The Tax Cuts and Jobs Act (TCJA) of 2017 allow people who were previously unqualified to file an income tax return now eligible to do so. Why? The TCJA increased and decreased several types of tax deductions, which in turn can increase or decrease an income tax return. This impacts the elderly population as well. Some of the ways the elderly now qualify for an income tax return are:
- If they made estimated payments on their pension income but have now stopped due of death.
- If they are paying for large and expensive medicines and treatments.
- If they applied to receive certain tax credits.
The season of the income tax return has also become the season of tax fraud. Tax fraud is when false information is submitted to the IRS, in the attempt to reduce the amount of taxes owed or conversely, to increase a tax refund. The most common form of tax fraud is tax-related identity theft. This is when personally identifiable information (PII) is used without a person’s consent in the attempt to commit fraud and other tax-related crimes. A PII can be personal information, such as social security numbers, names, and bank account numbers. Anyone can become a victim of tax fraud; often common targets are the elderly.
According to the U.S. Senate Special Committee on Aging, the 2018 Fraud Book cited “IRS scams as the top complaint reported to the Senate Aging Committee’s Fraud Hotline.” Common awareness towards the types of potential fraud can be invaluable in protecting themselves against it. Here are the four most common types of tax fraud schemes going around this season.
Phishing is when fraudsters send emails to taxpayers filled with website links that claim to be from the IRS. The goal is for the taxpayer to “fall for the bait,” click into the links, and input their information. As such, if the taxpayer fulfills this request, then the information goes directly into a fraudster’s hands.
Awareness of how the IRS works can help avoid phishing. Know that the IRS will never contact someone and ask personal information through emails, text messages, or any social media outlets. Any occurrence outside of this behavior is most likely a sign of potential fraud.
Phone fraud is when fraudsters call taxpayers claiming to be from the IRS. The callers will try to ask questions to get all sorts of information out of the taxpayer: personal information numbers, taxes they may (or may not) owe, and payments to make immediately.
Know that the IRS will never call with any demands or for you to make any immediate payments. They also will not contact you about your taxes without mailing you a bill first.
Tax Preparer Fraud
Tax preparer fraud is when a fraudster disguises themselves as a tax professional and contacts a taxpayer in the attempt to receive their personal information. Typically, these methods of communication come from an email or letter, with a purported tax business printed on the signature or letterhead. Unless someone personally knows their tax professional or tax filing business, the “professionals” attempting to contact a taxpayer are typically fraudsters. These emails try to trick taxpayers into thinking they must update their information. However, they are really trying to get a taxpayer’s information for fraud.
If you find an email from a tax professional or business you have never heard of, it is best not to reply. Likewise, if you do not recall any history with the company or tax professional, it is best not to reply.
Fake IRS Agents Coming to Your Home
Fraudsters also like to show up in person, disguised as the IRS. They generally carry picture ID’s and sometimes business cards of the IRS. This type of attempted fraud is most commonly used on the elderly.
A great way to avoid these types of fraudsters is to make a judgment call. We recommend to not give anyone your information unless you feel completely confident and comfortable around this person. You can also call the IRS to confirm of any pending visits to your home. The idea is to not give away any of your information, unless you can confirm that you are speaking with an IRS agent.
Another way to avoid fraud is to update your personal information to the IRS. We recommend updating all addresses, phone numbers, emails, and other personal information you usually give to the IRS. Know that your refund check, if not direct deposited, will be sent to the last known address the IRS has on file. If you happen to move and not update your personal information, then your check will be sent to your old address, potentially leaving it unguarded for fraudsters to take.
Updating your information to your all your estate planning documentation is crucial, too. For the elderly, we advise to update (or create, if needed) a:
- Durable Power of Attorney
- Health Care Surrogate
- Proactive Medicaid Planning Approach
- Revocable Trust
- Homestead Exemption on your primary residence in Florida
Contact OC Estate and Elder Law at (954) 251-0332 or firstname.lastname@example.org for further information on updating and creating an estate plan, as well as ways to protect hard-earned assets from all types of fraudsters.