Remember Donations May Cut Tax Bills

As tax filing season approaches, the Internal Revenue Service reminds taxpayers who give money or goods to a charity by Dec. 31, 2016, that they may be able to claim a deduction on their 2016 federal income tax return and reduce their taxes.

Only donations to eligible organizations are tax-deductible. IRS Select Check on IRS.gov is a searchable online tool that lists most eligible charitable organizations. Churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations even if they are not listed in this database.

Claiming Charitable Donations
Only taxpayers who itemize using Form 1040 Schedule A can claim deductions for charitable contributions.

Monetary Donations
A bank record or a written statement from the charity is needed to prove the amount of any donation of money.

Donating Property
For donations of clothing and other household items the deduction amount is normally limited to the item’s fair market value.

Benefit in Return.
Donors who get something in return for their donation may have to reduce their deduction.

Older IRA Owners Have a Different Way to Give
IRA owners, age 70½ or older, can transfer up to $100,000 per year to an eligible charity tax-free.

Good Records
The type of records a taxpayer needs to keep depends on the amount and type of the donation.

Courtesy of IRS.

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

IRS, Partners Warn of Online Threats

The Internal Revenue Service, states and the tax industry remind you that online threats and annoyances abound. There are viruses, worms, Trojans, bots, spyware and adware – all fall under the malicious programs (malware) umbrella.

How do you protect your computer from hackers and identity thieves? You need security software and to keep it turned on. You also need security on all of your digital devices, including laptops, tablets and mobile phones.

The IRS, state tax agencies and the tax professional industry are asking for your help in their effort to combat identity theft and fraudulent returns. Working in partnership with you, we can make a difference.

That’s why we launched a public awareness campaign that we call Taxes. Security. Together. We’ve also launched a series of security awareness tips that can help protect you from cybercriminals.

Tens of thousands of new malware programs launch each day, making the use of security software essential to safe internet use. These malware programs can disable your computer, install viruses that give cybercriminals control, steal your data, track your keystrokes to give criminals your passwords and many other malicious acts.

Tax Help for Self-Employed and Sharing Economy

As tax filing season approaches, the Internal Revenue Service wants taxpayers who are self-employed or involved in the sharing economy to know about free resources that are available to help them with their taxes.

Sole proprietors and independent contractors can get helpful information from the IRS Small Business and Self-Employed Tax Center. This resource includes online tools such as the Tax Calendar for Businesses and Self-Employed, which has key tax dates and necessary actions for each month of the year.

For those who provide services to consumers, such as rides in personal vehicles for a fee or the use of property, such as apartments or homes for rent, the IRS created the Sharing Economy Resource Center. It has tips such as:

Income is generally taxable, even if the recipient does not receive a Form 1099, W-2 or some other income statement, but some or all business expenses may be deductible.
There are some simplified options available for deducting many business expenses.
People involved in the sharing economy often need to make estimated tax payments during the year to cover their tax obligation.
Alternatively, people involved in the sharing economy who are employees at another job can often avoid needing to make estimated tax payments by having more tax withheld from their paychecks.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Health Care Law’s Rules Around Seasonal Workers

As an employer, your size – for purposes of the Affordable Care Act –  is determined by the number of your employees. If you hire seasonal or holiday workers, you should know how these employees are counted under the health care law.

Employer benefits, opportunities and requirements are dependent upon your organization’s size and the applicable rules. If you have at least 50 full-time employees, including full-time equivalent employees, on average during the prior year, you are an ALE for the current calendar year.  However, there is an exception for seasonal workers.

If you have at least 50 full-time employees, including full-time equivalent employees, on average during the prior year, your organization is an ALE. Here’s the exception: If your workforce exceeds 50 full-time employees for 120 days or fewer during a calendar year, and the employees in excess of 50 during that period were seasonal workers, your organization is not considered an ALE. For this purpose, a seasonal worker is an employee who performs labor or services on a seasonal basis.

The terms seasonal worker and seasonal employee are both used in the employer shared responsibility provisions, but in two different contexts. Only the term seasonal worker is relevant for determining whether an employer is an applicable large employer subject to the employer shared responsibility provisions.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Small Business Tax Tips

Tax Tip #1: Home Office
Make sure that your office is distinct from your living area. Whether it is a room of its own or a part of a larger space, there should be a clear line between your workspace and the rest of the home
If you only have one computer, claiming it as the office computer will be difficult. No auditor will believe that it is not utilized for personal use as well. The burden of proof will be up to you, so either dedicate a computer solely to work, or omit the computer area from your office space.

