Countdown to Financial Fitness: Someone Filed My Taxes for Me

Countdown to Financial Fitness: Someone Filed My Taxes for Me: I should be working on my income taxes today instead of writing this blog. I'm not one of those taxpayers who rushes to file for my ref...

Someone Filed My Taxes for Me

I should be working on my income taxes today instead of writing this blog. I'm not one of those taxpayers who rushes to file for my refund in early February, as soon as the W-2s come out. First of all, I rarely get a refund, and secondly, I have some investments that don't report until March. I take that as my license to procrastinate.

But these days, with identity theft running rampant, it's risky to put off filing your tax return. Two years ago, someone beat me to it.

About this time in 2015, my husband and I received a cashier's check in the mail for $9156.02. Nice sum of money, but we weren't expecting such a payment. I assumed it was a fraudulent check and studied it carefully for the fine print stating that cashing it obligated me to buy something or subscribe to some service I didn't want. My mother-in-law used to receive checks in the mail claiming to be prize money; instructions were included for her to deposit the check and then mail in a "processing fee." But the check we received looked real. I couldn't find the catch.

We even called the police department for advice. "If you got a check you weren't expecting, of course it's fraudulent. Tear it up," they instructed us.

But we were hesitant to tear it up until we knew for sure it was a scam. My husband called the bank that had issued the check and read them the information. "It's real," they told him. "It came out of our San Diego branch that issues refunds for TurboTax."

TurboTax? We've never used TurboTax. And we hadn't even filed our 2014 taxes yet, so how could it be our tax refund?

My husband called the Clark Howard radio show. Clark, a consumer advocate, suggested we go to the IRS website under "Where's My Refund?" and put in my husband's Social Security number, our filing status, and the amount of the check.

Bingo! "Your refund has been processed and $9156.02 has been electronically deposited to your bank account."

Fortunately, the crooks screwed something up, and instead of a direct deposit to a thief's bank account, a paper check was generated and mailed to the address on file with the IRS. Otherwise, we never would have known we'd been scammed.

The fun began. We had to file a police report, alert the credit bureaus, and contact the IRS, who assigned us a special counselor to handle return of the fraudulent check (no, unfortunately, we didn't get to keep the money!) and processing of our real return. Although I'd expected to owe money that year, we actually had a refund due—which we didn't receive until December, after our claim of identity theft had been investigated and resolved.

We never learned how it happened. The same fate had befallen our neighbor the year before; he found out because he filed electronically, and when he pushed the Submit button, he was advised he had already filed a return under that Social Security number. The common denominator was an urgent care facility, where both my husband and neighbor had recently received medical treatment.

So far, thankfully, we have not seen any other evidence of identity theft in our financial lives. The IRS has given us a PIN to use when we file subsequent tax returns. However, we're still experiencing fallout from this incident. Our 2014 state tax return is under audit, because the figures I submitted don't match the numbers the IRS sent them--from the fraudulent return, which arrived first.

Have you ever been a victim of identity theft? What suggestions do you have for preventing it?

Sharon Marchisello is the author of Live Cheaply, Be Happy, Grow Wealthy.

Countdown to Financial Fitness: When I Was on Food Stamps

Countdown to Financial Fitness: When I Was on Food Stamps: Over 40 million Americans receive benefits from the Supplemental Nutrition Assistance Program (SNAP), also known as food stamps. I'm g...

When I Was on Food Stamps

Over 40 million Americans receive benefits from the Supplemental Nutrition Assistance Program (SNAP), also known as food stamps. I'm glad our country has this safety net for low-income families, but I hope never to qualify again.

In addition to earning a low income (amount varies according to the number, age, and disability status of the family members), eligible households can only own $2250 in countable resources, or $3250 if at least one person is over 60 or disabled. Most states exclude a home, vehicle(s), and a retirement pension as countable resources. But still, $2250-$3250 is not much of an asset these days.

We've all heard stories of rampant welfare and food-stamp fraud. I read that at one time, approximately 4% of claims were fraudulent; now the number has been reduced to about 1%. That still leaves millions of people truly in need of assistance.

In the mid 1970s, I was pushed out of my job in Houston, Texas, and filed for unemployment. Someone suggested I apply for food stamps as well. I was happy for any help I could get.

I had to make an appointment at my closest Department of Human Resources office, a 20-mile drive from my apartment. (Now many states allow you to apply online.) Although they'd given me a list of what I needed to bring to the interview—copies of every bill I owed, canceled rent checks, bank statements, proof of unemployment claim, etc.—it wasn't quite good enough, because after I arrived, they decided there was one more paper I needed. They were unable to proceed with my application, so we had to schedule a follow-up interview when all of my documentation was in order.

When I slinked out of the office, humiliated that I couldn't even follow simple government instructions, I ran into a guy I knew from college. We'd worked together part-time on the University of Houston campus as French language tutors. Now he was employed as a social worker at the Texas Department of Human Resources. And I was a client applying for food stamps. I'd hoped he hadn't recognized me, but no such luck.

