wire transfers.

Other frauds on the “dirty dozen” list are phishing emails, which look as if they come from the IRS or a tax software company. If you click a link, you land on an official-looking website and are asked for personal information, which the criminals use to create false tax returns.

Identity theft also continues to be a major concern, with bad guys using stolen Social Security numbers to file fraudulent returns. While the number of identity theft tax cases has plunged, almost 238,000 cases were reported in 2016.

“It’s the second year tax return fraud has decreased,” Breyault says, “but they’re not going to be able to catch all of it.”

Additional resources for business accounting tips are available here.

The Southbourne Tax Group: How To Recognize the Signs of Tax Identity Theft

Tax filing season is upon us. Soon you will be filing your paperwork and perhaps receiving a nice check — unless thieves file a return in your name first and falsely claim your refund.

Unfortunately, if a thief has your Social Security number and other relevant information, tax identity theft is very hard to prevent. Greg McBride, Chief Financial Analyst for Bankrate.com, notes that "somebody could have your Social Security number and they could have been sitting on it for a while... you would have no idea until they go and file a bogus tax return under your Social Security number. You only find out at the point where your legitimate return gets rejected."

While recent IRS efforts have resulted in a 50% drop in both confirmed fraudulent identity theft tax returns and new identity theft reports from 2015 to 2016, tax-identity thieves still falsely claim millions of dollars in undeserved refunds every year.

The IRS is attempting to help taxpayers be proactive by recognizing the signs of potential tax ID theft. The "Taxes. Security. Together" program urges taxpayers to take reasonable precautions and to work with the IRS whenever any activity occurs that suggests tax ID fraud.

Examples of suspicious activity include receiving tax–related documents that you did not request and should not receive, including receiving a bogus refund. Occasionally, information meant to be delivered to the thief will be sent to you by mistake. If you receive a tax document from an employer that you have never worked for, a tax transcript that you did not request, or a reloadable prepaid debit card that you did not expect, you should be highly suspicious of potential tax fraud.

You may also receive a letter from the IRS asking you to verify a suspicious tax return filed with your name and Social Security number. A greedy thief may try to claim a large refund or make a basic error in the return that compels the IRS to label the return as suspicious. When that occurs, the IRS will contact you to see if the return is legitimately yours.

If your return is rejected, start by immediately looking for any simple errors such as transposed Social Security numbers or confusion with respect to dependents — for example, your teenage son or daughter filed their own return claiming themselves when you have also claimed them as a dependent. If no errors are evident, you will have to deal with what McBride calls the "massive headache" of rectifying the situation.

McBride offers perhaps your best line of defense: "To whatever extent you can, try to file your tax return early." Beat the thieves at their own game and file as soon as you have the necessary tax documents from employers and financial accounts. However, since the thieves don't care if your information is correct or not, they have an inherent time advantage.

It's preferable to be preventative and extremely careful with your personal information. The IRS urges you to take reasonable and simple steps, such as securing your computer and mobile devices, using strong passwords, avoiding phishing e-mails, and not engaging in suspicious texts and calls from alleged IRS officials.

Make sure that you take similar precautions with your mobile and wireless connections. Never transmit personal information over unsecured Wi-Fi connections or to unverified websites.

With respect to tax fraud, the IRS is your ally. Neither one of you wants tax-identity thieves to succeed. Do your part, be proactive and vigilant, and help to make 2017 a difficult year for tax-identity thieves.

Additional resources for business accounting tips are available here.

The Southbourne Tax Group: Lowell tax preparer allegedly kept refunds; tips for choosing tax preparer

There are a lot of scam warnings at tax time, but you may not have considered this one before: Make sure you check out your tax preparer.

Last week, a court approved an injunction requested by State Attorney General Maura Healey, aimed at stopping a Lowell tax preparer, Samuel Dangaiso, of Tax Enterprises, from doing business.

“We allege that this defendant filed more than $2 million in fraudulent deductions and pocketed tens of thousands of dollars of the falsified refunds,” said Healey. “This tax season, we will be watching for scam tax preparers and will take action to stop tax fraud in order to protect the public.”

The attorney general's office alleges that Dangaiso filed tax returns that included invented, unjustified deductions without the knowledge of his clients.

Dangaiso would then direct the full refund to his own bank account, pay the customer their expected amount and then keep the rest, Healey said.

The investigation revealed that he kept at least $150,000 in refunds from more than 300 returns since 2009.

The IRS strongly suggests that consumers check the qualifications and history of their tax preparer. The IRS maintains a directory of credentialed preparers that you can access through this website.

Additionally, the IRS said that consumers should never sign a blank return.

They should also double-check all routing numbers for bank accounts on their filings to verify that refunds will be sent directly to them and not to the preparer.

