Don't fall for these Scams! Please!

A voice mail from a caller claiming to be with the IRS stating that you are delinquent on your Income Taxes and demanding that you call back to make payment over the telephone or else face fines and possible jail time. 

A call in the middle of the night telling you that your grandson is in trouble and you need to send money now for his bail. And don't tell his parents!

The convincing caller informing you that you have just won $100,000 in a foreign lottery but that you need to send $5,000 to claim your prize.

Three different scams but  two things in common. They prey on peoples' fear or greed. Over the past several years we have had clients and friends fall victim to all three of these scams resulting in the loss of tens of thousands of dollars and strong feelings of shame and embarrassment for having been duped. Over the last two weeks we have had 3 incidences of the IRS scam. Fortunately the only loss was loss of sleep until they could talk with us the next day.

So lets talk a little about the IRS phone scam.

The IRS has had over 90,000 complaints about the IRS Phone Scam and has identified over 1,100 victims who have lost an estimated $5 million.

According to the IRS: https://www.irs.gov/uac/newsroom/irs-repeats-warning-about-phone-scams

1. The IRS's first contact will be written correspondence delivered through US mail.
2. The IRS will never ask for credit card, debit card or prepaid card information over the telephone.
3. The IRS will never insist that a taxpayer use a specific payment method to pay tax obligations.
4. The IRS will  never request immediate payment over the telephone.

What to do if you receive one of these calls:

If you know that you owe Federal Income Taxes (meaning you have filed your Income Tax returns and had a balance due that you did not pay) but have not received any correspondence from the IRS, don't panic. Hang up the call (or don't return the voice message) and call the IRS at 800.829.1040 to help resolve your payment issue. You can also call us to review your situation and options.

If you don't believe you owe Federal Income Taxes, hang up the call (or don't return the voice message) and report the incident to TIGTA (Treasury Inspector General for Tax Administration) at 800.366.4484.

Some additional basics:

1. Never give account information or your social security number over the telephone to someone you don't know and trust.
2. Never be coerced into making a payment by telephone by a caller demanding that you do so and threatening you if you do not. HANG UP the call! If you are frightened, tell a friend or someone you trust. If they are not available, call or email us (hopefully you will consider us both a friend and someone you can trust.)
3. If it sounds too good to be true, it probably is. If you never bought a ticket for the Irish Sweepstakes it is VERY unlikely that you won.
4. If a caller tells you not to tell anyone else about your making the payment that the caller is telling you to make, HANG UP! Tell someone that you just received such a call.

So now you know some of what we know. Please share your stories or any additional wisdom that you have so that we can all know more than we currently know.

What happens to my student loans if I die?

Have you ever wondered as a college student or as a parent of a college student, what happens to all of your student loans at death? “God forbid!”  Here’s the good news and bad news.

The good news: The Federal government has a great deal for you. Now the bad news; you have to die first.

If your student loans are through a federal government agency then generally speaking, those loans will be discharged (forgiven) at your death.  That is to say, that any federal student loan debt that you have at your death will not pass on to any heirs. No one will be left holding the bag for your unpaid federal student loans.  Well, actually every US citizen who pays Federal Income Taxes will be left holding the bag, but we don't need to go down that path at the moment.

What about Parent Plus loans? So as you know, Parent Plus Loans are an obligation of the parent of a student and not the student. The good news is that federal Parent Plus Loans are also discharged at either the death of the student or the parent. That’s the good news. The bad news is that if the discharged loans are due to the death of the student, then the Parents will have to pay Federal Income Taxes on the loan amount forgiven. The IRS will issue a Form 1099-C (Forgiveness of Debt Form) to the Parents for the year that the debt was discharged. For example, let’s say your Parent’s have a balance on a Parent Plus Loan of $30,000. If you were to die, the Parents would receive a 1099-C reporting $30,000 (the balance of the loan) as Miscellaneous Income. They would have to include that on their Federal Income Tax return and pay income taxes on that phantom income. So if they are in the 25% tax bracket they would have to pay $7,000 in additional income taxes.

Keep in mind we are only talking about Federal Student Loan obligations. If you have private student loans then you need to check your Loan Documents to determine whether they provide for any such discharge at death. Most do not, but there are some that do.

If you are considering consolidating/refinancing your Federal Student Loans with a private student loan you should at least take the above discussion in consideration.

So, if you have Federal Student Loans you now have one less thing to worry about, which gives you more time to focus your worrying on how to pay back all of those loans.

We believe that all of us together know more than any one or two of us, so if you have any additional information on this subject please add to the discussion. So now you know something of what we know. Please share it with someone you know who needs to know it too. 

Lee and Ed

The Financial Guys