IDENTIY FRAUD AND YOUR TAX RETURN ( from irs.gov, creditcard.com)

Taxpayer Guide to Identity Theft





What is identity theft?
Identity theft occurs when someone uses your personal information such as your name, Social Security number (SSN) or other identifying information, without your permission, to commit fraud or other crimes.

How do you know if your tax records have been affected?
Usually, an identity thief uses a legitimate taxpayer’s identity to fraudulently file a tax return and claim a refund. Generally, the identity thief will use a stolen SSN to file a forged tax return and attempt to get a fraudulent refund early in the filing season.

You may be unaware that this has happened until you file your return later in the filing season and discover that two returns have been filed using the same SSN.

Be alert to possible identity theft if you receive an IRS notice or letter that states that:

More than one tax return for you was filed,
You have a balance due, refund offset or have had collection actions taken against you for a year you did not file a tax return, or
IRS records indicate you received wages from an employer unknown to you.
What to do if your tax records were affected by identity theft?
If you receive a notice from IRS, respond immediately. If you believe someone may have used your SSN fraudulently, please notify IRS immediately by responding to the name and number printed on the notice or letter. You will need to fill out the IRS Identity Theft Affidavit, Form 14039.

For victims of identity theft who have previously been in contact with the IRS and have not achieved a resolution, please contact the IRS Identity Protection Specialized Unit, toll-free, at 1-800-908-4490.

How can you protect your tax records?
If your tax records are not currently affected by identity theft, but you believe you may be at risk due to a lost/stolen purse or wallet, questionable credit card activity or credit report, etc., contact the IRS Identity Protection Specialized Unit at 1-800-908-4490.

How can you minimize the chance of becoming a victim?
Don’t carry your Social Security card or any document(s) with your SSN on it.


Don’t give a business your SSN just because they ask. Give it only when required.


Protect your financial information.


Check your credit report every 12 months.


Secure personal information in your home.


Protect your personal computers by using firewalls, anti-spam/virus software, update security patches, and change passwords for Internet accounts.


Don’t give personal information over the phone, through the mail or on the Internet unless you have initiated the contact or you are sure you know who you are dealing with


============


ID Theft Tool Kit
Are you a victim of identity theft?
If you receive a notice from the IRS, please call the number on that notice.

If not, contact the IRS at
800-908-4490


Fill out the IRS Identity Theft Affidavit, Form 14039

(Please write legibly and follow the directions on the back of the form that relate to your specific circumstances.)


--------------------------------------------------------------------------------

Credit Bureaus
Equifax
www.equifax.com
1-800-525-6285

Experian
www.experian.com
1-888-397-3742

TransUnion
www.transunion.com
1-800-680-7289


--------------------------------------------------------------------------------

Other Resources

Visit the Federal Trade Commission or call the FTC toll-free identity theft helpline:
1-877-ID-THEFT
(1-877-438-4338)

Visit the Internet Crime Complaint Center (IC3) to learn more about their internet crime prevention tips


--------------------------------------------------------------------------------

Report Suspicious Emails
Report suspicious online or emailed phishing scams to:
phishing@irs.gov

For phishing scams by phone, fax or mail, call:
1-800-366-4484


--------------------------------------------------------------------------------

For More Information
IRS.gov/identitytheft
IRS.gov/phishing


===============================================================
Tax ID theft skyrockets; thieves feasting on a refund bonanza

They steal your identity and go on a spree with Uncle Sam's debit card

By Susan Ladika
Published: March 26, 2012



If it can happen to a slain police officer, it can happen to anyone.

Taxpayers are having hundreds of millions -- or perhaps billions -- of dollars in tax refunds swiped by crooks who file fraudulent tax returns using the victim's Social Security number, then pocket the refunds. The victim has no idea the fraud has occurred until they try to file their own return and it bounces back.

"Nobody's immune from this crime," says Sal Augeri, a police detective in Tampa, Fla. The Tampa Bay area, along with South Florida, appear to be ground zero for the crime. But Florida is by no means alone. Just in the last week of January, the Internal Revenue Service (IRS), working with various other agencies, cracked down on suspected fraudsters in 23 states from New York to California.