Additional resources for business accounting tips are available here

The Southbourne Tax Group: 7 Tips For Preventing Invoice Fraud

The Accounts Payable department is a prime target for fraud. Criminals looking to exploit your business take advantage of AP departments buried in paperwork to submit phony invoices and hope they’ll slip by as legitimate.

A single fraudulent invoice might not impact your company too much. However, over time invoice fraud can become quite a costly problem. Foiling invoice fraud is often frustrating, but implementing these tips will significantly reduce the risk of your company falling victim.

1) Employ 3-Way Matching

If you can match each invoice to a purchase order and receipt of goods, then you’re much less likely to pay a fraudulent invoice. Most fraudsters won’t bother fabricating three separate documents.

2) Watch Invoice Amounts

Amounts on invoices can provide clues that the invoice isn’t on the up-and-up. If your company requires additional review for invoices over $1,000 (for example), checks squeaking by right under that threshold (such as $999.98) should raise suspicion.

3) Keep Up Moral

Invoice fraud can come from inside the company or from an outside source. Happy employees are unlikely to commit fraud and more likely to catch fraud from outside sources. If they don’t have reason to complain, then they’re more likely to care about doing right by the company.

4) Check On Vendors

Fraudulent invoices are typically issued under fake business names or use a legitimate name but a fake address or bank account number. You’ll want to look up any new vendors to make sure they’re legitimate and find the address on Google maps. If the address is residential or a post-office box, that’s a big red-flag. Also, check-in with your existing vendors directly if their account information changes.

5) Track Invoice Activity

If you’re tracking invoice activity, you’ll be able to notice when something changes. For example, one vendor typically submits 5 to 10 invoices a month and suddenly you see 50 from them in a single month. It might be legitimate, but you’ll still want to get in touch with them and double-check.

6) Implement “Fuzzy Matching”

Duplicate payments are one way to commit invoice fraud – fraudsters submit a near-perfect copy of a legitimate invoice and hope no one notices one payment is going to a different account number. Sometimes they’ll also change date, invoice number, or amount. You’ll need a program that allows for “fuzzy matching” to catch near-duplicates as well as identical invoices.

7) Employ Automation

Automation in the AP department gives you the tools you need to more effectively implement all these other tips for preventing fraud. It’s probably the single most important step you can take to stop invoice fraud.

With NextProcess’ AP Automation Software, you instantly get detailed insight into everyday invoice processing. Our software automates invoice processing according to your custom specifications. It can catch many sorts of suspicious invoices on its own and gives you the tools you need to more easily track invoice activity and check on vendor information. On top of that, automation software is easy to use and frees up employees for more interesting work. It’s a win-win for the company and everyone in the AP department.

Additional resources for business accounting tips are available here.

The Southbourne Tax Group Review: Struggling middle class give less to charity

Donations by wealthy Americans surge

The divide between the rich and not-so-rich in America can be seen most glaringly in the amount of money they give (and have stopped giving) to charitable causes.

The average American household is giving far less to charity than it did a decade ago, but this hides two vastly different patterns of charitable giving. Over the past 10 years, charitable giving deductions from lower-income donors have declined significantly, at almost the same rate that charitable giving from higher income donors increased. Itemized charitable deductions from donors making less than $100,000 a year declined by 34% from 2005 to 2015, while the same deductions from donors making $100,000 or more a year increased by 40%, according to a study of tax filings by the Institute for Policy Studies, a left-wing think tank.

“The growth of inequality is mirrored in philanthropy,” Chuck Collins, report co-author said. “As wealth concentrates in fewer hands, so does philanthropic giving and power.” As a result, charities are increasingly relying on larger donations from smaller numbers of high-income, high-wealth donors, which could lead to undue influence of funds in major charitable organizations. And they are receiving less from the vast population of donors at lower and middle-income levels. (The authors consider low and mid-range donor income as under $100,000 per year.) Overall, charitable giving increased 4% to $373.25 billion year-over-year in 2015, regardless of income level.

The number of donors giving at typical donation levels has also been steadily declining. (In terms of donations, below $10,000 is considered a low to mid-range gift, while over $10,000 is considered a high-dollar gift.) Lower and middle income donors to national public charities have declined by as much as 25% between 2005 and 2015. These are the people who have traditionally made up the vast majority of donor files and lists for most national nonprofits since their inception. This rate of decline “correlates strongly” with overall economic indicators, such as wages, employment and homeownership rates, the study said. And more and more giving is going into warehousing vehicles like foundations and donor advised funds, instead of to charities on the ground, it added.

It’s not all doom and gloom: Giving to schools and colleges is expected to grow by 6.3% this year and 6.1% next year, according to a separate report released last year by the Indiana University Lilly Family School of Philanthropy and presented by Marts & Lundy, a fundraising and philanthropy consulting firm based in Lyndhurst, N.J. But the middle class likely had less to do with this spike too. “This may be due in part to the increasing interest of donors, and especially wealthy donors, foundations and even corporations, in funding higher education, as well as a growing role for philanthropy in K-12 education,” the report added.

