Most retirement investments are sheltered under one of a variety of tax-advantaged plans. However, there are many other tax schemes that should be avoided. They are tax scams. The Internal Revenue Service actively
makes efforts to track down the tax scammers.
Here are five tax scams to be aware of and avoid in retirement.
1. Excess Life Insurance
This is usually an offer for highly paid employees as a way to offer compensation without having it show up on yearly income, the IRS said
Free Retirement Calculator: When Can You Retire? — Click Here to Find Out
2. Attempts to Get Around Roth IRA Contribution Limits
According to Bankrate, the IRS actively looks for tax scams
involving Roth IRA contributions and early distributions. A key warning sign on this scam is if a financial adviser recommends moving an asset into a Roth IRA at less than its full value.
3. 401(k) Accelerated Deductions
The IRS defines these
as “deductions for contributions of an employer to an employee's trust or annuity plan and compensation under a deferred payment plan.”
This is a common problem to be aware of in retirement. This involves an e-mail sent by a fake tax preparer asking for someone to update their online IRS information. It is an attempt to get at usernames and passwords.
5. Phone Scams
The IRS also warns retirees
to be aware of phone scams that go around at tax time asking for tax bills to be paid. Victims are threatened and told they must pay immediately. Often callers can alter caller ID to make it look like the IRS is calling. The IRS does not call and demand immediate payment in that way.
How Soon Can You Retire? Free Test Shows You When — Click Here
The U.S. Securities and Exchange Commission offers tips
on avoiding retirement scams. They include:
- Closely examine the promise of early retirement without having to reduce your income.
- Be wary of the promise of high gains. Remember high gains are usually obtained through high risk, which is often not a great idea for someone nearing or already in retirement.
- Make sure you understand the fees associated with the plan.
- Understand the common tricks of scams including, convincing you that others have had success with the scheme, showing feedback from experts that seem credible, giving a “false sense of urgency” to the decision.
© 2021 Newsmax. All rights reserved.