Beware of the Newest IRS Scam: What to Tell Clients

Beware of the Newest IRS Scam: What to Tell Clients

Have you heard about the new high-level telephone scam targeting taxpayers and making the rounds all over the country?


The callers say they are IRS employees, but of course, they are not. The scammers use fake names and false identification to convince consumers that they're the real deal since they make the caller ID to show IRS. They even know a lot about a citizen on the other end of the line.

The con artist tells victims that they owe money to the federal agency and demand that it be paid promptly through a wire transfer or a pre-loaded debit card. If a target refuses, they receive threats like an arrest or suspension of a driver's license. The con artist becomes hostile and insulting. Some victims hear the promise of a refund to trick them into sharing private information. If the phone goes unanswered, the scammer leaves an "urgent" callback.

Other ways the scam works is to send a false IRS form (CP 2000) and claim that the income reported on the return does not match the income stated by an employer or even Social Security. The con artist claims this has to do with the Affordable Care Act. They hope to worry and confuse you and make you feel vulnerable. They'll follow-up with emails with attached forms, text messages, and more calls in hopes to scare you. The scammers want to retrieve your Social Security number, date of birth, and other personal data to use and steal your identity. They will offer a fake "protection plan" to get your credit card number.

Please remember - the IRS will never contact you to collect overdue taxes by an email, text message, or a phone call. Other things the IRS will never do:

  • Call and require instant payment. The IRS will never make you buy a prepaid debit card, gift card or wire transfer. The federal agency will mail the bill if you owe taxes.
  • The IRS will never threaten to call local authorities and the police to arrest you for the outstanding debt.
  • Demand that you pay taxes without giving you the opportunity to question or appeal the amount owed.
  • Get a credit or debit card number over the phone.
     

If you receive an email, text messages, mail or even live calls concerning money you owe, do not respond. Just hang up the telephone. If you get a "CP 2000" form in the mail, call the IRS at 1-800-366-4484 to confirm it is a scam. The federal agency saw close to 400 percent surge in phishing and malware incidents in the 2016 tax season, so beware.

If you click on the link that's in the email, it leads you to a website designed to emulate the official-looking IRS.gov website. While at the fake site, they ask for your Social Security number and more personal data and use the information to file a false tax return. The fake website may carry malware, which infects the citizen's computer to allow the con artist to access private archives or track keystrokes to gain information.

The threat remains high, but variations of the IRS impersonation scam continue year-round.

Carol Marak
Aging
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Carol Marak earned a Fundamentals of Gerontology Certificate from the USC Davis School of Gerontology and advocates on behalf of older adults and family caregivers. She simpli ... Click for full bio

Building a Better Index With Strategic Beta

Building a Better Index With Strategic Beta

Written by: Yazann Romahi, Chief Investment Officer of Quantitative Beta Strategies and Lead Portfolio Manager of JPMorgan Diversified Return International Equity ETF at J.P. Morgan Asset Management

With the global economy warming up, but political uncertainty remaining a constant, it’s more important than ever for investors to position their global portfolios to navigate long-term market volatility. That’s where the power of diversification comes in, says Yazann Romahi, Chief Investment Officer of Quantitative Beta Strategies at J.P. Morgan Asset Management and Lead Portfolio Manager of JPMorgan Diversified Return International Equity ETF (JPIN).

Not all diversified portfolios are alike  


In their search for diversification, many investors turn to passive index ETFs, which track a market cap-weighted index. But these funds aren’t always the most effective way to steer a steady course through volatile markets—and there are two key reasons why.

First, traditional market cap-weighted indices are actually less diversified than investors may think. For example, in the S&P 500, the top 10% of stocks account for half the volatility of the index. Within sectors, while you might assume that sector risk is distributed across the ten major sectors fairly evenly, it is a surprise to many that at any point in time, one sector can be as high as 50% of the risk.

Second, cap-weighted indices come with some inherent weaknesses, including exposure to unrewarded risk concentrations and overvalued securities. So, while these indices provide investors with exposure to the equity risk premium and long-term capital growth, as is the case with any other investment, investors can also experience painful downturns, which increase volatility and reduce long-term performance. For investors seeking equity exposure with broader diversification—and potentially lower volatility—strategic beta indices may be better positioned to deliver the goods.

