The FBI is warning about a new scam involving fraudsters posing as lawyers representing fictitious law firms. Using social media or other messaging platforms, scammers offer their services, claiming to have authority to investigate fund recovery cases.

To verify the contact, the "lawyers" say they are working with, or have received information on, the scam victim's case from the FBI, Consumer Financial Protection Bureau (CFPB), or other government agency. In some cases, scam victims have reached out to fraudsters on fake websites, which look legitimate, in hopes of recovering their funds.

Then, they ask for payment or additional personally identifiable information that can be used to trick victims a second time. The FBI urges folks to be cautious and remember the common fraud prevention refrain—if in doubt, assume it’s a scam.

It’s true that scams are increasingly becoming more sophisticated and widespread. Nasdaq's Global Financial Crime Report estimates that scams and fraud added up to $485.6 billion per year in projected losses with U.S. victims taking a beating: the U.S. ranks second globally for major fraud losses.

So, what’s driving the upticks? A recent survey conducted by BioCatch, a global company focused on solving digital identity challenges through examining behavioral biometrics, aimed to offer clarity. One of the reasons may be that while U.S. banks may trust technology, they don’t trust each other—there’s no meaningful sharing of information. That’s a break from behaviors abroad where statistics suggest that when banks in other countries share at scale, their losses are decreasing.

(Part of the reluctance to share information may come from consumers. While 32% of those surveyed in the U.S. consider data privacy regulation as one of the main inhibitors to sharing data with other banks, 30% worry about the potential for misuse. These numbers are higher than global averages.)

As scammers develop new schemes to steal money and information from consumers, the commitment to fraud prevention must evolve even faster. Understanding what kinds of scams are spreading and how they operate, as well as the roles that consumers, law enforcement, and financial institutions can play in mitigation and prevention, are all key. That means that education will continue to be a big part in stopping scammers.

In another scam, the fraudster (aware of U.S. retirement accounts and rollover rules) nudges the individual to withdraw retirement funds for purposes of making an investment. The selling point from the scammer is that the investor can transfer the funds back to a retirement account tax-free within the applicable 60-day window for retirement account rollovers.

Unfortunately, in many instances, the criminal takes the funds and disappears, leaving the victim with a huge loss and even more massive tax headache. 

The IRS has granted extensions of the 60-day rollover period where taxpayers were the victims of fraudulent schemes. However, taxpayers interested in requesting relief through a private letter ruling (PLR) should recognize the request is not an easy one, requiring the taxpayer to submit a litany of information to the agency to review whether the taxpayer satisfies the “equity and good conscience” exception.

Taxpayers who have withdrawn funds from retirement accounts due to fraud sometimes have options under the federal income tax laws–if you find yourself in that unfortunate situation, talk to a tax professional.

Retirement account laws can be notoriously difficult to navigate at the best of times, but for the millions of former U.S. persons living abroad, understanding the tax implications of U.S. retirement accounts is critical. That’s because IRAs, Roths, and SEPs remain tethered to U.S. tax rules long after you give up U.S. status. Withholding taxes, U.S. estate tax exposure and the harsh “covered expatriate” tax regime are often overlooked until the time for planning has passed. U.S. citizens and green card holders who are contemplating giving up U.S. status need to be proactive in their tax planning to preserve hard-earned wealth–understanding the tax treatment of retirement accounts can help avoid unintended tax consequences.

And that’s a wrap on tax news for this week–but keep reading for more good stuff, including our fraud-focused tax trivia question. 

Enjoy your weekend,

Kelly

My tax preparer told me that the IRS charges a fee for e-filing. Is that true?

No, that’s not true. The IRS doesn't charge a fee for e-filing your federal income tax return. 

That doesn’t mean that it won’t cost you extra. Many online tax preparation software programs like TurboTax or TaxAct may charge you a fee to e-file, depending on the type of software you use and the complexity of your tax returns (simple returns may be filed for free). 

Your tax preparer may be charged a fee by a processor, which they may opt to pass along to you either as a stand-alone cost or as part of the overall cost of your tax return. However, the IRS does not charge your tax preparer a fee for e-filing.

If you’re looking for fully free e-filing options, you can use IRS Free File or Direct File. 

Free File is an existing program offered as part of a public-private partnership between the IRS and Free File Inc., formerly the Free File Alliance. Through this partnership, tax preparation and filing software providers make their online products available to eligible taxpayers. That means that you can prepare and e-file your federal taxes for free. 