Tax Tip #2: Technology Purchases
Up-and-coming businesses need to be up-to-date on their technology, and Uncle Sam does not hinder this. Under Section 179 of the tax code, equipment expenses such as computers, printers, and even company vehicles are tax-deductible, up to a certain amount. Depending on the item, you can deduct the full cost on the year of purchase, or split it between several years.
Business-related software also qualifies under section 179. So don’t be afraid to get the technology you need to perform necessary business tasks. Just be aware of the amount you can deduct under section 179 because it changes yearly.

Tax Tip #3: Travel Costs
Since travel can be necessary for business success and expansion, many of the expenses are completely tax deductible.
Feel free to take your family with you, but only the costs for you, and only those that are business-related, can be deducted.

If you’re taking clients out for a meal, those costs are 50% deductible, just make sure to write on the bill/receipt the reason for the meal.
Conference fees are deductible as long as the conference is directly useful for your business. If it’s a conference related to your industry or will help you run your business more smoothly, then it probably qualifies.

As always with finances, especially taxes, it’s important to keep your receipts and details about the reason for purchases. While doing this for every purchase may seem over-the-top, it’s easy once you get into the habit of it. It will also save you a lot of grief if you get audited, and it will help you keep peace of mind that your finances aren’t going to get your business in trouble.

Courtesy of LessAccounting

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

5 Ways to avoid Audit

While audits are rare, most Americans would probably like to avoid them altogether. The percentage of people who actually are audited is extremely small, according to the Internal Revenue Service, but the number has risen slowly since 2008. If the IRS does decide to audit you, there is little you may do to stop it. You may, however, reduce the odds that you will be singled out for that extra attention in the first place.

1. Check your figures

One of the most common red flags for auditors – erroneous data entry – is also one of the most preventable. It seems simple enough to follow the advice to “double-check your return,” but surprisingly, people often are too careless regarding their taxes. Correctly reporting dependents and exemptions, as well as ensuring that the numbers match, is important because the IRS's automated system will easily detect discrepancies. And they don’t know if that is a mistake or purposeful.

2. Honesty is the best policy

Perhaps it’s common sense, but being 100 percent truthful on your tax return is an absolute must to reduce the chances of an audit. Realistically reporting income, deductions, credits and other figures can help keep the tax man at bay. Not reporting all your income is a surefire way to attract attention.

3. Go vanilla

The largest pool of filers – which consists of individuals or joint filers who earned less than $200,000 but more than the lowest earners – tends to avoid overt scrutiny. Taxpayers who make more than $1 million a year and those in very low income brackets are most likely to be audited.

4. Realistic deductions

Unusual or unrealistic itemized deductions, either for individuals or small business owners, may raise a red flag for auditors.

For a sole proprietor who files Schedule C, which details profits and business expenses, reporting losses for three years or more could encourage an auditor to request proof that the filer is actually in business.

5. E-filing helps

The Internal Revenue Service maintains that filing returns electronically can “dramatically reduce errors,” lowering the odds of an audit. The error rate for a paper return, the IRS reported, is 21 percent. The rate for returns filed electronically is 0.5 percent.

Courtesy of TurboTax

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Limited Penalty Relief for Filers of Form 1098-T

Announcement 2016-42 provides notice that the IRS will not impose penalties under section 6721 or 6722 on eligible educational institutions with respect to Forms 1098-T, Tuition Statement, required to be filed and furnished for the 2017 calendar year under section 6050S if the institution reports the aggregate amount billed for qualified tuition and related expenses on Form 1098-T instead of the aggregate amount of payments received as required by section 212 of the Protecting Americans from Tax Hikes Act of 2015 (Public Law 114-113 (129 Stat. 2242 (2015)).

Announcement 2016-42 will appear in IRB 2016-49  dated December 5, 2016.

Taxes. Security. Together.

The Internal Revenue Service, state tax agencies and the nation’s tax industry urge you to join their effort to combat identity theft by doing more to protect personal and financial data from online threats.

Working in partnership with you, we can make a difference. That’s why for the second year in a row, we have embarked on a public awareness campaign called “Taxes. Security. Together.” And, we’ve launched a series of security awareness tips that can help protect you from cybercriminals. This is all part of the Security Summit effort, a joint effort between the IRS, the states and the private-sector tax industry.

Here’s an overview of basic steps to help protect your data:

1. Use security software. Security software can protect your computer – and your data – from numerous threats posed by malicious programs, also known as malware.