The situation is so bad, Augeri testified March 20 before the U.S. Senate Subcommittee on Fiscal Responsibility and Economic Growth about what he's observed. During the hearing it was revealed one of the tax fraud victims was Tampa police officer David Curtis, who was gunned down in 2010. His widow is still struggling to get the tax refund.

"It's a growing problem that undermines confidence in the tax system," says Mark Steber, chief tax officer at Jackson Hewitt Tax Service and chairman of the IRS Electronic Tax Administration Advisory Committee.

Problem runs into billions
While it's impossible to get a handle on exactly how much money is swiped, in the Tampa Bay area alone Augeri estimates it totals up to $1 billion and could be as high as $10 billion nationwide.



HOW THE SCHEME WORKS

While the methods employed can vary, in Tampa the scheme generally works like this:
• Fraudsters find willing accomplices who have access to Social Security numbers at places such as doctor's offices and insurance companies or from credit card applications. The accomplices may steal 100 names and Social Security numbers, and get paid $1,000.
• The thieves use that information to file a fake tax return in your name -- usually beating you to the punch and filing early in the tax season.
• They take the refund -- which may come in the form of a check or prepaid debit card -- and bring it to a business they're in cahoots with.
•The business cashes the check or cashes out the debit card, gives the fraudster a cut, then keeps the rest, laundering it through the business.


At the IRS, the agency caught 262,000 fraudulent returns in 2011, seeking $1.45 billion in refunds, an agency spokesman says. That's an 81 percent increase since 2010, when the agency identified 49,000 suspicious returns, seeking $247 million in refunds. But if the fraudulent return isn't caught and slips through the system, the burden will fall on you to prove your identity, and the problem can take months to resolve, the IRS representative admits. Ultimately, you'll receive your refund, with the federal government coughing up the cash.

No one can pinpoint precisely why the crime is booming, but Steber says, "identity theft goes hand in hand with tax fraud."

A Federal Trade Commission report says that of the 1.8 million complaints it received in 2011, 15 percent involved identity theft. Of those, almost one-quarter were related to tax or wage fraud.

Criminals also are drawn to it because it's less risky than many other types of crime, Augeri says. Rather than trying to sell a kilo of cocaine for a few thousand dollars, and running the risk of being shot by other bad guys, the crooks can sit in their living room and crank out returns, netting tens of thousands or hundreds of thousands of dollars. "It's more lucrative and the punishment isn't as bad."

The 'TurboTax' scheme
On the street, it's a scheme known as "TurboTax" and evidence of the fraud can be found when police show up at all kinds of cases, Augeri says. In one recent suicide, the dead teen was found with two prepaid tax refund debit cards in his pocket.

The problem started popping up in Tampa in the second half of 2010. Police would pull over vehicles and find ledgers filled with Social Security numbers and stacks of prepaid debit cards.



The U.S. Postal Service also started noticing stacks of IRS mailings going to certain addresses, and the names on the envelopes didn't correspond with the names of the residents, Augeri says. That led postal inspectors to confiscate stacks of refund checks and debit cards.

"Over the past few years, the IRS has seen a significant increase in refund fraud schemes in general and schemes involving identity theft in particular," said Steven T. Miller, deputy commissioner for services and enforcement for the agency, in written testimony to the Senate committee. "Fighting identity theft will be an ongoing battle for the IRS and one where we cannot afford to let up. The identity theft landscape is constantly changing, as identity thieves continue to create new ways of stealing personal information and using it for their gain."

Steps to prevent tax ID fraud
While there's no way to guarantee you won't fall victim to tax return fraud, you can take steps to try to prevent it.

Rather than joining the crush of millions of Americans filing at the last minute, Steber recommends submitting your tax return early. "You effectively lock out people from trying to file your (fraudulent) return."

If you try to e-file your return and it bounces back, you'll have to file a paper return, and the IRS spokesman recommends you immediately fill out an Identity Theft Affidavit and submit it to the agency so it flags your account.

