Maybe this one’s happened to you. The phone rings. You answer. You hear an automated female voice. “The FBI…”
The voice pauses a split second. In that flash of time, your heart skips a beat and you think, What do the feds want with me? What’ll happen when a real person picks up the line after this recorded message?
Then you hear the rest of the message.
“… reports there is a home break-in every 15 seconds. Your local police recommend you protect your home. If you allow us to place a small sign in your yard, we will install a new security system at absolutely no cost to you whatsoever…”
Well, it gets your attention. Not least because whoever’s behind the call ignores the Do Not Call Registry. The Better Business Bureau logged 7,400 complaints about burglar alarm system and monitoring companies nationwide during 2013.
But that one’s old hat by now. This, however, is not…
“Don’t disregard this message, as delay in calling us back might end up in a legal matter for you,” said the voicemail on Al Cadenhead’s mobile phone.
It was — supposedly — from the IRS.
Cadenhead, a pastor in Charlotte, called back: “This woman gave me her name and her badge number and said she was informing me that they were filing a warrant for my arrest for tax fraud; and she started listing all the things they were going to do.”
He was nearly certain he’d done nothing wrong, but “I don’t want to cause embarrassment to my family, to my church. I’m retiring in a few months. This is not how I want to be remembered, being arrested,” he told CBS News.
And so began an eight-hour ordeal in which he withdrew money from his bank and bought prepaid debit cards at drug stores, calling the scammers with the card PINs.
By day’s end, he was out $16,000.
About 10,000 Americans are getting calls every week like the one the pastor got. The pace is quickening as April 15 approaches.
To date, the Treasury Department’s inspector general says 366,000 people have reported receiving these calls. More than 3,000 were taken in… and cleaned out an average $5,167.
The scammers likely work overseas. Catching them will take years, say the feds.
Bottom line: If you get a call from someone claiming to be with the IRS demanding immediate payment and threatening you with arrest… it’s a scam. Hang up.
And don’t let the 202 area code for Washington, D.C., on the caller ID fool you….
Alas, there’s another tax “scam” that’s all too real… and you can’t escape its clutches.
It’s the new IRS paperwork this year that accompanies Obamacare. We teased out the implications a few days ago. You have to affirm you have health insurance or else fork over a penalty (or tax, or whatever the hell the Supreme Court wants to call it).
The IRS has given this penalty a very special name — the “individual shared responsibility” payment. (So is it individual? Or is it shared? Ugh…)
There’s a three-step process. Here’s the scoop from CPA, attorney and radio host Mark Kohler — tax strategist for the Laissez Faire Letter: “All individuals subject to the ISR rules use their 2014 income tax return to:
- “Report that they have qualifying health care coverage (also called minimum essential coverage)”
Mark says for most people, that means employer-sponsored coverage… government coverage like Medicare, Medicaid or TRICARE for military personnel or retirees… or individual plans bought on the “exchanges.”
There’s a box to check on your 1040. Easy-peasy.
If you can’t do that, then Mark says you must…
- “Show they qualify for an exemption from coverage”
There’s a form for that, 8965. Essentially you’re exempt if your income falls below certain thresholds spelled out in IRS Publication 5187.
If you do not qualify, then Mark says you’re required to…
- “Make an individual shared responsibility payment.”
Or in plain English, the penalty. This year, it’s either $95 per adult or 1% of household income, minus certain adjustments — whichever figure is higher.
“The IRS is prohibited from using liens or levies to collect any ISR payment,” Mark reminds us. “However, if taxpayers owe such a payment, the IRS may offset that liability with any tax refund that may be due to them.”
[Ed. note: With only 43 days remaining in tax season, time’s a-wasting if you want to save as much as $18,000 this year using the tips from Laissez Faire’s free guide, The Vanishing Point: How to Disappear From the IRS This Tax Season and Save a Boatload of Money in the Process.
Reaction to last year’s edition of this guide was overwhelmingly positive. “I saved $16,000 in taxes last year alone!” say a couple from Arizona. “I got $3,200 back from the IRS based on one idea,” says a man from Utah.
For access to this year’s revised and updated edition, look here.]
The major U.S. stock indexes are in the red this morning. As we write, the Dow is off more than 100 points, to 18,095. The Nasdaq is holding up better, off a quarter percent, to 4,967.
Gold is creeping lower, less than $2 away from the $1,200 level again. Crude is back below $50, at $49.75.
The weakness in the commodity space can be chalked up in part to strength in the dollar.
At last check, the dollar index crested 96 for the first time since 2003. The index’s biggest component, the euro, is down to $1.108.
It was last summer our friend Chuck Butler at EverBank Global Markets foresaw a run of dollar strength in late 2014 stretching into this year. “I just thought there was a lot of euphoria going around that needed to be worked through,” he says now.
“All the years of zero interest rate policy ( ZIRP), all the years of quantitative easing (QE) and all the years of stimulus (remember ‘Cash for Clunkers,’ tax rebates, $700 billion and so on?) had finally worked itself into the economy, and things looked brighter, if only for a little while.”
