IRS Steps in Against Identity Theft

By: Heather R Cunningham

Over the past several years, tax-related identify and refund fraud has become much more prevalent.  Identity thieves file tax returns using stolen social security numbers and claim false refunds.  They often file electronically and early in the year before the IRS is able to verify the information being submitted, and before the real taxpayers have a chance to file their returns.  Then, when the individual whose social security number has been falsely used attempts to file, their return is rejected because the IRS only allows one return to be filed per social security number.  Once this happens, the taxpayer is forced to file their return on paper, completing additional forms and procedures with the IRS to verify their identity, which delays the processing of their return and receipt of any refund.

The IRS is developing techniques to combat this tax-related fraud.  One way is by using a pilot program that began during 2015.  As part of this program, the IRS has started working with several large payroll companies to develop methods to help verify W-2 information.  The IRS developed a program which generates unique codes for the payroll companies to report on the W-2’s they prepare.  This unique code will then be entered into tax software when the individuals prepare their tax returns.  In order for that return to be accepted by the IRS the codes on the w-2 must match what was generated in the IRS’s system.  Since identity thieves will not have access to the w-2 codes when filing their false returns, the codes won’t match, the return will be rejected.

During the first year of implementation, the program was used for 1.5 – 2 million W-2’s.  The IRS plans to have it expanded to anywhere between 24 and 50 million W-2’s for the 2016 tax year.

As we all know of someone who has been the victim of some form of identity theft, it is good to see the government taking steps to prevent it.

If you have questions or concerns, contact us or call us at 216.524.8900

Getting the Most Out of Annual Reports

By: Billy Nguyen

Are you a shareholder or investor in a company? If so, then pick up that annual report and begin looking for these key essential items!

Current and potential investors like to know where, and how their hard-earned money is being utilized by the companies they invest in.  Annual reports are required to be filed by companies each year to report their performance.

A current trend in annual reports, companies are using public communication to play an important role in how they communicate with their investors.  Companies are rapidly crossing into the digital age of creating their annual reports online, using video clips, infographics and even animation to attract and engage investors.

Whether online or on paper, some investors read annual reports but fail to read them effectively.  Annual reports should be approached with a sense of skepticism.  In other words, you should be reading between the lines to decipher the actual condition of the company.  Here are some key essential items to look for in a company’s annual report:

At first impression, lots of glossy color pages filled with photos or meaningless graphics used as space-filler is usually a red flag.  An annual report should not just be a marketing tool, but rather a true representation of how a company performed.  Instead of pictures, look for text, financial statements, and notes that give insight to what the company has been up to.

A good letter to shareholders should be candid and honest, and should provide an insight on the company’s future and its economic or competitive condition.  At the very least, management should provide an explanation of changes in sales and earnings from the prior year.

As you glance over the profit and loss financial data, it is important to look for these trends: sales, earnings, and dividends.  The questions that you should be asking:

  • Are these trends getting better or worse?
  • How does it compare to industry norms?

Ideally, you should be looking for a rise in sales and earnings, with earnings rising faster than sales as the firm leverages its infrastructure.

When jumping over to the balance sheet, think about the following key items: How is the balance sheet changing over time?  How do assets compare to debt or other liabilities? Check out the cash flow statement and see if the business has been a generator of cash or a user of cash.  What have they spent their cash on?

Afterwards, it’s time to determine if there are any hidden surprises that you might have missed.  The management discussion and analysis is the section to go to.  You should read the risk factors and the legal proceedings section.  This will allow you to determine if this industry is highly fragmented due to a rise in competitors or if they are experiencing a period of volatility in stock price.

Last but not least, you should be looking for that “unqualified opinion” on the audit report from a Certified Public Accounting firm.  An ‘unqualified opinion’ states that the financial statements were audited in accordance with standards of the Public Accounting Oversight Board and “present fairly, in all material respects”.

So there you have it!  Those are some key essential items that you should be looking for when reading an annual report.  By focusing on the most important aspects of the company, it avoids time wasted on companies that do not meet your standards for investment.  For help reading between the lines of your annual report, contact us or give us a call at 216.524.8900

Savings Options for Special Needs Individuals

by: Jillian Strunk

About 15% of children in the United States have developmental disabilities, including Down syndrome, cerebral palsy, intellectual disabilities, among others. With the great advancement in medical care, these individuals now have the chance to live long and full lives. This creates the need to provide financial support for their future as independent individuals for a much longer period of time. Luckily, there is a growing list of options to save for special needs individuals without disqualifying them from their disability benefits.


529 – ABLE Savings Accounts

In December of 2014, the Achieving a Better Life Experience Act (ABLE) was passed. ABLE allows families and individuals with disabilities to maintain investment accounts for qualified disability expenses tax-free without losing eligibility for public benefit programs. They are similar to 529 College Savings Accounts and 401(k) retirement accounts. The money deposited into the account is invested in different options allowing the growth of savings for long-term care. The money can be withdrawn at any time and is not taxed so long as the funds are used for approved expenses, including basic living expenses like rent and utilities, employment expenses like job-training, and wellness expenses like health insurance premiums and adaptive equipment. In Ohio, the first state to enact ABLE, these savings accounts are called STABLE accounts. There are a few minor fees for account maintenance and an initial deposit of $50 is required, but enrollment is online and very user-friendly.