2. Use encryption software to protect sensitive data. If you keep sensitive financial data such as prior-year tax returns or important records on your hard drive, consider investing in encryption software to safeguard documents with password protection.

3. Use strong passwords. Use strong passwords of 10 or more digits that include letters, numbers and special characters. Do not use the same password for all your accounts, especially your financial accounts.

4. Avoid phishing emails. Never reply to emails, texts or pop-up messages asking for your personal, tax or financial information.

5. Back up your data. Periodically back up all the data on your computer via your protected cloud storage or a separate disk.

6. Protect your wireless network. If you use a residential wireless network connection, make sure you have a strong password protection for it. And, if you use public Wi-Fi, never share sensitive data.

The IRS, state tax agencies and the tax industry joined together as the Security Summit to enact a series of initiatives to help protect you from tax-related identity theft in 2017. You can help by taking these basic steps.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith

Registration Now Open for 2017 Advance Monthly Payments of the Health Coverage Tax Credit

The Internal Revenue Service has opened the new registration and enrollment process for qualified taxpayers to receive the benefit of the Health Coverage Tax Credit (HCTC) on an advance monthly basis during 2017.

Eligible taxpayers can have 72.5 percent of their qualified health insurance premiums paid in advance directly to their health plan administrator each month. Each payment made on their behalf to the health plan administrator lowers their out-of-pocket premium costs.

Taxpayers may be eligible to elect the HCTC only if they are one of the following:

An eligible trade adjustment  assistance (TAA) recipient, alternative TAA recipient or      reemployment TAA recipient,
An eligible Pension Benefit Guaranty Corporation (PBGC) payee, or
The family member of an eligible TAA, ATAA, or RTAA recipient or PBGC payee who is deceased or who finalized a divorce with them.
Taxpayers can now begin the process of registering with the IRS and providing required information to participate in the 2017 Advance Monthly Payment program for the HCTC. This includes completing and mailing Form 13441-A, HCTC Monthly Registration and Update, with all required supporting documents to the IRS.

Bookkeeping tips

Entrepreneurs keep a lot of the financial details of their business in their heads. Doing so has its advantages: No new software to learn, no danger of a system crash that loses all your data, and you can tweak your budget as often as you need without sitting down at a desk.

But when you don't have a system and some processes in place, unpleasant surprises can pop up, goals can be easily missed and important paperwork forgotten. Getting a better handle on your money can help you to make and keep long-term goals, smooth out the seasonal ups and downs of your cash flow and maybe improve your profits. It can also help you to stay out of trouble with the Internal Revenue Service.

1. Plan for major expenses.
You're less likely to miss business opportunities or have to scramble for a loan when the expenses become unavoidable.

2. Track expenses.
You otherwise might some miss tax write-offs and may lose out on others.

3. Record deposits correctly.
You may be less likely to pay taxes on money that isn't income.

4. Set aside money for paying taxes.
The IRS can levy penalties and interest for not filing quarterly tax returns on time.

5. Keep a close eye on your invoices.
Late and unpaid bills hurt your cash flow.

Some entrepreneurs believe that once they've sent out an invoice, they've taken care of billing. Not so, Every late payment is an interest-free loan and hurts your cash flow.

Courtesy of Entrepreneurs

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

IRS Provides Special Relief to Encourage Leave-Based Donation Programs for Victims of Hurricane Matthew

The Internal Revenue Service today announced special relief designed to support leave-based donation programs to aid victims of Hurricane Matthew.

Under these programs, employees may forgo their vacation, sick or personal leave in exchange for cash payments the employer makes, before Jan. 1, 2018, to charitable organizations providing relief for the victims of this disaster.

Under this special relief, the donated leave will not be included in the income or wages of the employees. Employers will be permitted to deduct the cash payments as business expenses.

This relief is similar to that provided following Hurricane Katrina in 2005, Hurricane Sandy in 2012, the Ebola outbreak in West Africa in 2014 and this summer’s severe flooding in Louisiana. Details of this relief are in Notice 2016-69, posted today on IRS.gov.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Special Tax Breaks for U. S. Armed Forces

As tax filing season approaches, the Internal Revenue Service wants members of the military and their families to know about the special tax benefits available to them.

IRS Publication 3, Armed Forces Tax Guide, is a free booklet packed with valuable information and tips designed to help service members and their families take advantage of all tax benefits allowed by law. Here are some of those tax benefits.

