‘Tis the Season for Gift Card Fraud

‘Tis the Season for Gift Card Fraud

With supply chain snarls still plaguing parts of the U.S. economy, many consumers are turning to gift cards as the holiday present of choice this year. In fact, according to the website Research and Markets, the United States gift card industry is expected to reach $188 billion in 2022.

Why is gift card fraud such a problem?

Because of the small dollar amounts involved, gift card fraudsters face a low probability of prosecution. It’s also easy to convert gift card value to cash or merchandise. In other words, this kind of fraud is relatively risk-free and easy to pull off.

In one common scam, a crook goes to a retail establishment, grabs a handful of gift cards from an out-of-the-way stand or kiosk, and records the card numbers using a magnetic strip reader. After returning the cards, the crook heads home and repeatedly checks balances on the merchant’s website until the numbers are activated.

The thief then spends or transfers the money on the card before the legitimate buyer or gift recipient has a chance to use it. Less sophisticated scammers may simply scratch off the card’s coating and replace it with a sticker, hoping the buyer won’t notice.

You can scam-proof your gift card experience by following these tips:

  • Don’t pick the front card. Crooks are impatient. They often return compromised cards to the most accessible place on the rack. Select your gift card from the middle of the rack.
  • Buy gift cards online. Purchase cards online, directly from the business that issued them. This reduces the potential tampering risk.
  • Inspect packaging. If you purchase gift cards in person at a store, examine the cards for signs of tampering. It’s safer to buy from stores that keep gift cards behind the counter or in well-sealed packaging.
  • Register the card. If a card issuer lets you register on their website, do it. You’ll be able to check your balance regularly and identify any abuse.
  • Don’t give out card information to callers claiming to be from government agencies, tech companies, utilities or other businesses. Only scammers ask you to pay fees, back taxes or bills for services with gift cards.
  • Don’t buy gift cards from online auction sites. They could be counterfeit or stolen, according to the Federal Trade Commission.

If you think you’ve been scammed, contact the store directly and report incidents to local law enforcement.

Still Time to Reduce any Tax Surprises!

Still Time to Reduce any Tax Surprises!

Consider conducting a final tax planning review now to see if you can still take actions to minimize your taxes this year. Here are some ideas to get you started.

  • Review your income. Begin by determining how your income this year will compare to last year. Since tax rates are the same, this is a good initial indicator of your potential tax obligation. However, if your income is rising, more of your income could be subject to a higher tax rate. This higher income could also trigger phaseouts that will prevent you from taking advantage of certain deductions or tax credits formerly available to you.
  • Examine life changes. Review any key events over the past year that may have potential tax implications. Here are some common examples:
    • Purchasing or selling a home
    • Refinancing or adding a new mortgage
    • Getting married or divorced
    • Incurring large medical expenses
    • Changing jobs
    • Welcoming a baby
  • Identify what tax changes may impact you. Some of the major changes this year include the lowering of the child tax credit and the lowering of dependent care credit for working couples. This year also marks the first year in the last two with no pandemic related payments. If you think this could impact your situation it may make sense to conduct a tax planning review.
  • Manage your retirement. One of the best ways to reduce your taxable income is to use tax beneficial retirement programs. So now is a good time to review your retirement account funding options. If you are not taking full advantage of the accounts available to you, there is still time to make adjustments.
  • Look into credits. There are a variety of tax credits available to most taxpayers. Spend some time reviewing the most common ones to ensure your tax plan takes advantage of them. Here are some worth reviewing:
    • Child Tax Credit
    • Earned Income Tax Credit
    • Premium Tax Credit
    • Adoption Credit
    • Elderly and Disabled Credit
    • Educational Credits (Lifetime Learning Credit and American Opportunity Tax Credit)
  • Avoid surprises. Your goal right now is to try and avoid any unwanted surprises when you file your tax return. It’s also better to identify the need for a review now versus at the end of the year when time is running out. And remember, you are not required to be a tax expert. Use the tips here to determine if a review of your situation is warranted.
Understanding Tax Credits Versus Deductions

Understanding Tax Credits Versus Deductions

Tax credits are some of the most valuable tools around to help cut your tax bill. But figuring out how to use these credits on your tax return can get complicated very quickly. Here’s what you need to know.

Understanding the difference

To help illustrate the difference between a credit and a deduction, here is an example of a single taxpayer making $50,000 in 2022.

  • Tax Deduction Example: Gee I. Johe earns $50,000 and owes $5,000 in taxes. If you add a $1,000 tax deduction, he’ll decrease his $50,000 income to $49,000, and owe about $4,800 in taxes.

    Result: A $1,000 tax deduction decreases Gee’s tax bill by $200, from $5,000 to $4,800.
  • Tax Credit Example: Now let’s assume G.I. Johe has a $1,000 tax credit versus a deduction. Mr. Johe’s tax bill decreases from $5,000 to $4,000, while his $50,000 income stays the same.

    Result: A $1,000 tax credit decreases your tax bill from $5,000 to $4,000.

In this example, your tax credit is five times as valuable as a tax deduction.

Too good to be true?

Credits are generally worth much more than deductions. However there are several hurdles you have to clear before being able to take advantage of a credit.

To illustrate, consider the popular child tax credit.

Hurdle #1: Meet basic qualifications

You can claim a $2,000 tax credit for each qualifying child you have on your 2022 tax return. The good news is that the IRS’s definition of qualifying child is fairly broad, but there are enough nuances to the definition that Hurdle #1 could get complicated. And then to make matters more complicated…

Hurdle #2: Meet income qualifications

If you make too much money, you can’t claim the credit. If you’re single, head of household or married filing separately, the child tax credit completely goes away if you exceed $240,000 of taxable income. If you’re married filing jointly, the credit disappears above $440,000 of income. And then to make matters more complicated…

Hurdle #3: Meet income tax qualifications

To claim the entire $2,000 child tax credit, you must owe at least $2,000 of income tax. For example, if you owe $3,000 in taxes and have one child that qualifies for the credit, you can claim the entire $2,000 credit. But if you only owe $1,000 in taxes, the maximum amount of the child tax credit you could claim is $1,400.

