Avoiding Tax on Social Security

[erchess]

My father received an intriguing card in the mail. He is invited to send in his and mother's ages and phone number to receive more information. Here is the come on.

In 1935, Franklin Delano Roosevelt promised the American Public that they would NEVER pay taxes on their Social Security benefits.

The Government has impsed new TAXES on your Social Security benefits. Are you aware of how these new laws affect you?

There are ways that LEGALLY, you can reduce, or altogether avoid, these UNFAIR additional taxes.

Section 72 of the Internal Revenue Service tax code states if you are 65 and over, you are eligible to take advantage of preferential tax treatment and pay NO Social Security taxes.

The return address is Senior Service Department / P O Box 1367 / Durant, OK 74702-9931.

Now does anyone have any idea what sort of snake oil is being peddled here? I am struggling to keep my Father from returning the card and worse yet following the advice.

[Snaggletooth]

Oklahoma

I would equate the FDR promise to the one promised to the Indians when they were given the entire territory of Oklahoma, to remain Indian territory "as long as stars shine and rivers run."

[erchess]

ummmm

Does that mean you don't have to be an Indian to live in Oklahoma today?

[S T]

Mailouts

Yes either my clients or my mother in law (age 98) have received many of these type of notices! I tend to disregard, based on "if it is too good to be true, it probably is a scam". Someone is trying to obtain personal financial information, or trying to sell something!

However, if you decide to delve into the offer and obtain information, please post for the rest of us your findings!


Sandy

[erchess]

I am simultaneously attracted and repelled

I would dearly love to know what these guys are trying to pitch. It is clear that they want to talk to Daddy on the phone and I would love to know both what they want to pitch and how their behavior would change if they knew that the mark's son the EA was on the line. However I am also scared a little. My Dad truly feels in his heart of hearts that the government promised him when he was working that his Social Security would never be taxable and he relied upon that promise when making financial arrangements for his future. He is retired State of NC employee covered by the Bailey Decision and he is very proud of the Retirees' Organization for standing up to the State. He feels that Social Security Recipients have as good a case as did his State Retirees group. My concern about this is that he may go back to doing his own returns if I can't do them as he wants them done. Since I took over doing my parents' returns ten years ago he has argued with me at length about two issues and I think he actually did his own return one of those years. Anyway because of that history I may urge him not to send in the card. If we do send in the card and hear from the company I wll definitely continue this thread.

Would someone please post a brief statement of what is in IRC Sec. 62 giving particular attention to whether there is anything in that section pertaining to Social Security and especially its taxability?

[BOB W]

http://www.taxalmanac.org/index.php/Sec._62._Adjusted_gross_income_defined

[Black Bart]

If you pick it apart piece by piece,

My father received an intriguing card in the mail. He is invited to send in his and mother's ages and phone number to receive more information. Here is the come on.

then it's not so intriguing. The basic request is usually for age and phone number; the "invitation" to furnish SSN, DOB, bank and credit card numbers follows a little later.

In 1935, Franklin Delano Roosevelt promised the American Public that they would NEVER pay taxes on their Social Security benefits.

While Roosevelt is one of our revered presidents and Social Security was his pet project, he had no authority to make such a promise. He might well have promised we'd never pay today's gas prices, but to what avail?

The Government has impsed new TAXES on your Social Security benefits. Are you aware of how these new laws affect you?

These "new" taxes began in 1984 (looked up an old return). I'm "aware" that the effect is I have to pay taxes on Social Security.

There are ways that LEGALLY, you can reduce, or altogether avoid, these UNFAIR additional taxes.

I'm guessing they want your father to transfer his retirement accounts to their bogus "investments." Here's an URL laying out a strategy which might work if handled by legitimate people who, almost certainly, your "card" people are not.

http://www.ehow.com/how_2102019_avoid-paying-taxes-social-security.html

A quick summary of it: "...the formula that determines your Social Security taxability includes all forms of taxable investment income, such as interest, dividends, and capital gains. Reallocating some or all of these income items into tax deferred or tax-free accounts or vehicles can reduce or eliminate the tax on your Social Security income. There are several ways...one is to move taxable interest-bearing instruments such as...CDs or...stocks into a tax-deferred vehicle such as a fixed or variable annuity...Another is to sell your taxable investments and buy them back inside a..."

You get the picture -- "Sell that old stuff, get in ours, and stop paying taxes."

Section 72 of the Internal Revenue Service tax code states if you are 65 and over, you are eligible to take advantage of preferential tax treatment and pay NO Social Security taxes.

True enough, those over 65 get preferential tax treatment -- an extra $1,050 to $1,300 standard deduction. And if not working, they generally pay NO Social Security taxes although they may well pay taxes ON Social Security.

The return address is Senior Service Department / P O Box 1367 / Durant, OK 74702-9931. Now does anyone have any idea what sort of snake oil is being peddled here? I am struggling to keep my Father from returning the card and worse yet following the advice.

While I'm unfamiliar with the Bailey Decision you mention, I assume it gave tax relief to retired government employees. We had a similar matter here in Arkansas (McFadden versus Weiss) which did the same thing. Surely your father is aware that those things are handled through the courts as a class-action suit and not by some post-card outfit in Oklahoma which at best will put his money in worthless "investments" and at worst will entice him to join/contribute to a tax protesters' scam (breaking the law).