Combat pay is partially or fully tax-free.
The Earned Income Tax Credit may be worth up to $6,269 for low-and moderate-income service members.
An IRA or 401(k)-type plan might mean saving for retirement and cutting taxes too.
An automatic extension to file a federal income tax return is available to U.S. service members stationed abroad.
Most military bases offer free tax preparation and filing assistance during the tax filing season.
Both spouses normally must sign a joint income tax return, but if one spouse is absent due to certain military duty or conditions, the other spouse may be able to sign for him or her.
Those leaving the military and looking for work may be able to deduct some job search expenses, such as the costs of travel, preparing a resume and job placement agency fees.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

What You Need To Know About U.S. Taxes & Moving Across The Border

As the Electoral College map turned red on Tuesday, many Americans saw red, too, and apparently had thoughts about moving to Canada. In fact, the official English version of the Canadian Citizenship and Immigration website went down more than once on Tuesday night through early Wednesday morning (it’s true, I checked it out), reportedly due to heavy traffic.

Because of its size and relatively low population, Canada has long embraced those from outside of its borders. On Tuesday, Canada reminded the world of its stance on immigration by tweeting out a reminder that it welcomes people of all cultures, perhaps a little nod to those threatening to leave the United States if the election results weren’t in their favor.

First things first: if you’re a U.S. citizen or tax resident, moving across the border won’t change your U.S. filing requirements all that much. Fleeing the country isn’t the silver bullet that you might expect to avoid reporting and paying taxes. So long as you’re a U.S. citizen or tax resident, you’re still required to file your federal income tax return with the Internal Revenue Service (IRS) every year and report your worldwide income. Yes, worldwide. We have a global tax system which means that you file and pay taxes on income earned all over the world – though certain credits, exclusions, and deductions may apply.

One factor that can change your tax picture is the existence of a tax treaty. The U.S. has nearly 70 tax treaties with countries all around the world, and as you’d expect, one of those is with Canada. It gets eyeballed so much that the IRS has a publication, Pub 597, Information on the United States – Canada Income Tax Treaty, explaining the highlights. The general idea of the treaty is to provide beneficial treatment for certain income items so that all income isn’t taxed in both countries. Here are a few highlights:

Dividends. For Canadian source dividends received by U.S. residents, the Canadian income tax generally may not be more than 15%.
Interest. Canadian source interest received by U.S. residents is typically exempt from Canadian income tax.
Gains from the sale of property. Generally, gains from the sale of personal property by a U.S. resident having no permanent establishment in Canada are exempt from Canadian income tax.
Royalties. Copyright royalties and other like payments for the production or reproduction of any literary, dramatic, musical, or artistic work (other than payments for motion pictures and works on film, videotape, or other means of reproduction for use in connection with television, which may be taxed at 10%) are typically exempt from Canadian tax.
Personal Services. A U.S. citizen or resident who is temporarily present in Canada during the tax year is exempt from Canadian income taxes on pay for services performed, or remittances received from the United States if the citizen or resident qualifies under one of the treaty provisions. (If you become a resident, all bets are off.)
Self-Employment Income. Income from services performed (other than those performed as an employee) is taxed in Canada if attributable to a permanent establishment in Canada.
Pensions and Annuities. Pensions and annuities from Canadian sources paid to U.S. residents are subject to tax by Canada, but the tax is limited to 15% of the gross amount (if a periodic pension payment) or of the taxable amount (if an annuity). Canadian pensions and annuities paid to U.S. residents may be taxed by the United States, but the amount of any pension included in income for U.S. tax purposes may not be more than the amount that would be included in income in Canada if the recipient were a Canadian resident. Pensions do not include Social Security benefits.
Charitable Contributions. You may deduct contributions to certain qualified Canadian charitable organizations on your U.S. income tax return.

Courtesy of Forbes

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Accounting Tips for Small Business

Accounting can be tedious for any business, but if your small business doesn’t keep tight books it can make your taxes a nightmare. Without a system for your business’s finances a lot of things can slip through the cracks and end up costing you money in the long run. With a clear-cut process and some simple bookkeeping tips you can get a better grip on your financial situation, and even increase your earnings. The goal is to get a simplified process created detailing your businesses finances. Having a method that combines your expenses, invoices, deposit records and tax information can make your life as a small business owner ten times easier, especially as tax season rolls around.

1. Go Paperless by using Cloud-Based Accounting
Look for packages made for small business owners because they streamline the process by providing basic templates for your business like invoices, deposit slips, and business account check printing. With the addition of cloud-based accounting systems you can access your business information from anywhere.

