Earlier this year I received a voicemail message from my Mom. She was in a full-blown panic and she desperately needed my help. She told me the IRS had just called her and told her they had assessed thousands of dollars in penalties and that they needed payment right away. Lucky for her, amid her panic, she hung up and called me instead.
She is not alone. Many Americans receive calls like this each year and this type of scam tactic is becoming more popular. These scams run year-round. Scammers continue to pose as IRS agents and attempt to scare individuals into sending them money. Scare tactics range from reading out fake badge numbers to threatening to call the authorities. Many times these scammers are successful.
Getting a hold of an IRS agent is not easy. Even as a tax professional, one must navigate through long and tedious menus over the phone and often wait on hold for long periods of time. The IRS will never call or email an individual to demand money. In the case that you do have a tax liability, they will issue you a notice via mail. This notice will give you the appropriate call back numbers and addresses to respond to and resolve the issue (if needed). Furthermore, the IRS will never:
1. Call or email you to demand immediate payment, especially by asking for credit card or debit card numbers over the phone.
2. Demand payment by pre-paid debit cards, or gift cards.
3. Demand that you pay taxes right away and not allow you to discuss or appeal the amount you supposedly owe.
4. Ask that you verify your personal information such as your social security number, name, and address.
Unfortunately, scammers have started to also send fake letters and bogus emails with the IRS logo to individuals. If you are unsure about a letter and/or email, we encourage you to call the hotlines listed on their website, or contact your CPA for assistance.
IRS hotline numbers can be found here: https://www.irs.gov/e-file-providers/contact-irs-for-more-information
For a list of Tax Scams/Consumer Alerts: https://www.irs.gov/newsroom/tax-scams-consumer-alerts
Emergency funds are necessary. We all need to be prepared for those unplanned expenses that show up when we least expect them. Home repairs, illness, job loss —there are so many things that can happen at any moment. Are you prepared to handle them? An emergency fund will prepare you for those unexpected setbacks and reduce your dependence on borrowing money, most likely at high interest rates. It’s not a question of whether or not we need an emergency fund, but how much of an emergency fund we really need.
Decide How Much You'd Like to Save
$1,000, three to six months' living expenses, a year's wages—there are a lot of opinions out there about how much money you should put into an emergency fund, but the only opinion that matters is yours. Ask yourself how much you would need to have tucked away to feel secure, and make that the amount that you save in your emergency fund.
Calculate Your Monthly Expenses
Make a list of all of your regular monthly expenses—housing costs, food, utilities, debt repayments, transportation costs, insurance, and all of your other "must-pay" bills. If you need to cover $2,500 in monthly expenses for three months, you'll need to set aside $7,500 in your emergency fund.
Here’s an emergency fund calculator that may help you determine how much you should save for a rainy day.
Open an Account
Once you've determined how much you need to save, it's time to decide where you'll keep your money. Since you want your emergency fund to remain fairly accessible, a savings account, money market account, or short term certificates of deposit —make good sense. Any one of these accounts will give you the liquidity that you need, while still earning you some interest.
Determine How Much You Can Afford to Save
If you're like most people, it's going to take time to build up your emergency fun—probably even a lot of time. That's okay. The important thing is that you get started today. Look over your finances and determine how much you can afford to put toward your emergency fund each month. Even $10 a month will help, so don't worry if that's all you can afford to do.
Set up Automatic Deposits
Make saving easy by scheduling automatic deposits to your emergency fund. Then, sit back and watch as the balance grows month-after-month.
The bottom line, according to www.fidelity.com is that there are many other circumstances besides losing a job that could require having cash on hand—like natural disasters, unexpected child care expenses, or a surprise medical bill that insurance won't cover.
You may not be able to plan for all of them but protecting yourself with insurance, having ample cash savings that are easily accessed, and keeping credit available, just in case, make a good start.
That’s one reason that Fidelity suggests establishing an emergency fund and then continuing to save 5% of your after-tax income for unexpected expenses.
Read Viewpoints on Fidelity.com: 50/15/5: a saving and spending rule of thumb.
Everyone needs an emergency fund—no matter how old you are or what your income level is. And if you’re diligent about saving for it, you'll be ready for anything—rain or shine.