It’s been a big summer for financial fraud. And statistics suggest that it’s not going to get better—especially for seniors. Scams targeting individuals aged 60 and older—sometimes called elder fraud—caused over $3.4 billion in losses in 2023, up approximately 11% from the previous year.One of the things that I’ve noticed is that it can be easy to dismiss these instances of fraud as targeting easy money. But that’s not the case. Increasingly, scammers don’t expect to get a quick payday. Rather, they work at it, cultivating “friendships” and convincing potential victims that they need help. I’ve been on the receiving end of a few calls asking for advice—and reporting potential scams—this summer. You can read about one such scam here. (Spoiler alert: Unlike some of the others, this one ends happily. (☆) )
Speaking of fraud, the IRS has announced a second Employee Retention Credit (ERC) voluntary disclosure program (☆) for businesses that want to pay back the money they received after filing ERC claims in error. The second program is not as favorable as the first—you must pay back 85% of the credit—and will run through November 22, 2024. The second program only applies to tax periods in 2021—you can’t use this version of the voluntary disclosure program to repay ERC money from 2020.
The IRS continues to chase what it deems abuse of the ERC, announcing last week that over 460 criminal investigations have been initiated in connection with the claim. Their efforts appear to be paying off: last year, a preparer was indicted for allegedly filing over $124,000,000 in false ERC Claims. The staggering fraud has resulted in the IRS slowing down—and in some instances, stopping altogether—the processing of claims while they sort out those that are legitimate.
Crime may factor into taxes in other ways. The Earned Income Tax Credit (EITC) has provided financial relief to millions of low- and moderate-income working families. Recent research suggests that the program can also play a significant role in reducing crime rates. Specifically, a look at the effects of EITC disbursements on crime rates in major U.S. cities like Chicago, New York City, and Los Angeles found evidence of burglary and robbery rates decreasing significantly in the week of and three weeks following disbursements.
In other crime news, a Florida man pleaded guilty (☆) to evading nearly $2.4 million in taxes on income he earned from his business. According to court documents and statements, 76-year-old Roger Whitman generated millions of dollars from the sales of medical equipment but did not report and pay taxes on that income. When the IRS tried to collect, Whitman formed a trust where he directed his income and used the funds in the trust to pay personal expenses.
Loading...
(Props to Enrolled Agent—and Florida resident—Adam Markowitz, who tweeted, “These stories never start with, “A North Dakota man…” do they?”)
Trusts shouldn’t get too much of a bad rap. Trusts—especially revocable living trusts—are often used to a good end in estate planning. However, one of the most pervasive misconceptions about revocable living trusts is that they provide asset protection (in reality, this is not the case while the creator of the revocable living trust is alive). Other legal tools and strategies may be able to make up for those shortcomings.
Recent recommendations from the Taxpayer Advocate Service (TAS) included improving services for international taxpayers. A major issue for those taxpayers has been large gifts—U.S. taxpayers receiving gifts over $100,000 from foreign individuals must report these gifts to the IRS, even though no tax is imposed on such gifts. Many taxpayers are unaware of this requirement until it’s too late, resulting in penalties that can be as much as 25% of the gift’s value. Recognizing the harshness of this penalty, the TAS recommended that the IRS adjust the $100,000 threshold for inflation. The IRS agreed, with new rules expected to be published by the end of 2024.
While I’m not expecting any big tax legislation through the end of the year, I’ll think we’ll see more guidance from IRS—especially as it applies to digital assets and ERC. I also expect the IRS to ramp up messaging about identity theft, fraud, and data security. Take steps to protect yourself—and those you care about. In the immortal words of Hill Street Blues’ Sergeant Phil Esterhaus, “Let’s be careful out there.”
Loading...