We all work hard for our money, but if we’re not careful, it can be ripped right out from under us. From getting scammed on the internet, to medical emergencies, here are eight situations that can make you broke in an instant — plus a few ways to protect yourself.
1. Getting scammed
Maybe you’re smarter than the average scammer, but loads of people are too trusting and naive. In fact, someone claiming to be from eBay scammed my own mom out of a few hundred dollars via email once. She thought the email was legit because at the time she was selling items on the auction site, and she assumed the request for her banking information was not only sanctioned, but part of the company’s protocol.
“Scammers target seniors because they’re considered wealthy, trusting, and typically unwilling to report scams,” says Roger Cowen, owner of Cowen Tax Advisory Group in Hartford, Connecticut. “Common scams include callers pretending to represent Medicare or the IRS to get your personal information, and fake charity workers asking for donations.”
How to protect yourself
The best way to stave off online and phone scammers is to verify that you’re dealing with a reputable organization before providing any financial information. Many institutions never send emails requesting such information, and it’s a policy you should adopt for yourself — never provide bank account, Social Security, or credit card numbers over email.
If you’ve received a phone call asking you to verify any financial information, double check the source before handing it over to the person on the line. Jot down their name and tell them you’ll call the company back at the verified number you have in your records. Beware of fake websites as well (these links are usually embedded in scam emails) by checking the domain name to make sure it’s correctly spelled. Look for https:// to precede any domain that has your financial information. The “s” means the site is security-fortified and usually legitimate. (See also: What to Do When You Suspect a Scam)
2. Tax penalties
Getting a bill for back taxes can be devastating. You’ll not only owe whatever taxes you avoided in the past — which may be substantial if you’ve filed inaccurate returns for years — you may owe interest and penalties as well.
This can happen not only to filers who outright lie in an effort to buck the system, but also to well-intentioned filers who make errors on their returns.
In either case, you’ll be required to pay up in a short period of time — or go to jail. Being broke or behind bars could be your only options.
How to protect yourself
If your taxes are complicated, hire a reputable accountant, report your income and deductions accurately, accept your tax liability, and pay it. If it’s a large sum, you may qualify for a payment plan. Moving forward, ask your accountant for estimated tax vouchers so you can pay ahead of time to lessen the burden when you receive the actual numbers in April. Otherwise, if you know you’re looking at a sizable tax bill, save as much as you can so you can settle up with the IRS as soon as possible. (See also: The Easiest Way to Avoid a Tax Audit)
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