2. Find A Good Advisor
Having a good advisor on payroll to help you out at least once a month can become invaluable. They can teach you how to handle your books properly, answer any questions and fix any mistakes that might have been made.

3. Keep Personal and Business finances separate
Never mix the two up, it will make your accounting much more difficult to handle. It’s a lot easier to keep accurate records if your only dealing with one type of account, so stay organized.

4. Plan for Major Expenses
Set aside money for major expenses like inventory, office supplies, repairs and maintenance.

5. Set Aside Money for Taxes
If you keep track of your financial records properly you can be prepared for year-end taxes. Setting aside a little bit of money each month towards paying your small businesses taxes you wont have to cutback at the end of the year or get a loan to pay your taxes, you will already be prepared.

6. Keep and Eye on Your Invoices
Late and unpaid bills can affect your businesses credit and effect your tax payments as well. Keep your bills organized and always pay on time.

7. Keep Daily Records and Reconcile bank accounts monthly
Double check your bank accounts and daily records at least once a month. Reconcile your withdrawals and deposits in your account so that discrepancies can be spotted more easily.

8. Avoid Cash
Using cash it is hard to keep track of spending. You also lose track easily of write-offs because there is no record of purchases. By using a debit or credit card you can keep track of amount spent, where it was spent and when it was spent.

9. Set up a specific time each week to go over your books
Giving yourself at least a half an hour ever week to go over your finances and make sure everything is in order.

10. Check Up Monthly On Your Accounts Receivable.
Having a client owe you money for services, especially at the end of the year, isn’t the same as having that money in your business account. Make sure you stay on top of your accounts receivable so that you are getting all the monthly payments you are owed. Without receivables, income dwindles.
Courtesy of Kabbage
For more information contact Neikirk, Mahoney and Smith at 502-896-2999

GO VOTE

Short as sweet today. It is simple, go vote! We are in the middle of making History today, make sure your candidate gets your vote!

For more information contact Neikrik, Mahoney and Smith at 502-896-2999

IRS Warns Tax Professionals of New e-Services Email Scam

The Internal Revenue Service today issued an urgent alert to tax professionals who use IRS e-services to beware of an email asking them to update their accounts and directing them to a fake website.

The subject line for the fraudulent email is “Security Awareness for Tax Professionals.” The “From” line is “Your e-Services Team.” It has both an IRS logo and an e-services logo that hyperlinks to a URL verified as a phishing site. The spoofing site poses as an e-services registration page.

The scammers are attempting to exploit current IRS efforts to strengthen the e-services authentication process and its ongoing communications with tax professionals about their accounts. Scammers are attempting to steal e-services usernames and passwords or additional personal data through a registration page.

If e-services users have already clicked on the fake logo and provided their username and password, they should contact the e-services help desk to reset their accounts. If the same password is used for other accounts, these should be changed as well. As an extra precaution, users should perform a deep security scan on their computers, re-evaluate their security controls and be alert to any other signs of identity theft or data compromise.

Tax professionals should always go directly to IRS.gov to access e-services and never click on any links provided in emails.

Tax professionals who receive a suspicious email should send it as an attachment to Phishing@irs.gov and then delete it. Recipients should not click on any links.

The scammer email tells recipients that information was stolen from certain user accounts in 2015 from a state-sponsored actor. It says users are being asked to upgrade their e-service account to ensure protection of their information. It asks them to click on the login to access their accounts for security upgrade.

The IRS is in the process of upgrading e-services security and has been in communication with tax professionals about updating their accounts.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Visit IRS.gov/AIR for Resources about Reporting Process

Under the Affordable Care Act, certain organizations must report information to the IRS and individuals about health insurance coverage. The reporting requirements apply to insurance companies, self-insured companies, applicable large employers and employers that provide health insurance to their employees. ACA information returns and transmittals are electronically filed through the ACA Information Return system, also known as AIR.

The ACA Assurance Testing System opens November 7 for tax year 2016 testing. AATS is a process to test software and electronic transmissions prior to accepting software developers, transmitters, and issuers into the AIR program. Software developers – including employers and issuers – who passed AATS for tax year 2015 will not have to retest for tax year 2016; their tax year software packages will be moved into production status. New participants need to comply with test requirements for tax year 2016.

Other non-ACA information returns – such as Forms 1099 – can be electronically transmitted through the Filing Information Returns Electronically system, also known as FIRE.  Even if you previously used FIRE, if you are transmitting to AIR, you should familiarize yourself with the AIR procedures, which are different than those for FIRE.