But now QE is over, the chatter is about raising interest rates, the stimulus cash is spent. “Where will the economy look for a boost now?” Chuck asks rhetorically. “In case you haven’t noticed, three months of very weak retail sales have printed. Factory orders, industrial production and durable goods orders are all printing negative or below expectations.
“I still believe that by the end of summer, this dollar strength will be in our rearview mirror, as it takes time for these things to work themselves through.”
Sign of the times — another megabank is set to shutter hundreds of branches.
A few days ago, JPMorgan Chase announced cost cuts to the tune of $1.4 billion. Key to the plan — closing some 300 branches over the next two years.
The Associated Press sums up: “Due to the increasing use of online and mobile banking, bank branches will move away from everyday transactions to focus more on advisory services like wealth management and account openings…”
For nine months, we’ve been cluing you in to the mobile banking phenomenon. Our microcap specialist Thompson Clark has been on the case.
“The process is as simple as pie,” he says — “you snap a picture of both sides of the check with your smartphone, and boom. You’re finished.
“Banks will save so much money with mobile banking, they won’t be able to afford not to offer it. According to Javelin Strategy & Research, it costs $4.24 per transaction in a physical bank branch. On the smartphone, this number is a miniscule $0.10.”
And a company on Thompson’s radar collects most of that 10 cent cost — 8 cents, to be precise — thanks to a patented process.
For access to all of Thompson’s microcap recommendations, follow this link.
The word is “chirography” — by one definition, “one’s own handwriting or autograph; a style or character of writing.”
Somehow, it escaped our attention two years ago when Jacob Lew became the new Treasury Secretary that he had, well, a peculiar signature. “When Lew was nominated for the post in January 2013,” says the delightful website Futility Closet, “it threatened to appear on all U.S. paper currency for the duration of his tenure.”
Just imagine seeing this on every new Federal Reserve note…
Said President Obama at the time, “Jack assures me that he is going to work to make at least one letter legible in order not to debase our currency, should he be confirmed as secretary of the Treasury.”
Which he did. Here’s the modified signature…
Meanwhile, the debasement of the currency continues apace…
“I’ve been a reader since late 2009,” reads an entry in our virtual mailbag, “and as always, you are doing a great job (no ‘buts’ here).
“Last week’s mention of ‘disinflation’ got me thinking that we need a relatively accurate yet simple way of representing the damage (let’s call it ‘economic changes,’ to be PC) of current central bank policy. Are you aware of any common measures that would do something like plot the Shadow Stats true inflation rate minus the increase in money supply (QE/etc.) over time (maybe the last 10 years)?
“I’m pulling these numbers out of a hat, but let’s say last year the money supply increased by 20%. You mentioned that year-over-year inflation is currently at 7.5%. To me, this looks like a contraction of 12.5%.
“I appreciate the fact that the term ‘money supply’ is an oversimplification, but I think this illustrates the point I’m trying to make. If you plotted this over a period of time, I think it would make a pretty powerful statement. Are you aware of any published measure similar to this? If not, is it something you guys could put together? (Nothing like asking a free newsletter to do some pro bono work.)
“I can’t shake the feeling we’ve been in a depression for years — the only reason the global media aren’t calling it a depression is due to the dilution of the money supply. The numbers keep getting bigger, but the measured units are changing. It’s straight from ‘Magic Tricks 101.'”
The 5: We put the matter to macro maven Dan Amoss, an old hand here at Agora Financial now in charge of Jim Rickards’ research unit. He gently suggests you’re looking for cues in the wrong place.
“Most of the money supply growth in recent years is due to Fed QE,” he explains, “which (temporarily) inflates bonds and stocks. So that’s not going to lead to inflation, only malinvestment… and QE, in fact, is depressing the real economy because it robs savers of interest income.
“Growth in commercial bank credit — the kind that boosts inflation in the real economy — has been tame. That’s due to a variety of reasons, including banks repairing their balance sheets, weak demand for credit and a lack of creditworthy borrowers. I don’t expect a renewed surge in commercial bank lending for years. Our banks are like those in post-bubble Japan in that regard.
“I don’t expect a serious, lasting inflation reflected in the CPI until the Fed changes policy to ‘helicopter drops,’ or as Bernanke called them in his 2002 speech, ‘money-financed tax cuts.’
“I see such a policy change as inevitable, but not necessarily imminent. The change could be either self-directed by the Fed or forced upon it by Congress.
“That’s when gold would go vertical in terms of dollars, as it has in terms of bolivars or rubles. That’s the reason to own it.”
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. Speaking of Jim Rickards, his next online briefing exclusively for Agora Financial readers is set for this coming Monday at 10:00 a.m. EDT.
The topic this time is off the beaten path… but it’s also one of his favorite hedges against catastrophe. It doesn’t trade on exchanges like stocks, and it can’t jingle in your pocket like precious metals. But it’s been used by wealthy families for centuries… and it’s more accessible to you the retail investor than you might think.
We’ve dubbed this month’s session “Investment Secrets of the Palazzo Colonna.” Participation is free to all subscribers of Rickards’ Strategic Intelligence. If you’re not yet a subscriber, sign up now and you’ll get full instructions later this week about how to take part.
