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Are You Committing These Financial Illegalities?

Are You Committing These Financial Illegalities?

March 24, 2019

Are You Committing These Financial Illegalities?
Some people make money moves that may get them in trouble.

 Provided by Rob Taylor


Americans do many things with their money and invested assets, most of them on the up and up. However, there are exceptions; cases in which people unintentionally bend or break the law. Here are a few examples, from the cavalier to the ridiculous.

Signing a check that is not your own. Have you ever wondered, “If a relative is no longer able to sign their checks, may I sign for them?” The safe answer is yes – if you have been granted power of attorney (POA) for your relative. POA gives you the legal ability to handle any financial transactions on their behalf – including writing checks.1

However, depending on the state in which you reside, you may be permitted to sign on behalf of another as long as you follow some specific rules. First, you need to have written permission from the person on whose behalf you wish to sign. Second, make sure to clearly write “P.P.” before that person’s signature. This abbreviated form of the Latin “per procurationem” roughly translates to “by proxy” and indicates you have permission to sign on their behalf.1

Overestimating non-cash donations to a charity or nonprofit. Imagine this. Someone donates a van to a food bank. In the donor’s mind, that van is worth the original purchase price of $6,500. Unfortunately, the fair market value of the van turns out to be substantially less due to depreciation. However, the donor reports the value to the Internal Revenue Service (I.R.S.) at $6,500. If the I.R.S. disagrees (and it very well might, assuming decent documentation is available), the donor might be in for a tax penalty. It’s important to remember that this information should not be construed as tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty.2

Forgetting to report 100% of income. Some people intentionally misstate their incomes to the I.R.S., and other people neglect to report miscellaneous forms of income like royalties, freelancer payments, dividends, prizes, and so on. A penalty may await them.

The chances of forgetting the odd W-2 or 1099 form rise when a taxpayer moves during a year or works several jobs. Tips must also be taken into account when filing a federal tax return; the I.R.S. provides Form 4137 to help individuals determine any additional Social Security and Medicare taxes they may owe as a result of tips and wages not reported on an individual’s W-2 statement.3,4

Forgetting estimated tax payments. If an individual’s freelance income is significant enough that they expect to pay more than $1,000 in taxes from such activity, then estimated tax payments must be made quarterly to the I.R.S. Penalties may be triggered if quarterly deadlines are ignored.4

Deducting too much in business-linked expenses. This can also invite an I.R.S. penalty, and business owners, executives, and entrepreneurs can fall prey to this common tendency. The I.R.S. finds that less than 7% of such deductions are intentionally overstated or made up.5

Ruining money. Making U.S. paper currency or hard currency unusable is a federal crime. If someone intentionally or unintentionally defaces, perforates, glues together, or mutilates bills or coins to the degree that they can no longer be used in commerce, it is a violation of federal law.6

If you are guilty of negligence, it sure beats being guilty of fraud. The standard I.R.S. penalty for a reporting mistake on your 1040 form is 20% of the unreported amount. Contrast that with the 75% civil penalty for tax fraud. Of course, negligence can be viewed as fraud – and that alone should make people think twice about inaccurately stating details of their personal finances.7

DISCLAIMER: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of Global View Capital Advisors. LTD (GVCA) or any of its affiliates. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

1 - [7/3/2018]
2 - [5/29/2018]
3 - [11/6/2018]
4 - [11/5/2018]
5 - [11/5/2018]
6 - [2/26/2018]
7  - [11/5/2018]