If you are required to file 250 or more information returns, you must file them electronically. This requirement applies separately for each type of return and separately to each type of corrected return. All filers are encouraged to electronically file even if you have less than 250 returns.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Accounting 101

This assumption requires us as small business owners...

to keep all of our business transactions separate from our personal transactions.

The easiest and best way to so this is to open a business bank account.

Some people think that just keeping separate records is enough in separating business from personal. It is not. You should physically keep your money separate. Some business owners will go as far as keeping their personal and business accounts in different banks.

They said it is better for them as they have to write out a check to deposit instead of transferring between accounts in the same bank.

The main thing is not to pay for personal expenses out of that business account. If you need money from your business for personal expenses write yourself a check or transfer the money into your personal bank account.

One of the biggest justifications for keeping a separate bank account for your business is for clean and accurate bookkeeping.

If you have a separate bank account for all of your business transactions then it will be easier to match and record all of those transactions.

I have even missed recording a few expenses and caught them when I did my bank reconciliation...which by the way is 100 times easier when you have a separate account.

Come tax time, you or your accountant will be happy you maintained separate accounts too.

Also if you were ever audited...you do not want to bring in a bank record that has your personal expenses mixed in. Auditors tend to frown upon that.

Courtesy of BasicAccountingHelp

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Jan. 31 W-2 Filing Deadline; Some Refunds Delayed Until Feb. 15

A new federal law moves up the W-2 filing deadline for employers and small businesses to Jan. 31. The new law makes it easier for the IRS to find and stop refund fraud. It also delays some taxpayer refunds. Those taxpayers claiming the Earned Income Tax Credit or the Additional Child Tax Credit won’t see refunds until Feb.15, at the earliest.

Here are some key points to keep in mind:

Protecting Americans from Tax Hikes (PATH) Act.
Different from past deadline.
Helps stop fraud or errors.
Some refunds delayed.
File tax returns normally.
Use IRS.gov online tools.

Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers may need their Adjusted Gross Income amount from a prior tax return to verify their identity. They can get a transcript of their return at www.irs.gov/transcript.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Dozens of Individuals Indicted in Multimillion-Dollar Indian Call Center Scam Targeting U.S. Victims

The indictment was returned by a grand jury in the U.S. District Court for the Southern District of Texas on Oct. 19, 2016, and charges the defendants with conspiracy to commit identity theft, false personation of an officer of the United States, wire fraud and money laundering.  One of the defendants is separately charged with passport fraud.

The indictment alleges that the defendants were involved in a sophisticated fraudulent scheme organized by conspirators in India, including a network of call centers in Ahmedabad, India.  Using information obtained from data brokers and other sources, call center operators allegedly called potential victims while impersonating officials from the Internal Revenue Service (IRS) or U.S. Citizenship and Immigration Services.  According to the indictment, the call center operators then threatened potential victims with arrest, imprisonment, fines or deportation if they did not pay taxes or penalties to the government.  If the victims agreed to pay, the call centers would then immediately turn to a network of U.S.-based co-conspirators to liquidate and launder the extorted funds as quickly as possible by purchasing prepaid debit cards or through wire transfers.  The prepaid debit cards were often registered using misappropriated personal identifying information of thousands of identity theft victims, and the wire transfers were directed by the criminal associates using fake names and fraudulent identifications.

The co-conspirators allegedly used “hawalas,” in which money is transferred internationally outside of the formal banking system, to direct the extorted funds to accounts belonging to U.S.-based individuals.  According to the indictment, these individuals were expecting the hawala transfers but were not aware of the illicit nature of the funds.  The co-conspirators also allegedly kept a percentage of the proceeds for themselves.

According to the indictment, one of the call centers extorted $12,300 from an 85-year-old victim from San Diego, California, after threatening her with arrest if she did not pay fictitious tax violations.  On the same day that she was extorted, one of the U.S.-based defendants allegedly used a reloadable debit card funded with the victim’s money to purchase money orders in Frisco, Texas.

The indictment also alleges that the defendants extorted $136,000 from a victim in Hayward, California, who they called multiple times over a period of 20 days, fraudulently purporting to be IRS agents and demanding payment for alleged tax violations.  The victim was then directed to purchase 276 stored value cards which the defendants then transferred to reloadable debit cards.  Some of the victim’s money ended up on cards which were activated using stolen personal identifying information from U.S.- based victims.  

Courtesy of Justice

For more information contact Neikirk, Mahoney and Smith at 502-896-2999