Take the tax credit…but get help!

The bottom line is that tax credits are usually more valuable than tax deductions. But tax credits also come with lots of rules that can be confusing. Please call to schedule a tax planning session to make sure you make the most of the available tax credits for your situation.

The IRS Announces Tax Scams

The IRS Announces Tax Scams

Compiled annually, the IRS lists a variety of common scams that taxpayers can encounter. This year’s list includes the following four categories.

  • Pandemic-related scams. Criminals are still using the COVID-19 pandemic to steal people’s money and identity with phishing emails, social media posts, phone calls, and text messages.

    All these efforts can lead to sensitive personal information being stolen, and scammers using this to try filing fraudulent tax returns. Some of the scams people should continue to be on the lookout for include Economic Impact Payment and tax refund scams, unemployment fraud leading to inaccurate taxpayer 1099-Gs, fake employment offers on social media, and fake charities that steal taxpayers’ money.
  • Offer-in-compromise mills. Offer-in-compromise (OIC) mills make outlandish claims about how they can settle a person’s tax debt for pennies on the dollar. Often, the reality is that taxpayers are required to pay a large fee up front to get the same deal they could have gotten on their own by working directly with the IRS. These services tend to be more visible right after the filing season ends while taxpayers are trying to pay their recent bill.
  • Suspicious communication. Every form of suspicious communication is designed to trick, surprise, or scare someone into responding before thinking. Criminals use a variety of communications to lure potential victims. The IRS warns taxpayers to be on the lookout for suspicious activity across four common forms of communication: email, social media, telephone, and text messages. Victims are tricked into providing sensitive personal financial information, money, or other information. This information can be used to file false tax returns and tap into financial accounts, among other schemes.
  • Spear phishing attacks. Criminals try to steal client data and tax preparers’ identities to file fraudulent tax returns for refunds. Spear phishing can be tailored to attack any type of business or organization, so everyone needs to be skeptical of emails requesting financial or personal information.

What you can do

If you discover that you’re a victim of identity theft, consider taking the following action:

  • Notify creditors and banks. Most credit card companies offer protections to cardholders affected by ID theft. Generally, you can avoid liability for unauthorized charges exceeding $50. But if your ATM or debit card is stolen, report the theft immediately to avoid dire consequences.
  • Place a fraud alert on your credit report. To avoid long-lasting impact, contact any one of the three major credit reporting agencies—Equifax, Experian or TransUnion—to request a fraud alert. This covers all three of your credit files.
  • Report the theft to the Federal Trade Commission (FTC). Visit identitytheft.gov or call 877-438-4338. The FTC will provide a recovery plan and offer updates if you set up an account on the website.
  • Please call if you suspect any tax-related identity theft. If any of the previously mentioned signs of tax-related identity theft have happened to you, please call to schedule an appointment to discuss next steps.
Shrinkflation is Upon Us!

Shrinkflation is Upon Us!

Be aware, be prepared

Inflation is upon us, and a hidden gem used by companies to combat price increases is often hidden from the unaware. It’s called shrinkflation. Here’s what you need to know about this hidden price hike and what you can do to cope with its effects.

Defining shrinkflation

Shrinkflation is the technique of downsizing a product or ingredients to lower costs. In many cases the retail price of something will not change, but the amount of product in the package is lowered. Common techniques include putting less in a package or changing the amount of a high-cost ingredient in the product.

And the changes are often subtle. Would you realize the amount in a box is lowered by 1/2-an-ounce if the box stays the same size? Or that your cereal has fewer raisins in it than a month ago?

Edgar Dworsky, a former assistant attorney general in Massachusetts, recently spoke with the Consumer Federation of America about changes he’s been tracking in grocery isles. Here are some recent examples of shrinkflation:

  • Kimberly-Clark’s Cottonelle Ultra Clean mega rolls of toilet paper are reduced from 340 sheets to 312
  • Keebler’s Chips Deluxe with M&Ms packages are now 9.75 ounces, down from 11.3 ounces
  • Gatorade’s 32-ounce bottles are now 28 ounces
  • Cadbury is reducing the size of its popular chocolate bar by 10%

Knowledge is key

While many manufacturers are transparent about these changes as they combat inflation, it is not as apparent to spot when you are shopping. Here some are suggestions to help you identify and combat shrinkflation.

  • Focus on unit cost. Instead of focusing on the price of the product, look for the unit cost of the item. Grocery stores can be very helpful in this area, as most tags will show a common unit of measure below the items for sale. If you shop at a store that doesn’t provide this information, you can still calculate the unit price using the information printed on the front of a product’s package.
  • Compare the packages. When you replenish your popular shopping items, spend a minute to compare the product with the last one you purchased. Make a mental note if the packaging or number of items in the package is changing.
  • Have alternatives. Perhaps it is time to try another toilet paper brand, or choose a different cookie. Many store brands are a great alternative to the market leaders.
  • Offset shrinkflation with deals. This includes reviewing featured items at different shopping locations, looking at a store’s weekly flyer for deals, loading up on favorite items when they are on sale, participating in a store’s loyalty program, and looking for coupons using online services.

Remember, inflation is here and everyone needs to cope with it, including manufacturers. But by being aware, you can retain some control to reduce inflation’s impact on you and your family.