Avoiding these two common tax scams

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Fraudsters and scammers have become more creative and dangerous. Early this year, the Internal Revenue Service (IRS) released a list of the most common tax scams for 2014. The following are two of these scams and tips on how to spot and avoid them.

Phishing

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Phishing is when unscrupulous individuals pose as reputable companies and attempt to obtain information such as credit card details and Social Security Numbers through electronic communication, usually e-mails, phone calls, and SMS. The IRS warns taxpayers to be wary of e-mails claiming to have come from them: the IRS does not initiate communication with taxpayers through e-mail. Tax professionals, finance services professionals, and recent immigrants have also been targeted through SMS and e-mail schemes.

To avoid being victimized by phishers, the taxpaying public is warned by the IRS to exercise caution when speaking to people passing themselves off as IRS employees, and to be wary of calls and e-mails that ask for credit or debit card numbers, threaten to turn them over to the authorities, or demand payment without giving them the opportunity to appeal.

Tax preparer fraud

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In a typical case of tax prepare fraud, an individual approaches a tax preparer professional or agency for help in filing returns. Unbeknownst to the client, the tax preparer alters the information provided, such as business and personal expenses, and states false deductions in order to claim larger returns. The tax preparer then funnels the extra money into his or her own accounts without the client’s knowledge. When the IRS discovers the inaccuracies on the return, the tax preparer is nowhere to be found and the client is left to deal with the repercussions of tax fraud. The client will have to pay for the additional taxes him or herself, as taxpayers are legally responsible for the information provided on their returns. He or she may also have to pay additional penalties or worse, face prosecution.

To prevent being a victim of tax preparer fraud, taxpayers should choose their tax preparer with care. It is advised to choose an accredited tax preparer with a Preparer Tax Identification Number (PTIN,) a Certified Public Accountant (CPA), a tax attorney, a licensed public accountant, or an Enrolled Agent (EA), a federally authorized tax practitioner that can represent taxpayers before the IRS.

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REPOST: The U.S. States with the Highest (and Lowest!) Taxes

Lindsay Lowe of Parade.com shares this list of U.S. states with the highest and lowest taxes.

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When it comes to state taxes, some Americans have it better than others.

Business publisher Kiplinger rounded up the most and least “tax-friendly” states in the U.S., factoring in state income tax, sales tax, and gas taxes and fees.

Delaware topped the “friendly” list, with a low state income tax ranging from 2.2 to 6.6 percent, no state sales tax, and gas taxes well below the national average.

Wyoming, which has no state income tax, followed close behind, thanks to its 4 percent state sales tax and relatively low gas tax.

On the other end of the spectrum, California ranked as the least tax-friendly state, with a state income tax anywhere between 1 and 13.3 percent, a 7.5 percent sales tax, and a gas tax of $.053, well above the national average of $0.31.

Connecticut, New Jersey, and New York also made the list of the least tax-friendly states.

Check out the full rankings here, and click here to find out which states offer sales tax holidays in August (there are still a few days left!).

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Planning for retirement: Roth IRA vs. traditional IRA

An individual retirement account (IRA) is a retirement plan tailored for individuals and provided by several financial institutions. Any person who receives taxable compensation can take out an IRA. Married couples can have one IRA each, even if one spouse is unemployed. IRA provides a way to save for retirement while taking advantage of several tax breaks.

There are several types of IRAs. These include traditional IRAs and Roth IRAs.

 

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Traditional IRAs can be obtained by individuals under the age of 70 1/2. They are tax-deferred, meaning investment earnings and compound interest can accumulate without the IRA’s growth being hindered by taxes. Investment earnings will be taxed only when the account holder withdraws them. These distributions will begin automatically when the individual turns 70 ½ years old. Required minimum distributions (RMD) are determined by dividing the IRA’s account balance as of December 31 of the past year by the applicable distribution period. The IRS website provides worksheets and tables to help individuals determine their RMDs.

Traditional IRAs are classified into deductible and non-deductible. Deductible traditional IRAs allow account holders to deduct contributions on their tax return, while non-deductible IRAs do not. However, account holders can fund their non-deductible IRAs with after-tax dollars (money for which taxes have already been paid).

 

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Unlike traditional IRAs, Roth IRAs do not grant an upfront tax break. Instead, account holders place their after-tax dollars into a Roth IRA account, where it can collect compound interest tax free. Account holders don’t have to wait until they’re 70 ½ years old to withdraw contributions — they can do so after five years from the date they opened their Roth IRAS and can do so without incurring any penalties as long as they are qualified distributions.

Withdrawals of investment earnings of unqualified contributions before the age of 59 ½ will, however, be subject to a 10 percent tax penalty and income taxes, unless it’s for a qualifying reason.

Roth IRAs do not have a mandatory age requirement for withdrawals: money can stay in a Roth account and the account holder can continue making contributions to it for as long he or she likes.

To learn more about traditional and Roth IRAs and to determine which one is best, interested individuals should speak to their accountant or financial adviser.

 

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REPOST: IRS Eases Up on Accidental Tax Cheats

This article from The Wall Street Journal explains the leniency granted by the Internal Revenue Service (IRS) for those who failed to report offshore accounts by accident.