Direct File also allows eligible taxpayers to file taxes directly with the IRS online for free. With Direct File, some of your information, like your employment and wage information from your Form W-2 (if it's available), can be transferred directly to your tax return. You can also get access live support from IRS staff, Monday - Friday, 9 a.m. to 3:30 p.m. Eastern time. But that option won’t be around for long—the controversial program is expected to be eliminated after this year.

Do you have a tax question that you think we should cover in the next newsletter? We'd love to help if we can. Check out our guidelines and submit a question here.

The services available from the kiosks, which are supposed to be connected to a computer, are the same as those that you’d normally see on the IRS website. These kinds of services may not normally be easily available to taxpayers in rural and underserved communities since taxpayers in these communities may not have access to a computer, printer, or the internet at home. 

The kiosks would be a great idea—if they worked. In April 2024, TIGTA found that the IRS had 100 kiosks located at 37 TACs. Of those, only 55 kiosks were operational. Of the remaining kiosks, 40 were inoperable, and the status of five was unknown. Additionally, TAC managers at 11 locations reported that the kiosks were not connected to a working printer, which prevented taxpayers from printing tax forms or other documents.

When a kiosk becomes inoperable or encounters issues that cannot be resolved with basic troubleshooting, the TAC manager submits a service ticket to the third-party contractor. And then… they wait. TIGTA found that the time needed to close service tickets ranged from 30 days or less to 463 days (most took between 151-365 days to resolve), while 24 tickets were open (meaning the contractor did not perform work on these tickets).

After those findings were revealed last year, the IRS indicated the plan was to work with the existing contractor to make the kiosks operational by December 31, 2024. However, in January 2025, TIGTA visited eight TACs with inoperable kiosks and found the machines were still not working.

When TIGTA brought those concerns to the agency, the IRS said it was discontinuing the kiosk program. According to TIGTA, “While we support the IRS’s decision to discontinue the current kiosk program, we believe that offering taxpayers a self-service option could be beneficial as the IRS reduces and restructures its workforce.”

(The IRS workforce dropped from 103,000 employees in January 2025 to approximately 77,000 in May 2025, a 25% reduction.)

In response, TIGTA recommended that the IRS perform a study to determine whether a new kiosk program that uses updated technology or deploys laptops to TACs would provide effective and efficient self-service options to taxpayers. IRS management agreed with the recommendation and indicated that it will assess the potential benefits and challenges of introducing a new program designed to offer modern self-assistive solutions for taxpayers.

The growth in SALT tax law may be helped along by the One Big Beautiful Bill Act (OBBBA). The SALT cap featured prominently in discussions before the law was passed. The House SALT Caucus originally pushed for the cap to be increased from $10,000 to $40,000, but Senate Republicans were concerned with the overall cost of the bill, and advocated for keeping the cap at $10,000 and using it as a pay-for to offset other tax cuts. 

The result is that the SALT cap was raised to $40,000 for single and joint filers. The deduction phases out for filers with modified adjusted gross income (MAGI) above $500,000 ($250,000 for married couples filing separately), and reverts to $10,000 for incomes of $600,000 and above. The deduction and the phase-out levels will increase by 1% a year until 2029, when the cap reverts back to the original $10,000. 

And, under OBBBA, passthrough entities (PTE) that were taking advantage of the states' workaround are still able to do that–those workarounds allow PTE owners to sidestep the cap.

However, in a recent case, the U.S. Court of Appeals for the Second Circuit rejected arguments by several states who challenged updated regulations that would prohibit many of the SALT workarounds passed in the wake of the Tax Cuts and Jobs Act.

The quintessential example of these workarounds was the creation of a state charitable fund (or a local version of the same), which could accept payments from residents, who would then receive a state or local tax credit. In 2018, the IRS issued proposed rulemaking to disallow the charitable-deduction workaround. In essence, the proposed rule required that taxpayers would have to reduce their federal charitable deduction for the amount of any state or local tax credit received “in consideration for the taxpayer’s payment or transfer.”

The final rule made some tweaks, and the states launched a legal challenge. On appeal, the Second Circuit had to address several issues in addition to the substantive tax merits, including an allegation that the Final Rule was contrary to §170 of the tax code.

The crux of §170 as it applies to charitable contributions is that the taxpayer cannot receive a quid pro quo—because, if so, then the payment does not really represent a contribution or a gift. In other words, to the extent a taxpayer receives a benefit that is commensurate with the payment, it really isn’t a gift.

The Second Circuit reasoned, among other things, that the argument from the states misstates the quid pro quo principle (meaning that it was not the taxpayer’s desire to claim the § 170 deduction that was disqualifying, but rather it was the receipt of the state tax credit).

The result? The Second Circuit sided with the federal government, finding that the Final Rule was neither arbitrary nor capricious.