Avoiding Financial Scams at Tax Time and Beyond

Avoiding Scams When Filing Taxes 

Scammers are becoming increasingly sophisticated in their approaches. They often prey on fears about owing money to the IRS or missing important deadlines. Some of the most prevalent schemes include: 

IRS Impersonator Calls: Some scammers pretend to be IRS agents, warning of arrest or legal consequences if instant payment isn't made. Keep in mind, the IRS does not reach out by phone, email, or text. They always start with a letter via the U.S. Postal Service. 

Stolen Identity Tax Fraud: Criminals steal Social Security numbers to file fake tax returns and claim refunds before the actual taxpayer files. Submitting your tax return early in the season may help stop this kind of fraud. 

 Email Phishing Schemes: Emails that look like they're from the IRS or tax software firms might ask for personal information or have harmful links. They often appear very legitimate but show small warning signs, like minor spelling mistakes or strange email addresses. 

Strategic Steps for Fraud Protection 

Just as we support strategic financial planning to help clients reach their goals, we suggest a strategic approach to prevent fraud. Here are key protective measures to implement: 

Never Share Sensitive Information by Phone or Email: Financial institutions and government bodies will not request sensitive information, such as Social Security numbers, banking details, or passwords, through these means. 

Implement Strong Digital Security: Use robust, unique passwords for all financial accounts and enable two-factor authentication whenever possible. Consider using a password manager to maintain complex passwords securely. 

Monitor Financial Accounts Regularly: Review bank and credit card statements promptly for suspicious activity. Sign up for account alerts to be notified of unusual transactions immediately. 

 Work With Trusted Professionals: Partner with qualified tax preparers and financial advisors who have established reputations and proper credentials. Ask for referrals from trusted sources and verify credentials independently.  

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Legal Safeguards to Consider 

From an elder law perspective, several legal tools can provide additional protection against financial exploitation. 

Durable Power of Attorney: This legal document lets you appoint someone you trust to handle your financial matters if you can't manage them yourself. It's important to pick a person with good financial skills and someone you can completely rely on. Since most Powers of Attorney are effective immediately (i.e. do not require you to be incapacitated before your appointed agent can act on your behalf), they make it easy for your agent to step in and assist you if you need help. 

Revocable Living Trust: Trusts not only ensure assets avoid probate upon your death, but they also can set clear rules for how your assets are to be managed during your lifetime and help keep an eye on financial transactions. Additionally, in the event you can no longer manage your assets, the trust will have an appointed successor trustee who can quickly step in and take over management when needed. Trusts can be a crucial planning tool for older adults who might be vulnerable to exploitation. 

Conservatorship: If you are the child or loved one of an elderly person who has lost the capacity to protect himself or herself from a scammer, you may want to discuss appointing a conservator to handle your loved one’s financial and legal affairs for them.  

Advanced Directives: These documents ensure your wishes are followed regarding healthcare decisions if you become incapacitated. 

Taking Action When Fraud Occurs 

If you suspect you've been targeted by a scammer, take immediate action: 

Report suspicious calls claiming to be from the IRS to the Treasury Inspector General for Tax Administration (TIGTA). File a complaint with the Federal Trade Commission (FTC). Contact your financial institutions to secure your accounts. Place a fraud alert on your credit reports with the major credit bureaus. Document all communications and keep detailed records. 

The Role of Family and Professional Support 

Creating a network of trusted individuals who can help monitor for signs of fraud is crucial. Ask a trusted family member or friend to help monitor your finances. Have regular discussions with your financial advisor about any troubling financial activities. Keep open communication with your tax professional to watch for any warning signs. Consider consulting an elder law attorney for extra protective steps. 

At WHZ, our goal is to provide you with "Absolute Confidence, Unwavering Partnership, For Life." Schedule a complimentary consultation on our website at whzwealth.com or give us a call at (860) 928-2341. And for help with putting protective legal measures in place, contact KKC Law at kkc-law.com or (860) 646-1974. 

Presented by Principal/Managing Partner & Chief Strategist James Zahansky, AWMA® and KKC Law Partner Allison T. Poirier. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. 697 Pomfret Street, Pomfret Center, CT 06259 and 392-A Merrow Road, Tolland, CT 06084, 860.928.2341. http://www.whzwealth.com These materials are general in nature and do not address your specific situation. For your specific investment needs, please discuss your individual circumstances with your financial advisor. WHZ Strategic Wealth Advisors does not provide tax or legal advice, and nothing in the accompanying pages should be construed as specific tax or legal advice.