When I finally got my application approved, I received, by mail, an authorization card to purchase $50 worth of food stamps for $37. These days, one might be able to save that much on groceries by using coupons and loyalty cards! I had to redeem my authorization card and pay my $37 in person at a different office—fortunately, no one I knew worked there—also about 20 miles away from my apartment, in order to collect my $50 booklet of food stamps. Now recipients are given a SNAP card that blends in like an ordinary credit or debit card, so they're not as conspicuous in public.

And of course, there were restrictions about what one could buy with food stamps. There still are, as one of the goals of the program is to promote good nutrition. On my first trip to the grocery store using food stamps, I made the mistake of including in my purchases a bag of dry kibble for my pet kitten. "Ma'am, you can't buy cat food with food stamps!" screamed the cashier. The customers behind me in line—and at the other registers—glared at me like I was a criminal. I just knew someone would slap on the handcuffs at any moment.

Fortunately, I was only on food stamps that one month. The Texas Employment Commission offered me a temporary job in their office, which I couldn't very well turn down and expect to continue receiving unemployment insurance benefits. Workers in the temp program were encouraged to test for other state government jobs, and I soon got an offer from the Texas Department of Human Resources.

The next time I saw my old college friend, I was in training to become a social worker, just like him. And I was helping other people get food stamps.

What are your thoughts on public assistance programs? I'd love to hear your comments.

Sharon Marchisello is the author of Live Cheaply, Be Happy, Grow Wealthy.

Countdown to Financial Fitness: Winning the Lottery

Countdown to Financial Fitness: Winning the Lottery: I read a story last week about a British woman who won the Euromillions lottery at age 17 and now wants to sue Camelot, the U.K.'s nati...

Winning the Lottery

I read a story last week about a British woman who won the Euromillions lottery at age 17 and now wants to sue Camelot, the U.K.'s national lottery, for ruining her life. Many readers were probably thinking, I'd love to have the opportunity to ruin my life by winning millions...

But many people who suddenly come into a huge fortune find themselves more unhappy than they were before the money.

According to a recent article in Fortune magazine, the Certified Financial Planner Board of Standards says nearly a third of lottery winners end up declaring bankruptcy. Bankruptcy also plagues many pro-athletes who grew up poor and then suddenly signed contracts for multi-million-dollar salaries.

Before you get your hands on a fortune, it's important to understand how to manage it. Or at least enlist advice from someone you trust. Preferably someone who doesn't have a stake in it.

It's almost impossible to keep a huge windfall a secret. Relatives and old friends you haven't seen in years—people who never gave you the time of day before—suddenly become your best friends. Everyone has their hand out. Sob stories. Guilt trips. Debts you'd forgotten about. Childhood promises. Investment proposals. "Expert" advice.

And then there are all those shiny objects. The sports car or yacht you've always dreamed about but knew you could never afford. Real jewelry. Designer clothes. Maybe a better place to live. Luxury travel. And of course, the opportunity to play Santa Claus for your family and friends.

You tell off your boss and quit your job.

But no matter how huge the windfall, it's not a bottomless pit. Up to 45% of your winnings may go to federal and state income taxes. And if you start doling out gifts exceeding $10,000 in value, you pay gift tax. That new mansion has to be maintained, and you may have to hire people to run it. The new sports car comes with expensive insurance.

Still, even after you pay the taxes on a multi-million-dollar jackpot, a lot of money is left. A lot of potential for improving one's life.

Some lottery commissions give winners the option of having the winnings annuitized over 20 or more years. You end up keeping more of the money, with a lower tax bill. While most winners opt for the bird-in-the-hand lump sum, I believe I'd take the deferred pay-out. That way, if I went crazy and blew through my winnings the first year, I'd have another installment to look forward to the following year. Surely after a few years, I'd grow accustomed to the income and learn to manage it sensibly.

I wouldn't make any sudden changes—quitting the job, moving, buying a business—unless plans were already in the works. I'd pay off any debts and fully fund my retirement account. I'd set aside a million or so for an emergency fund / long-term care plan. If I had kids or grandkids, I'd take care of their college funds.

I'd give a lot to charity. Besides supporting causes I believe in, the donation would lower my income tax bill and would not be subject to gift tax.

And of course, I'd have some fun. Take more trips. Buy presents. And invest most of the windfall—after carefully researching opportunities. I'd still stick to no-load, low-fee products I can understand. I still wouldn't pay more than necessary for purchases. I'd still recycle and conserve electricity and water.

Money doesn't guarantee happiness. But when used responsibly, it can make life easier.

What would you do if you suddenly received a huge sum of money? I'd love to hear your comments.

Sharon Marchisello is the author of Live Cheaply, Be Happy, Grow Wealthy.

Countdown to Financial Fitness: Are You a Saver or a Spender?

Countdown to Financial Fitness: Are You a Saver or a Spender?: Tomorrow is Valentine's Day, a popular time for couples in love to get married or engaged. But before your head gives in to the whims o...