Reports started trickling into state agricultural agencies in July: Consumers were worried about strange seed packets they had received in the mail. The unsolicited goods weren’t labeled and appeared to be sent from China. In a year already fraught with anxiety and paranoia, the story quickly made headlines.
Perhaps this was the first you’d heard of a scam known as “brushing,” in which some third-party e-commerce sellers set up fake buyer accounts and ship unordered goods (in this case, seeds) to “customers.” Why would they do this? Read on.
A growing fraud
Brushing scammers set up fake accounts with Amazon, eBay and other online platforms so that they can order their own merchandise, ship it to a real address and then post glowing reviews that bolster their ratings. The ultimate objective, of course, is to attract more buyers for their goods.
According to the U.S. Department of Agriculture (USDA), the seeds people received this summer seem to be part of a brushing scheme. (The USDA is continuing to investigate, but at this time, the seeds don’t appear to be dangerous or capable of producing invasive plants.) However, this isn’t the first time Americans have received unordered merchandise from unknown companies. Over the past couple of years, consumers have been surprised by gifts of everything from flashlights to hand warmers to Bluetooth speakers.
Considering that you aren’t obliged to pay for or send back merchandise you didn’t order, this may not seem like a big deal. However, it suggests that personal information has been disclosed or compromised. So if you receive one of their packages, brushers have — at the very least — your name and home address and may also have your phone number and email address. And, as the Federal Trade Commission (FTC) warns, these fraudsters may have set up fake accounts in your name on multiple websites — or even hacked your legitimate accounts.
Nip it in the bud
How can you prevent dishonest businesses from burnishing their own reputations at the possible expense of yours?
- Report a suspicious package to the online retailer or platform (if you know what it is).
- Check your accounts for suspicious activity and change your passwords.
- If it appears accounts have been compromised, review your bank and credit card statements and credit reports. Consider freezing them to prevent fraud perpetrators from opening new accounts in your name.
- File a report with the FTC at ftc.gov/complaint.
Remember that it’s always possible a seller simply sent you something by mistake. Or a friend may have ordered a gift and forgotten to enclose a message to you. So do a little snooping before jumping to conclusions. But if it still seems your mystery package is part of a brushing scam, don’t just brush it off. Report the “gift” and make sure your accounts are secure.
Despite the COVID-19 pandemic, students are going back to school this fall, either remotely, in-person or under a hybrid schedule. In any event, parents may be eligible for certain tax breaks to help defray the cost of education.
Here is a summary of some of the tax breaks available for education.
1. Higher education tax credits. Generally, you may be able to claim either one of two tax credits for higher education expenses — but not both.
- With the American Opportunity Tax Credit (AOTC), you can save a maximum of $2,500 from your tax bill for each full-time college or grad school student. This applies to qualified expenses including tuition, room and board, books and computer equipment and other supplies. But the credit is phased out for moderate-to-upper income taxpayers. No credit is allowed if your modified adjusted gross income (MAGI) is over $90,000 ($180,000 for joint filers).
- The Lifetime Learning Credit (LLC) is similar to the AOTC, but there are a few important distinctions. In this case, the maximum credit is $2,000 instead of $2,500. Furthermore, this is the overall credit allowed to a taxpayer regardless of the number of students in the family. However, the LLC is also phased out under income ranges even lower than the AOTC. You can’t claim the credit if your MAGI is $68,000 or more ($136,000 or more if you file a joint return).
For these reasons, the AOTC is generally preferable to the LLC. But parents have still another option.
2. Tuition-and-fees deduction. As an alternative to either of the credits above, parents may claim an above-the-line deduction for tuition and related fees. This deduction is either $4,000 or $2,000, depending on the taxpayer’s MAGI, before it is phased out. No deduction is allowed for MAGI above $80,000 for single filers and $160,000 for joint filers.
The tuition-and-fees deduction, which has been extended numerous times, is currently scheduled to expire after 2020. However, it’s likely to be revived again by Congress.
In addition to these tax breaks, there are other ways to save and pay for college on a tax advantaged basis. These include using Section 529 plans and Coverdell Education Savings Accounts. There are limits on contributions to these saving vehicles.
Note: Thanks to a provision in the Tax Cuts and Jobs Act, a 529 plan can now be used to pay for up to $10,000 annually for a child’s tuition at a private or religious elementary or secondary school.
Typically, parents are able to take advantage of one or more of these tax breaks, even though some benefits are phased out above certain income levels. Contact us to maximize the tax breaks for your children’s education.
When Congress authorized an additional $600 in monthly unemployment benefits as part of the CARES Act, out-of-work Americans weren’t the only ones it helped. Criminals have descended like locusts on state unemployment insurance agencies, using stolen identities to fraudulently claim both standard benefits and the additional funds administered by the Pandemic Unemployment Assistance (PUA) program. States have lost hundreds of millions of dollars. Individuals have also suffered, as government efforts to control fraud have clogged up benefit systems and delayed payments to the jobless.
