Welcome to March Madness (in my best Jim Nantz voice). While that term normally references the NCAA basketball tournament that starts March 14, one could easily apply it to the traffic congestion. Snowbird season will be over soon – or so we are told.
We could also apply the term to the questionable activities and policies in Tallahassee and our local school boards. But I digress – positivity is the New Year’s resolution.
Tax Identity Theft Update
In the spirit of seasons (tax season in this case), let us do a little reminder that the bad guys love to prey on us during this most fun time.
Tax identity theft has been a threat for many years affecting millions of taxpayers. There are various schemes used by scammers including phone calls and phishing text messages and emails. In recent years, however, we have seen a decrease in successful tax identity theft attacks due to education and some precautionary actions taken by the IRS. Still, it is important to be aware of these threats.
How does tax identity theft happen?
Phone scams are one of the most common scams deployed by identity theft fraudsters. You have likely received one of these fake calls over the years appearing to be from the IRS and demanding money for tax debts. The scammers create a sense of urgency and fear that results in many giving over money or personal information. It is important to remember that the IRS will contact you via letter if there is something wrong with your tax information—not over the phone.
Phishing messages are also a widely used method of scamming taxpayers. These messages may appear to come from the IRS or even your bank or tax preparer. For instance, some consumers reported receiving phishing emails from their tax preparer last year that either asked for personal information or requested that they download an attachment. Again, remember that the IRS will not contact you via email. If you receive something from your bank or accountant, be sure to call and confirm that they really sent it.
How to protect yourself
In addition to being aware of the tax scams that exist, there are steps you can take to help lock down your tax return. A few years ago, the IRS introduced Identity Protection PINs (IP PINs) to help protect taxpayers. IP PINs are six-digit numbers that prevent someone else from filing a return in your name. You must submit your PIN to verify your return.
When IP PINs were first introduced, they were only available to proven victims of identity theft or residents of certain states. Now, anyone can apply for an IP PIN. You can request the IP PIN on the IRS website. You will need to prove your identity by answering some questions.
Once you are set up with an IP PIN, you will receive a new one each year. It will be available in your online IRS account so be sure to protect that with a strong password. You or your tax preparer will submit your IP PIN when you sign and submit your return.
An additional “security” layer by the IRS
Last year, the IRS announced a partnership with ID.me using facial recognition software to identify taxpayers’ identities. This move was controversial among security experts and taxpayers as it required individuals to upload selfie data to ID.me to set up an online IRS account. As an alternative, the IRS allowed individuals to video chat with ID.me representatives instead of sending biometric data as a short-term fix. However, the IRS still has not come up with an alternative for taxpayers.
The federal government and the IRS have been at work to create a secure way to log into federal websites. Login.gov has still not been launched.
Market Review – Breather
February provided another cold reminder that inflation remains hotter than hoped and the markets struggled with the realization.
Stocks dropped in February as a stream of reports showed everything from inflation to the job market to spending by shoppers is staying hotter than expected. That has forced Wall Street to raise its forecasts for how high the Federal Reserve will have to take interest rates and then how long to keep them there.
Higher rates can drive down inflation, but they also raise the risk of a recession because they slow the economy. They likewise hurt prices for stocks and other investments.
The latest reminder came last Friday after a report showed that the measure of inflation preferred by the Fed came in higher than expected. It said prices were 4.7% higher in January than a year earlier, after ignoring costs for food and energy because they can swing more quickly than others. That was an acceleration from December’s inflation rate, showing the wrong momentum, and it was higher than economists’ expectations for 4.3%.
It echoed reports from earlier in the month that showed inflation at both the consumer and wholesale levels was higher than expected in January.
Frankly, none of this news should have been unexpected. One could make a good argument that a strong consumer and strong job markets are a good thing. The same argument could be made that Wall Street was spoiled over lower interest rates for a way too long period of time. The Fed is now attempting to correct that situation. Perhaps pundits should exercise the same patience we do with traffic and wait to see how the measures play out a little longer.
Enjoy your spring weather and take care of yourselves. Thank you for the trust and confidence you place in us; we sincerely appreciate it. Please do not hesitate to reach out whenever you have questions, concerns or whenever we may be of service to you.
Joe Downs, CFP® & John Cunningham, CFP®