The agency has begun issuing special identification numbers called Identity Protection PINs to taxpayers whose identities are known to have been stolen. That prevents others from using their identities. As of mid-March, the agency had issued more than 250,000 such IP Pins in the 2011 filing season, says Miller.

Don't let your SSN out
If you successfully file your return, it's crucial that you keep the information stored somewhere safe. Steber says he often stops at various tax preparers' offices while traveling, and he'll invariably finds taxpayers have tossed their completed returns in the dumpster. That's like handing fraudsters a treasure trove of personal information.

You also need make sure to keep your Social Security number, as well as those of family members, safe and secure. Often the IRS will give less scrutiny to the Social Security number of a deceased person or a child than to an adult filing a return, and it's not unusual for fraudsters to scour obituaries and birth announcements, trying to obtain information, Steber says. The IRS's Miller says that so far, 66,000 returns for the 2011 filing year have been stopped for review because they appear to come from recently deceased taxpayers who have no filing requirements

Steber cautions consumers to guard their Social Security numbers at all costs. "You should protect that information like you would a valuable piece of jewelry or other asset."


Read more: http://www.creditcards.com/credit-card-news/id-identity-theft-steal-tax-refunds-returns-1282.php#ixzz1qe6786Ie
====================================================

Stocks, Bonds, Cash and Inflation - the last 30 years

Chart of the Week for March 30, 2012 - April 5, 2012

When investing in any asset class, such as stocks, bonds or cash equivalents (U.S. 30 Day Treasury Bills), an investor assumes some level of risk. Securities with higher return potential typically carry more risk of not meeting return expectations or even possibly losing some or all of the amount invested. Stocks, for example, are typically more risky than bonds or cash equivalents, but have historically offered higher return possibilities. The graph above illustrates the relationship between risk and reward in different asset classes between February 1982 and February 2012.

We can see the growth of inflation and of a $1 invested in three different asset classes beginning at the end of February 1982. After 30 years, the $1 invested in stocks, as measured by the S&P 500 Index, would have grown to $26.56. If that same $1 was invested in bonds, as measured by the U.S. Long-Term Government Index, the investment would be worth $22.03. If the $1 was allocated completely to cash equivalents, represented by U.S. 30 Day T-Bills, its value would be $3.84, only slightly better than inflation. As a result of inflation, $2.40 is needed in February 2012 just to buy what $1.00 bought in February 1982.

Over the 30 year period, stocks outperformed bonds and cash equivalents, and stayed well ahead of inflation. However, stocks carried the most risk as demonstrated by the volatility in the blue line and if the chart stopped in December 2008, bonds outperformed stocks. Depending on your risk tolerance, time horizon, and investing goals, each investor should balance risk and reward to create their own portfolio. Remember the next 30 years may not look like the last 30 years.



© Copyright 2012 ICMA Retirement Corporation, All Rights Reserved. This information is intended for educational purposes only and is not to be construed as investment advice or a solicitation to buy or sell securities. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed here. Past performance is not necessarily indicative of future performance.

Retirement Plans from Hell (Forbes)

Money & Investing
Retirement Plans From Hell
Scott Woolley, 07.13.09, 12:00 AM ET


Early this year the woman overseeing the 401(k) plan for a rural Oregon company gathered her 25 colleagues together to hold an election. At stake: whether to continue paying AIG an annual 1.25% of assets to manage their 401(k) plan as part of an insurance contract, or switch to mutual funds costing a third less. No surprise that the proposal to convert passed easily.

Then the nasty surprises started popping up. As she sought to unwind the plan, the administrator discovered that AIG had been tacking on a variety of fees all along. One nicked employees for 2% annually when they borrowed money from their own 401(k)s--work the new plan was willing to do for a flat $50 a year.

To top it off, AIG said that many of the employees would have to wait five years to get back their entire nest eggs, with no choice but to keep paying the fees. AIG says such lockups are disclosed in its plan contracts and are shorter than the ones many other insurers impose.

The company's frustrated administrator, who agreed to talk only anonymously, says she's still baffled by the complex annuity contract. "We still don't have a good handle on what they're charging us," she says.

