Most Common Financial Scams
Tax Refund Scams
The Internal Revenue Service admits that it loses billions to tax fraud every year. In 2013, The IRS refunded $4 billion to thieves in fraudulent tax refund scams sending dozens of checks to one single address overseas!!!! Thieves brag on television and their social media pages that the IRS makes it easy for them to file millions of false tax returns every year using other people's names and social security numbers. If a thief can't get your social security number by burglarizing your home, stealing your wallet or hacking in to your financial accounts, he might use more devious tactics to get your information. A common one targets the elderly, who are approached with the claim that they (the thieves) are real tax preparers and if the victim will complete an official looking government form, they (the thieves) can get them hundreds or even thousands in additional government social security benefits or tax credits. Of course, the fake form asks for all the personal data the thieves need to complete a fake tax return next year. In another scam, thieves pose as real tax preparers, renting business offices during tax season and advertising a great deal to lure you in their door. How to protect yourself? If you hire someone else to do your taxes, stick to well-known companies like H & R Block. Avoid tax preparation services that just seem to pop up overnight and only operate during tax season. If you hire a CPA, make sure she is licensed and listed in the Yellow Pages. Do not respond to tax preparation services that solicit your business by telephone or email. If you've been victimized, you can file an Identity Theft Affidavit with the IRS at their website -- http://www.irs.gov/pub/irs-pdf/f14039.pdf or by calling them at 800-908-4490.
Reverse Mortgage Fraud
Reverse mortgages are designed to help the elderly obtain money for living expenses by mortgaging their homes when they are cash poor but house rich. Reverse mortgages are regulated by the federal government requiring that homeowners be at least 62 years old, but they are really designed for people older than 70. Sadly, scammers and unscrupulous companies are targeting more and more seniors -- the number of reverse mortgages taken out in the past few years has exploded, particularly by those who are just 62 years old needing money to pay healthcare bills. The scammers tell the victims that they can stop a foreclosure, obtain free money with no strings attached, and other lies that simply aren't true. Another version of this scam involves tricking an elderly person in to buying a new piece of property and getting a reverse mortgage on it so that the thief can take the money and run. Reverse mortgages do not stop a homeowner from having to pay insurance and taxes on the property. In fact, if the homeowner does not do both of these things, the lender can call in the reverse mortgage. Always check with HUD at hud.gov for a list of government approved reverse mortgage lenders before signing up, and remember that the earlier you take out a reverse mortgage, the more likely it is you will get in to trouble later on. You should really never take out a reverse mortgage because they are expensive, but if you must, wait until you are at least 75 years old.
Self-directed IRA Scams
More and more people are becoming interested in a self-directed Individual Retirement Account (IRA) because this type of IRA can hold many different types of assets, everything from stocks, bonds, real estate, gold, etc. The problem with them is they require extra paperwork and specialized knowledge to set-up and maintain. Scammers and unscrupulous financial managers are targeting the elderly, signing them up for bogus or low-quality investments that likely result in the accountholder losing all or a big chunk of his money. Some of these self-directed IRA's are nothing more than Ponzi schemes. Avoid getting ripped off by not responding to any unsolicited emails, telephone calls or mailings you receive. Watch out for the urgent sales pitch requiring you to immediately send money or miss out on the opportunity. Deal only with licensed financial planners and investment firms.
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