Washington state was the first to experience a COVID-19 outbreak and has since estimated losses of $650 million to unemployment insurance fraud. According to the Secret Service, a scam was detected when someone noticed that multiple direct deposits of benefits had been made to individuals residing out of state. These deposits were subsequently transferred overseas — likely by organized crime gangs.
But Washington is hardly alone. Many other states have discovered fraud. In May, Rhode Island’s labor agency reported that it had almost as many illegitimate unemployment insurance claims as legitimate ones. And widescale fraud in Michigan forced that state to stop payment on nearly 20% of unemployment claims pending review.
If you’re currently employed and receive an unemployment benefit check or debit card or a letter confirming an application for unemployment benefits, immediately contact your state. If you can’t get ahold of your state agency (a problem encountered by thousands of potential fraud victims), report your suspicions to police and the Federal Trade Commission (FTC) at identitytheft.gov. Your identity has likely been stolen and sold to criminals on the dark web. Be sure to request copies of your credit reports and review them for illegitimate activity.
Businesses can help fight unemployment insurance fraud, too. The FTC suggests that companies:
- Ask employees to speak up if they suspect their identities are being used to perpetrate unemployment insurance fraud,
- Direct HR to flag state unemployment agency notices about currently employed workers,
- Report suspected fraud to a state agency — preferably via its website,
- Provide a copy of the documentation to affected employees and let them know if the state requires them to also make a report,
- Bolster cybersecurity to prevent the loss of personal data that could be used to commit fraud.
This last tip is particularly important if your employees currently are working from home.
An easy target
The pandemic has probably unleashed more fraud activity than any other recent event. Even though PUA program payments were due to expire on July 25, state unemployment benefits are too easy and lucrative a target for fraudsters to pass up. But you can do your part to help disrupt these schemes.
Health care costs continue to be in the news and on everyone’s mind. As a result, tax-friendly ways to pay for these expenses are very much in play for many people. The three primary players, so to speak, are Health Savings Accounts (HSAs), Flexible Spending Arrangements (FSAs), and Health Reimbursement Arrangements (HRAs).
All provide opportunities for tax-advantaged funding of health care expenses. But what’s the difference between these three types of accounts? Here’s an overview of each one:
- HSAs. If you’re covered by a qualified high-deductible health plan (HDHP), you can contribute pretax income to an employer-sponsored HSA– or make deductible contributions to an HSA you set up yourself – up to $3,400 for self-only coverage, and $6,750 for family coverage for 2017. Plus, if you’re age 55 or older, you may contribute an additional $1,000.
You own the account, which can bear interest or be invested, growing tax-deferred similar to an IRA. Withdrawals for qualified medical expenses are tax-free, and you can carry over a balance from year to year.
- FSAs. Regardless of whether you have an HDHP, you can redirect pretax income to an employer-sponsored FSA up to an employer-determined limit – not to exceed $2,600 in 2017. The plan pays or reimburses you for qualified medical expenses.
What you don’t use by the plan year’s end, you generally lost – though your plan might allow you to roll over up to $500 to the next year. Or it might give you a 2 ½-month grace period to incur expenses to use up the previous year’s contribution. If you have an HSA, your FSA is limited to funding certain “permitted” expenses.
- HRAs. An HRA is an employer-sponsored arrangement that reimburses you for medical expenses. Unlike an HSA, no HDHP is required. Unlike an FSA, any unused portion typically can be carried forward to the next year. And there’s no government-set limit on HRA contributions. But only your employer can contribute to an HRA; employees aren’t allowed to contribute.
Please bear in mind that these plans could be affected by health care or tax legislation. Contact our firm for the latest information, as well as to discuss these and other ways to save taxes in relation to your health care expenses.
If you have a financial interest in or signature authority over a foreign financial account exceeding certain thresholds, the Bank Secrecy Act may require you to report the account yearly to the Financial Crimes Enforcement Network (FinCEN) by filing FinCEN Report 114, Report of Foreign Bank and Financial Accounts (FBAR).
Specifically, FinCEN Report 114 is required to be filed if during the year-
- You had a financial interest in or signature authority over at least one foreign financial account (which can be anything from a securities, brokerage, mutual fund, savings, demand, checking, deposit, or time deposit account to a commodity futures or options, and a whole life insurance or cash value annuity polity) and;
- The aggregate value of all such foreign financial accounts exceeded $10,000 at any time during the year.
The FBAR filing deadline is April 15th, with a six-month extension to October 15th allowed.Earlier this year, FinCEN announced that it will grant filers an automatic extension to October 15th each year- a specific request for extension isn’t required. The penalty for failing to file Form 114 is substantial- up to $10,000 per violation (or the greater of $100,000 or 50% of the balance in an account if the failure is willful)
FinCEN Report 114 must be filed electronically. To file it yourself, go to bsaefiling.fincen.treas.gov/mail.html. Once there, click on “Become a BSA E-Filer” and then click on “File an Individual FBAR: on the next page and complete the form.
Please give us a call if you have any questions or would like us to prepare and file FinCEN Report 114 for you.