Like the Oregon outfit, lots of mostly small companies are finding out the hard way that the 401(k) plans they bought from insurance companies, usually set up as "group annuities," came with a variety of hard-to-find charges and lockups. Or, more aptly, the plans they were sold by people motivated by lavish commissions. Many hyped the product as a low- or no-cost proposition for employers while glossing over the fees charged to employees. A successful ruse it is. All told, insurers have lured 18,000 companies into parking $185 billion of 401(k) assets inside group annuities and similar insurance contracts, according to an analysis by Larkspur Data Resources of plans with under $250 million in assets.

"Insurance companies cater to the smaller, less sophisticated part of the market," says Robert Prall, managing partner of Rx Investment Solutions, which advises companies on how to build low-cost 401(k) plans. "Every time we've gone into a company that has a group variable annuity contract, no one has really understood how it worked."

One John Hancock group annuity contract allows it to skim off up to 5% of assets before the remains go to work for savers. That's on top of "trailer" commissions of up to 1.4% of assets annually for as long as the plan exists and "asset charges" of up to 4%. John Hancock says those maximum fees provide a distorted picture and that it offers a variety of competitive rates. Why then, you might ask, does another piece of fine print state that John Hancock makes no claim "that any expenses paid directly or indirectly by the plan are reasonable"?

"When it comes to fee abuse in retirement plans, you can put group annuities at the top of the list," says Daniel Maul, an investment advisor in Seattle, Wash. who helps small firms set up 401(k) programs.

Among 401(k) plans with assets of less than $250 million, group annuity-style menus account for 55% of the market and are sold by AXA Equitable, Lincoln Financial and other insurers. A few are like the deferred annuities sold outside retirement plans that combine some life insurance coverage with savings features. Those products typically offer investors a choice of mutual funds; the insurance takes the form of a pledge to pay their heirs what they put in if they meet with an untimely end at a point when the value of their assets has fallen. At the end of their careers, deferred annuity holders can receive their savings either as a lump sum or as annuity payments for life.

By contrast, the group annuities containing 401(k) plans often provide neither a meaningful insurance benefit nor an annuitization option. In fact, beyond the same features that plain vanilla mutual funds offer for a fraction of the cost, group annuities' only upside is a tax benefit--for the insurers selling them, not for the 401(k) investors.

It works this way: Inside group annuities, legal title to the mutual funds belongs to the insurers. This ownership bestows on them the right to claim a corporate dividend received credit, an old feature of the tax code aimed at preventing the double-taxation of profits at the corporate level. Investors don't get a special tax benefit. The fact that annuities may be tax-deferred is irrelevant inside a retirement account, which is tax-deferred no matter how it is invested.

The annuity trappings do, however, mean that investors get hit up for higher fees. John Hancock's group annuity offers the JH American Funds Growth Fund of America at a cost of 0.91% annually. Other 401(k) investors can get an identical fund at less than half the cost.

An accountant at a five-person Texas firm was shocked to discover while looking through his 401(k) statements recently that AXA Equitable's group annuity was charging 1.69% annually to own its version of an S&P 500 index fund. The 0.64% charged for the fund alone is four to five times what low-cost providers Fidelity and Vanguard charge.

The fact that group annuities are sold at all is largely a function of muddled 401(k) regulation. By styling 401(k) plans as group annuities, sellers can shop for the most lax oversight. That's because regulators let insurers decide for themselves whether these products are securities, in which case they are overseen by the Securities & Exchange Commission and must be sold with a prospectus disclosing costs and other details. Or insurers can declare their group annuities are purely insurance products. Insurance regulators tend to focus on an issuer's claims-paying ability rather than its disclosure; most states allow insurers to sell group annuities without even issuing a prospectus.

While insurance salesmen are free to present themselves as honest brokers, they are not required to regard themselves as fiduciaries with a legal obligation to put plan participants' interests first. Often they don't.