How do we define strategic beta?


Strategic beta refers to a growing group of indices and the investment products that track them. Most of these indices ultimately aim to enhance returns or reduce risk relative to a traditional market cap-weighted benchmark.

Building on decades of proven research and insights, J.P. Morgan’s strategic beta ETFs track diversified factor indices designed to capture most of the market upside, while providing less volatility in down markets compared to a market cap-weighted index. Rather than constructing an index based on market capitalization—with the largest regions, sectors and companies representing the largest portion of the index—our strategic beta indices aim to allocate based on maximizing diversification along every dimension—sectors, regions and factors. The index therefore seeks to improve risk-adjusted returns by tackling the overexposure to risk concentrations and overvalued securities that come as part of the package with traditional passive index investing.

So, how do you build a better index?


As one of just a few ETF providers that combine alternatively-weighted and factor-oriented indices, our disciplined index methodology is designed to target better risk-adjusted returns through a two-step process.

First, we seek to maximize diversification across the risk dimension. This essentially means that we look to ensure risk is more evenly spread across regions and sectors, which balances the index’s inherent concentrations. As uncontrolled risk concentrations are unlikely to be rewarded over the longer term, we believe investors should strive for maximum diversification when constructing a core equity exposure.

Second, we seek to maximize diversification across the return dimension. Research shows that there are a number of sources of equity returns beyond growth itself. These include risk exposures such as value, size, momentum and quality (or low volatility). When creating a diversified factor index in partnership with FTSE Russell, we seek to build up the constituents with exposure to these factors. We therefore select securities through a bottom-up stock filter, scoring each company based on a combination of these return factors to determine whether it is included in the index. These factors provide access to a broader, more diversifying source of equity returns as they inherently deliver low correlation to one another, providing diversification in the return dimension.

So, whereas traditional passive indices allow market cap to dictate allocations, the diversified factor index seeks to ensure that we minimize concentration to any source of risk—whether it be region, sector or source of return.

How are you currently weighted versus the market cap-weighted index, and how have your under-   and over-weights enhanced risk-return profiles?


Crucially, our weightings don’t reflect specific views on sectors or regions and are instead, by design, the point of maximal diversification. It is important to remember that market cap-weighted indices typically carry a lot of concentration risk—for example, at various points in time, a single sector can explain half the risk of the index when left unmanaged. At the moment, three sectors explain two-thirds of the risk of the FTSE Developed ex-NA Index—these being financials, consumer goods and industrials. In contrast, the FTSE Developed ex-NA Diversified Factor Index—or strategic beta index, which JPMorgan Diversified Return International Equity ETF (JPIN) tracks—is explicitly designed to maintain balance and therefore these sector allocations range from 8% to 12%. In the short term, any concentrated portfolio can of course outperform a more diversified one, if the concentrated bet paid off.

Investing wholly in a single stock may outperform over short-term periods. At other times, it may significantly underperform an index. However, it is well understood that an investor is better off diversifying across lots of stocks for better risk-adjusted long-term gains. The same applies here. From a pure return perspective, if financials, for example, account for half of a cap-weighted index in terms of market cap and have a strong run over the short term, of course, this index would outperform over this period. Over the long run, however, it is fairly uncontroversial to suggest that the more broadly diversified index could achieve better risk-adjusted returns.

Seeking a smoother ride in international equity markets?


For investors targeting enhanced diversification through a core international equity portfolio, JPMorgan Diversified Return International Equity ETF (JPIN) targets lower volatility by tracking an index that more evenly distributes risk, enabling them to get invested—and stay invested.

Learn more about JPIN and J.P. Morgan’s suite of strategic beta ETFs here.

Call 1-844-4JPM-ETF or visit www.jpmorganetfs.com to obtain a prospectus. Carefully consider the investment objectives and risks as well as charges and expenses of the ETF before investing. The summary and full prospectuses contain this and other information about the ETF. Read them carefully before investing.

 

J.P. Morgan Asset Management
Empowering Better Decisions
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See how ETFs differ from other investment vehicles, learn how to evaluate them, and discover how ETFs can be used effectively to achieve a diversity of investment strategies. ... Click for full bio