You've described him as an intelligent, educated, business-savvy older citizen who's been around and I guess I just don't understand how/why he would even take such a ruse seriously.

[JCH]

This is nothing more than a tax avoidance scheme. If you contact Wesley Snipes or one of his lawyers, they'll give you additional information. I would file this one in the circular file.

[WD Kebschull]

Links to Internal Revenue Code

erchess:

Are you concerned about sectin 62 or section 72 of the Internal Revenue Code? In your initial post you referenced 72 and in subsequent post you referenced 62.

Here are two links to the Internal Revenue Code.

http://www.fourmilab.ch/ustax/www/sections.html

http://straylight.law.cornell.edu/uscode/html/uscode26/usc_sup_01_26_10_A.html

The one for Cornell appears to be the more up to date, but for your current purposes both are probably OK.

Section 86 of the Internal Revenue Code defines the portion of Social Security Benefits that are included in gross income.

I believe that you have more than ample grounds to be suspicious of the mailing to your father.

Cheers,

WDK

[jimmcg]

These schemes are generally "fishing expeditions" with the intent to gather personal information on the recipients for less than honorable purposes. People who pay attention to them are their most likely prey.

[Zee]

Black Bart-

Great summary! Thanks!

I'm tempted to write to these folks to see what they send and how they're taking advantage of folks. Someone questioned why an intelligent person might be duped. Greed and Avoidance of taxes work well to get people's attention.

[Snaggletooth]

I was a sucker once

"if it is too good to be true, it probably is a scam".

Yes, I hate to admit to my comrades how stupid I was when I was younger (Those who really know me might question the phrase "when I was younger").

Some 25-30 years ago, a similar circular was floating around the junk mails regarding the medical industry rip-off. They portrayed all doctors as jerks, hiding great eternal health truths so as to keep our entire society sick. They had a secret cure for cancer but were denying it to the public so they could keep the hospitals and clinics full and keep patients coming back to doctors forever and ever. Now, at long last, there was a publication dedicated to bringing these secrets to light and the beneficiaries of this information would finally be the public starving for real health and medical information. All it took was $35 for 12 issues!!

Aha!! Finally, I was to be delivered from the dungeons of medical ignorance, and be able to thumb my nose at ever-increasing medical costs. I could hardly wait to read the colossal wealth of medical secrets forthcoming in my very first issue!!

Sure enough, when the magazine came, the front page blazed forth a very simple and natural cure to treat hypertension, diabetes, aging, and any number of other maladies. The feature story started on page 3 and rambled for another 5 pages or so. It told of a rare, exotic mushroom found on the western slopes of a certain mountain in Bhutan. The mushroom was being threatened with extinction, and if we could only find a similar environment in the U.S. to cultivate it, we could then conquer most of today's modern diseases. There was a P.O. Box somewhere we could send off to find more information.

At that point, I knew I had been a $35 sucker. I guess every thick-headed idiot has to learn eventually.

[JohnH]

Greed and Avoidance of taxes work well to get people's attention.

If there were any doubt about the truth of that statement, just look at how some people have behaved in such a silly manner this year over the stimulus payment....

[FEDUKE404]

Observation on NC Bailey issues

...My Dad truly feels in his heart of hearts that the government promised him when he was working that his Social Security would never be taxable and he relied upon that promise when making financial arrangements for his future. He is retired State of NC employee covered by the Bailey Decision and he is very proud of the Retirees' Organization for standing up to the State. He feels that Social Security Recipients have as good a case as did his State Retirees group. ...

Although I think the issue about the Soc Sec is a scam, I must say that the Bailey decision in NC caught the attention of a few people. Even the illustrious (current) governor of NC (AG at the time) fought it all the way to the US Supreme Court....and lost!!

In a nutshell, state/federal employees/retirees were told for many years that their retirement would NEVER be taxed by the State of NC. In the mid 80's, the state started doing so. The Cliff Notes summary is that the retirees eventually won, and those "Bailey" folks will never see their retirement taxed by NC. They did draw a line in the sand (must be a member of retirement plan prior to some date in late 80's) for qualification before the rules were changed. Current (newer) state employees do not have that protection, so that a significant portion of their retirement will eventually be taxed by the state.

The interesting side issue is that the "Bailey" of said decision was one Pou (that's correct!) Bailey who was a fire/brimstone Superior Court judge, also a prior FBI agent who also had an admirable military career record. Since his OWN retirement was taxed by this decision, he had a vested interest. The retired state employees, military veterans, and retired civil service employees of NC now owe a significant debt of gratitude to Judge Bailey and to the others who were instrumental in getting the class action lawsuit settlement.

Although I doubt if FDR's promise carries much weight, never say never with the likes of Judge Bailey out there!!

FE

[oceanlovin'ea]

Got it too

I got that card in the mail today too. I read it and wondered what trick they were trying to pull on people and put it in the garbage.

Do you all want me to respond and see what happens? I'll show it to my husband. He may veto the idea. But it is in the area of research to help our clients.

Linda F