Among 401(k) plans designed for small companies, the total fees on some group annuities can top $1,000 per participant every year, or three times what low-cost 401(k) plans cost, according to data provider 401kSource. Have second thoughts after signing up and you'll discover that buying a group annuity is like joining the Sopranos.

"Surrender charges allow insurers to offer very generous commissions," explains Parker Payson of Employee Fiduciary, a Mobile, Ala. firm that sets up low-cost mutual-fund-based 401(k) plans for small companies. "The annuity provider wants to make sure the client is there long enough to recoup the commission."

Some insurers, including New York Life, refuse to offer group annuities. Deanna Garen, a managing director for the firm, points out that, in theory, retirement savings plans with annuitization features are a great idea. Unfortunately, says Garen, the ones on the market are too confusing and costly.

"They just haven't evolved to the point where there are sensible fee structures," she says.

Customers, for the most part, haven't evolved to the point where they know what's going on. Two-thirds of workers are unaware that they're paying anything for 401(k) plans, according to a 2007 survey by AARP. Another 20% aren't sure. Even among the handful who understood that fees are deducted from their accounts, few could say precisely how much they're paying.

Advice to employees: You don't have to take any of this lying down. Find out what you're paying to have your money managed. If it's too much, complain to the benefits department.

Last Minute Tax Tips (Fidelity)

Tax tips and opportunities for 2011 returns
Fidelity Viewpoints — 03/14/12
What to watch for and take advantage of before April 17.

Tax season is once again upon us, and knowing what you can and can’t deduct is probably top of mind for most Americans. On a positive note, Congress avoided a year-end flurry of tax-law changes in 2011, which may make filing returns this year somewhat less complicated. Still, taxpayers can expect a few challenges—as well as some opportunities—as the April 17 filing deadline approaches.

New forms and procedures are causing some confusion over the reporting of capital gains and self-employment deductions, while tax deferrals taken in previous years by some homebuyers and Roth IRA (individual retirement account) owners are now coming due.

However, many of the limits on tax-saving provisions have increased, and taxpayers might be able to capitalize on a number of deductions that are often overlooked. Plus, many investors may be able to contribute to an IRA and reduce their 2011 taxable income right up to the filing deadline, which has been extended by two days because of a holiday observed by the District of Columbia.

To help you sort through the clutter as you delve into your 2011 tax return, here’s a list of items that are likely to affect a wide array of taxpayers this season.

Last-minute moves to consider
Contributing to a qualified retirement plan remains one of the most effective ways to lower current-year income tax for many taxpayers. It’s too late to contribute 2011 dollars to a 401(k) plan or similar workplace savings plan, but other options are available until April 17, including:

Individual retirement accounts (IRAs).
For Roth IRAs, taxpayers who qualify can contribute up to $5,000 for 2011 if their modified adjusted gross income is below $107,000 (single) or $169,000 (married filing jointly). If you’re age 50 or older, you can contribute up to $6,000 for the year.

Keep in mind that contributions to a Roth IRA are not tax deductible. A Roth IRA’s primary advantage is that all qualifying retirement withdrawals are tax free.

Simplified employee pension plan (SEP-IRA).
A SEP-IRA is for self-employed people and small business owners. Contributions are made by the employer only and are generally tax deductible as a business expense. If you’re self-employed, you can contribute up to 20% of your 2011 income ($49,000 maximum) to a SEP-IRA.

Health savings account (HSA).
The 2011 limits for tax-deductible contributions to an HSA are $3,050 for individuals and $6,150 for families ($1,000 higher in each category for people age 55 and older). HSAs require participants to have high-deductible health insurance, and contributions must be used for qualified medical expenses.

Changes to make note of
A couple of reporting procedures and several increases in deductibility and eligibility limits are getting most of the attention this year. They include:

Cost-basis reporting.
If you invest in stocks or mutual funds, you’ve probably heard about the new IRS rules for reporting the cost basis on shares you sell. Cost basis is what you paid for your shares, including any required adjustments. It’s used to calculate your profit (or loss) when you sell. There are several methods for determining cost basis, and you can decide which one makes sense for you.