Nonprofit Pooled Income Special Needs Trust

Managed by nonprofit organizations, these trusts receive funds from many individuals and pool them together for investment. This pooled fund is managed by a trust adviser who makes decisions on the investments. Each individual investor is treated exactly the same. This means that when a trade is made, it is made for everyone in the pool, not just one individual. The larger amounts created by the pooled funds increase the potential for growth. Using distributions from the trust, the special needs individual can increase their quality of life without interfering with their eligibility for government benefits. The individual can use money from the trust account for services that are not paid for by insurance or government benefits, but which provide benefits to the disabled individual such as telephone service, cable tv, vacations, and adaptive equipment.  Be sure to check the rules of the specific trust before entering, as some have rules on the frequency of distributions and what happens to the remaining funds after death.


OBRA Trust

Named for the Omnibus Budget Reconciliation Act of 1993, OBRA trusts are first-person trusts. This means that the assets funding the trust come from, and belong to, the disabled individuals themselves, often from a legal settlement or an inheritance.  OBRA Trusts are not included as assets when determining public benefit eligibility.  Funds within an OBRA trust can be used for anything public benefits don’t cover.  These trusts have more regulations, but are beneficial if the disabled individual is expecting a sudden windfall of cash.  Upon the death of the individual, the remaining funds are used to reimburse the government for previously received Medicaid benefits.


Third-party Special Needs Trust

The most common type of trust used to benefit people with special needs, in a Third-Party Special Needs Trust a donor, such as a parent or grandparent, can set up a trust with the disabled individual as the beneficiary.  This allows individuals to give money to their disabled loved ones without impacting their eligibility for benefits.  A benefit to a third-party special needs trust is that distributions are not limited to a specific list of supplemental needs.   Another benefit to this type of trust is that the funds never belong to the beneficiary, meaning upon death, unlike first-party and pooled trusts, the government is not entitled to reimbursement for previously paid benefits.   The remaining assets in the trust can pass to other beneficiaries at the donors’ discretion.


Planning for the future of your special needs child can seem like a daunting task. These 4 options, among others, are available to assist in securing your child’s future without disrupting government benefits. Most trust accounts require the filing of federal Form 1041 and STABLE accounts require Form 1099-QA and Form 5498-QA to be include with the federal Form 1040. If you need help filing these form for your special needs child, call Hobe and Lucas for guidance! (216)524-8900

The IRS v.s. Identity Theft and Scams

By Bob Casmer

By now almost everyone has either experienced for themselves, or heard stories about someone they know being the target of an identity theft or scam.  It is no surprise that as technology has evolved over the past several decades and our reliance upon computers and the internet to handle all phases of our financial activity has increased, so to have the criminals upped their game to try and obtain information about us and gain access to our bank and credit cards accounts.

One particular technique used by criminals to obtain such information is through the guise of them being with the IRS. Those three small letters can strike fear into the hearts of many people, which is exactly what these criminals are counting on.   These scammers will often try contacting people via the phone or through the internet, claiming to be with the IRS. They further claim the person they are contacting is seriously in trouble with the IRS, owes significant back taxes and penalties, and needs to do something immediately or they could be subject to liens, more fines, and even imprisonment.  

These scammers are counting on these people being so worried that they don’t question the validity of the request and willingly hand over their personal information.

First of all, the IRS will never just call you on the phone with no prior contact.  The chief way the IRS initiates any review or contact with someone is via mail.  Likewise, they will not contact you via email.  In fact, the IRS is extremely averse to sending and receiving any information or records/documents via email and normally will not accept anything emailed to them.  They always ask that you fax or mail hard copies of documents to them. Receiving an email asking that you click on attached links or respond back to them with personal information is usually a dead giveaway that you are being subjected to some form of identity theft or scam.  In such instances, do not ever click on or open any links, nor email or send back any personal information in response to such requests.

If you get a phone call from a supposed IRS representative with no prior correspondence from them, it is likely a scam.  Do not give out any information over the phone, and be sure to ask the supposed agent for their name and IRS badge number.  A real IRS agent is required to give you that information anytime they talk with a taxpayer.  You can also ask for a call-back number and see how they respond.  If you have any doubts or suspicions, don’t give out personal or banking information.

It is very easy to contact the IRS yourself through their website at or by phone, to check and find out if the phone call or email, or even a suspicious letter you got, was actually legitimate.  You can also contact us at 216.524.8900 and let us know what you received.  We can help you quickly discern if you were the target of an identity theft scam. Now Better than Ever

HL-15a-vector Alt Legacy (for Tracy)-01Researching financial information may not be the most exciting thing you do in a given day, but we believe it should at least be intuitive. That’s why we are pleased to announce the launch of a fully refreshed, cleanly designed—configured for ease-of-use and expanded financial education. We have made it simpler for you to navigate resources, find the expertise you need and connect with knowledgeable professionals.

At Hobe & Lucas, we have always prided ourselves on delivering personal attention and responsive communication. To do this effectively, we recognize the need to make it easier to research the services we offer, the industries we serve and the tools we have developed. For this reason, changes include:

  • Improved, condensed navigation
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We know that a revised website is only as good as its users deem it. That said, we want to hear what you think of the new layout and content. When you have a moment, please take our brief survey to help us continue improving your user experience.

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