What Is IRA Contribution Information Form 5498?

What Is IRA Contribution Information Form 5498?

Your taxes are filed.  The refund is in the bank.  So why will you be receiving another tax form at the end of May?  For those of you who made an IRA contribution or rolled your 401K into an IRA in 2016, you will be receiving ‘Form 5498’ by U.S. Mail next month. No need to


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

Markets Set New All Time Highs Weeks After Brexit Selloff

 

What a difference a couple of weeks make. It was just 21 days ago when the global markets were caught off sides as UK citizens voted to leave the European Union. The move was largely unexpected and as a result, global investors sold first and asked questions later, scrambling to understand how this might impact their investments. As we have seen over and over, the markets do not like surprises or uncertainty and the Brexit outcome created both. Over two trading sessions, the EuroStoxx 50 Index sold off nearly 16% (in US dollars) and the FTSE 100 Index fell over 13%. The S&P 500 Index was not immune to the selloff and declined over 5% in sympathy with the global markets. And then suddenly, stock markets came roaring back. The EuroStoxx and FTSE averages have retraced most of their Brexit declines and the S&P 500 has rallied to new all-time highs.

Finding opportunity in the middle of uncertainty

The initial knee-jerk selloff reaction to Brexit appears to have been wrong. That is, the worst-case scenarios of global trade grinding to a halt and another European recession won’t likely play out. Brexit’s direct impact to the US economy will be minimal. However, the event has and will influence our capital markets in more subtle ways through currencies and interest rates. The event served to exacerbate some dominant market trends. 

For example, global markets will continue to favor US Treasury securities (and defensive dividend-paying stocks) because the US is seen as a safe haven in a troubled world and earning 1.4% on a 10 year Treasury bond is far better than losing money on an equivalent German sovereign bond. So whatever the Federal Reserve Bank presidents say, interest rates are likely to remain low for now. And the resulting strong dollar will help keep the lid on inflation.

For all of the above reasons, investors are looking for quality interest rate sensitive investments that still represent reasonable valuations. So where does an investor go to find value in this segment?

·  Interest rate sensitive assets like REITs are a viable investment vehicle and still represent good value, whereas utilities and telecom stock multiples are trading at multi-year highs.

·  Intermediate investment grade corporate bonds offer good yields and valuations, whereas floating rate and ultra-short maturity bonds will continue to under perform until rates begin to rise. 

·  Quality large cap blue chip growth companies that generate most of their revenues in the US and North America will be better positioned than companies with large European exposures. 

 

 Lighthouse has been building and managing our investment strategies for the past 24 months with a focus on quality large cap US investments that pay dividends.  The only shift in our overall outlook as a result of the UK vote is that interest rates will remain lower for longer and the US dollar will stay elevated and could even appreciate further. 

 

 


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

IRS Phone Scams

 

Although tax season is over for the majority of taxpayers, IRS tax scam season remains in full swing. A typical such scam works like this: Joe Taxpayer gets a phone call from a supposed IRS agent demanding immediate payment of back taxes. The agent says that an audit of previous years’ tax returns resulted in an assessment of several thousand dollars. He also provides a badge number, a case number, and even references the last 4 digits of the taxpayer’s social security number. The caller then warns that hanging up on the call or ignoring the request for payment will result in arrest, the assessment of additional penalties, and seizure of assets. Joe Taxpayer is then instructed to make payment via a wire transfer or through the purchase of a gift card.

According to a recent IRS report regarding phone scams, “the Treasury Inspector General for Tax Administration (TIGTA) announced they have received reports of roughly 896,000 contacts since October 2013 and have become aware of over 5,000 victims who have collectively paid over $26.5 million as a result of the scam.” Over the last few years, this fraudulent scheme has become a cottage industry in itself. However, examining these calls in more detail provides an excellent opportunity to learn more about how the IRS operates and may help you in detecting and avoiding such scams in the future.

Firstly, the IRS will not call you to initiate contact. One common theme amongst these scam calls is that the incoming phone number is spoofed so that the caller ID reads “Washington D.C.” Alternatively, the scammers may use the phone number of the local courthouse and insist that the police will be summoned if you don’t make payment immediately. These tactics are the first step in establishing a sense of legitimacy for the call, but don’t be fooled. As a matter of policy, the IRS corresponds with taxpayers by regular mail via the address shown on your most recently filed tax return (or a change of address form, if applicable). The IRS will NEVER attempt to contact you by email.

Let’s now focus our attention to the credentials provided by the caller. The badge number and case number are typically random letters and numbers. As for the last four digits of the social security number, this is information that may have been leaked through various governmental and private data hacks. In 2015 alone, Scottrade, T-Mobile, and BlueCross Blueshield were the targets of internet attacks in which the scammers obtained the private information of 4.6 million, 15 million, and 10 million customers, respectively. The government is also not immune from such hacks as the Office of Personnel Management leaked the data of 22 million public employees in 2015. Unfortunately, entire social security numbers may be included amongst the information leaked, but it is most often the last 4 digits that are compromised. Accordingly, although a scammer may be able to recite digits from your social security number, this should not serve as confirmation that the call is legitimate.

Perhaps the most intimidating aspect of these calls is the threat of police intervention, arrest, a lawsuit in the local court, etc. The important thing to remember here is that the IRS does not initiate court cases. In fact, they don’t need to. The IRS has sufficient legal authority to assess taxes, seize assets, garnish wages, and/or place liens on property without court action or involvement of the police. It’s actually the taxpayer that would typically petition the Tax Court or a district court to contest an assessment or obtain a refund of taxes paid. Therefore, the mere mention of courts, police, and/or lawsuits should be a red flag indicating that the call did not originate with the IRS.

 A final red flag is often the payment method that the supposed IRS agent insists that you use. They typically demand a wire transfer, the purchase of a gift card, or other method of payment that is quick but irreversible. The scammers rely on the fact that once you wire money to another account, it cannot be recovered. Even if the bank is willing to investigate the issue, they will often find that the money had already been withdrawn from the account to which it was transferred, thereby offering no way to recover the funds. Likewise, once gift card information is shared over the phone, the money on the card can be withdrawn online in seconds. Once this is done, there is unfortunately no recourse for the purchaser of the gift card.

One way to combat these scams is to hang up and call the IRS directly via the phone number provided on www.irs.gov (800-829-1040). By speaking directly with an IRS representative, you will be able to confirm whether there are any outstanding taxes on your account. Alternatively, you can reach out to Lighthouse Financial Services at (714) 572-8900 as we can look into the issue and reach out to the IRS on your behalf if necessary.

 


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.