For tax purposes, it’s your responsibility to report to the IRS your capital gains or losses when you sell securities or mutual fund shares. The IRS has updated Schedule D and incorporated a new form (Form 8949) which requires you to list specific transactions in detail. To make it easier for the IRS to check the accuracy of your reporting, the agency is phasing in a requirement that financial services companies have to report cost-basis information directly to the IRS.

For 2011, the only cost-basis information reported to the IRS will be for the sale of stocks acquired in 2011. Cost basis for your mutual fund shares won't be reported to the IRS in 2011, but you’ll still have to report the cost basis for those shares on your tax return, and specify that those shares are "noncovered."


Self employment tax.
For 2011 only, self-employed taxpayers get a break on their Social Security tax. Instead of paying a rate of 12.4%, the Social Security component of their self-employment tax is 10.4% on the first $106,800 of income. The Medicare tax component stays at 2.9%. If you qualify for this tax break, you’ll have to follow a slightly different procedure for arriving at your self-employment tax deduction on the first page of your tax return.

Deduction and exemption increases.
The perennially troublesome alternative minimum tax(AMT) has gotten its perennial patch. The 2011 exemption increases to $48,450 for single filers, $74,450 for joint filers, and $37,225 for married taxpayers filing separately.

If you choose not to itemize your deductions, you can claim the standard deduction. The 2011 amounts for most taxpayers increased to $5,800 (up $100 from 2010) for single tax filers, to $11,600 for married filing jointly (up $200 from 2010), and to $8,500 for head of household (up $100 from 2010).

The 2011 mileage rate for business use of your car is 51 cents a mile before July 1, 2011, and 55½ cents after June 30. That compares to 50 cents in 2010. The rates for miles driven for moving and medical purposes also increased.

Important reminders
Sensitive to the weak economy, Congress gave taxpayers two opportunities in recent years to defer a potentially significant portion of their tax bill. The downside of those opportunities has now arrived.

2010 Roth IRA conversions.
Taxpayers who converted assets in a traditional IRA to a Roth IRA in 2010 had the option of a one-year deferral of the tax due on the conversion. If you took advantage of the opportunity, you must now, with your 2011 taxes, pay half of the tax owed on the conversion, and the remaining half in 2012.

First-time homebuyer credit.
Congress helped first-time homebuyers with a tax credit of up to $7,500 in 2008. The catch was that the credit was essentially a 15-year interest-free loan. The first of the 15 repayments was due with 2010 tax bills, and the second is due this year. If you’re having trouble raising the cash for the payment, consider increasing your paycheck withholding this year to avoid a similar crunch next year.

Don’t miss these often overlooked deductions
Sales tax option.
For several years, taxpayers who itemize deductions have been able to choose between deducting their state income tax payments or their state and local sales tax payments. In states without an income tax, the choice is easy. In most other states, the math has usually worked out in favor of deducting the income tax.

But many taxpayers overlook the impact of large purchases, such as a car, boat, or RV. To save you the hassle of collecting your receipts for thousands of small purchases, the IRS allows you to deduct a sales tax estimate based on your income and where you live. The tax on a vehicle purchase (and, in some cases, a major home improvement) is counted in addition to the estimated amount, which can tip the calculation in favor of the sales tax deduction.

Energy-efficiency credits.
These have been around for a few years, but they can still be effective at saving tax dollars. In general, making energy-saving improvements to your home by installing energy-efficient windows, doors, roof, heating system, and other items may allow you to claim a tax credit equal to 10% of the cost, up to $500 (lifetime), depending on the type of improvement made. The credit is even higher if you install an alternative energy system. Learn more about available credits on the government’s Energy Star website.

Unreimbursed work expenses.
Many people fail to deduct work-related expenses, perhaps because they can only deduct the amount that exceeds 2% of adjusted gross income. But the eligible items can add up. A few of the potential deductions are depreciation on a computer or mobile phone required for your job, professional society dues, employment-related education, and uniforms. For a complete list, see IRS Publication 529, Miscellaneous Deductions. Plus, there’s a special deduction of up to $250 for teachers who use their own money to buy school supplies.