Additional resources for business accounting tips are available here

The Southbourne Tax Group: It's tax season, avoid fraud by following these tips

             

The person calling began to threaten the OPP civilian employee that if she did not send money to him, terrible things would happen to her

With tax season on the horizon OPP will be receiving calls from citizens who have been contacted and in some cases, have lost money. If you are contacted over the phone by someone saying they are the Canada Revenue Agency (CRA) here are some tips taken right from the CRA website:

The CRA:

• never requests prepaid credit cards;
• never asks for information about your passport, health card, or driver's licence;
• never shares your taxpayer information with another person, unless you have provided the appropriate authorization; and
• never leaves personal information on your answering machine or asks you to leave a message containing your personal information on an answering machine.

When in doubt, ask yourself the following:

• Is there a reason that the CRA may be calling? Do I have a tax balance outstanding?
• Is the requester asking for information I would not include with my tax return?
• Is the requester asking for information I know the CRA already has on file for me?
• How did the requester get my email address or telephone number?
• Am I confident that I know who is requesting the information?

When in doubt hang up the phone and call the CRA phone number included on the previous year tax returns or documentation received from the CRA. The number provided on the CRA website is 1-800-959-8281 for individual inquiries.

This story that happened in the late fall and speaks to the randomness of these calls.

A would be fraudster called the Orillia OPP detachment and was greeted by an administrative assistant with "good morning Orillia OPP". The person calling began to threaten the civilian employee that if she did not send money to him, terrible things would happen to her and he was going to be the one to do it.

The randomness comes from the fact that most people from Ontario understand that the OPP stands for Ontario Provincial Police. Many times these calls originate from foreign countries and are intended to scare you into sending money. If you receive one of these calls hang up and call the Canadian Anti-Fraud number at 1-888-495-8501.

If you or someone you know receives an e-mail, phone call or letter demanding money, asking for money, threatening you for money or saying the most terrible thing has happened and they need money to help a loved one please call someone you trust and talk it over with them. Think about the following when receiving an e-mail, phone call or letter:

• Is it reasonable? Would a police agency call you for money to bail someone out? Would someone notify you of a million dollar win over e-mail?
• If it's too good to be true it probably isn't true.
• Just hang up then report it.
• Call someone else and tell them the story before sending money.
• Call the agency that is calling you; if you receive an e-mail asking for updated information call the bank or go to the bank and talk to a live person.
• If there is any doubt call the Canadian Anti-Fraud Centre.
• Please talk to your relatives about frauds especially elderly relatives as they are more likely to be victims.

Sadly each year Canadians are defrauded of millions of dollars.

If you receive a call, e-mail or letter and know it's a scam please hang up, delete the e-mail or shred the letter. If you have been the victim of a fraud no matter how small please contact the Canadian Anti-Fraud Centre at 1-888-495-8501.

Additional resources for business accounting tips are available here.

The Southbourne Tax Group: Tips - Against Tax Refund Fraud

A survey conducted by the data security and identity protection firm found more than half of Americans aren’t worried about tax fraud, despite federal reports showing identity thieves filed 787,000 fraudulent returns in 2016, which adds up to more than $4 billion in fraud.

The survey also found that only 35% of taxpayers ask their preparers to use two-factor authentication (which is stronger than a single password) to protect their information. On top of that, only 18% use an encrypted USB drive to save tax documents that contain sensitive information. When it comes to choosing a tax preparer, 50% of respondents said they chose their tax preparers online, didn’t screen them beforehand or weren’t sure how to evaluate a tax preparer at all. CyberScout said this puts consumers at risk of getting scammed. Finally, more than half (51%) of taxpayers expecting refund checks in the mail don’t use a locked mailbox.

Americans taxpayers are too lax about identity theft, according to CyberScout.

These findings come from a nationally representative survey of more than 1,500 Americans aged 18 and over commissioned by CyberScout, using Google Consumer Survey.

“In tax season, it is crucial that everyone remain vigilant and on high alert to avoid tax-related identity theft or phishing schemes,” said Adam Levin, founder and chairman of CyberScout and author of “Swiped.” Levin is also the co-founder of Credit.com.

How taxpayers can protect themselves

This is one of the busiest times for identity thieves, but there are steps taxpayers can take to protect themselves. Here’s what CyberScout recommends:

- Use a password-protected Wi-Fi connection when filing your taxes. Use a long and complex password – not just for your Wi-Fi but also for any accounts you’re using during the tax-filing process.

- Get your return via direct deposit. If you must receive a return check via mail, have it sent to a locked mailbox.

- Ask your tax preparer to use two-factor authentication to protect your documents and personal information.

- Use an encrypted USB drive to save sensitive tax documents.

Additional resources for business accounting tips are available here.