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The Internal Revenue Service is sharply increasing the penalties on U.S. taxpayers who hide assets abroad, while lowering or eliminating fines on taxpayers if their failure to disclose offshore accounts was unintentional, the agency said Wednesday.

The changes mark the latest stage in a five-year-old U.S. government campaign to force millions of U.S. taxpayers who live abroad or have accounts in other countries to disclose accounts and pay what they owe. It also includes a new law that pressures foreign banks to share information about U.S. account holders starting July 1.

The campaign, which was the focus of a page-one article in The Wall Street Journal on Tuesday, has helped the IRS collect some $6.5 billion in taxes, interest and penalties from more than 45,000 taxpayers who have come forward voluntarily, the agency said. Federal prosecutors have filed more than 100 criminal indictments since the campaign began in 2009.

Yet record numbers of U.S. taxpayers are cutting official ties with the U.S. amid the campaign, by renouncing their citizenship or turning in their green cards. Experts say the spike is a response to tougher enforcement and stiff penalties that can equal half the balance of a foreign account for each year a required disclosure form isn’t filed—even if no tax is owed.

The IRS has been accused of coming down disproportionately hard on taxpayers with small accounts, and unfairly burdening people who didn’t understand the filing requirements.

The agency acknowledged the issue Wednesday. “Our aim is to get people to disclose their accounts, pay the tax they owe and get right with the government,” IRS Commissioner John Koskinen said in a statement, adding that “a compliance regime that is too harsh won’t net the desired result.”

Experts said the new rules could make it easier for taxpayers to approach the IRS if they weren’t violating the law willfully.

“The changes will help many people both in the U.S. and abroad who didn’t mean to cheat on their taxes by having offshore accounts,” said Seth Entin, a lawyer at Greenberg Traurig LLP in Miami who has handled hundreds of taxpayer confessions. “But it pushes people who have been trying to hide money abroad to come forward to the IRS sooner.”

Yet some lawyers cautioned that the IRS would have the final say on whether a taxpayer’s failure to comply with the law was unintentional.

Taxpayers who decide to stay in the shadows could face far stiffer penalties under the new rules. The IRS said it will increase penalties to 50% of the balance in an account, up from 27.5%, for taxpayers who apply to enter its limited-amnesty program after it becomes public knowledge that the financial institution where the account is held is under investigation by U.S. authorities.

About a dozen Swiss banks are being investigated by the U.S., and scores of others currently are negotiating penalties with U.S. authorities.

The U.S. launched the campaign in the wake of UBS AG UBSN.VX -0.85% ‘s 2009 admission that it helped American taxpayers hide money abroad. The Swiss banking giant paid $780 million to the U.S. and turned over information on more than 4,400 accounts.

The case marked the beginning of the end for Swiss-bank secrecy. For decades, wealthy taxpayers were able to hide assets in well-known tax havens such as Switzerland, the Cayman Islands and Panama.

U.S. authorities used information from UBS to pursue tax cheats and pressure their advisers. Credit Suisse Group pleaded guilty to similar charges in May and agreed to pay $2.6 billion.

The new rules will allow a far wider range of taxpayers to qualify for lower penalties, or none. Previously, the IRS allowed only those who owed $1,500 or less in tax to qualify, a stringent limit that many couldn’t meet. Now it is eliminating that requirement and others for taxpayers who say their violations were unintentional.

If the IRS accepts their claims, U.S. taxpayers who live in other countries will face no penalties for failing to disclose income or assets abroad. Instead, they will be liable for taxes they owe for the previous three years. U.S. taxpayers who reside in the U.S. and have undeclared foreign accounts could face penalties capped at 5%, on top of taxes owed.

“While these modifications don’t address all our concerns, I believe they are a significant step in the right direction,” Nina Olson, the national taxpayer advocate, an official IRS ombudsman, said in a statement.

One potential drawback: Taxpayers who come forward in the future may end up faring better than those who heard about the U.S. campaign in the past and presented their case to the IRS then. For example, experts said, taxpayers from the latter group who owed more than $1,500 in taxes could have paid a penalty as high as 27.5%.

In addition, taxpayers abroad face the risk of double taxation, said John Richardson, a Toronto lawyer who works with U.S. taxpayers living in Canada. “The problem is that, penalties aside, the U.S. tax laws are very punitive for U.S. citizens abroad,” he said.

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More reasons for the rich to stay alive: An overview of estate tax laws in New York

Changes to new tax laws are giving wealthy New Yorkers another reason to live longer and making financial planning harder during the time they have on earth.

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Gov. Andrew Cuomo made a tax relief proposal at the beginning of the year, with the goal of giving middle class and wealthy retirees more reason to stay in New York instead of fleeing to other states with lower estate taxes. Cuomo planned to achieve this by raising the state’s tax threshold from below $1 million to $5.25 million and lowering the top percent rate from 16 percent to 10 over the next four years. By January 1, 2019, state estate tax thresholds would be equal to the federal estate tax exemption, exempting 90 percent of all estates from being taxed. The reforms were rolled out on April 1, 2014.

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The kink in the plan is the so-called estate tax cliff. Other states and the federal government impose tax on estates equivalent to the amount that exceeds the threshold. For example, if the exemption amount is $5 million and the estate is worth $5.5 million, the $500,000 that goes beyond the exemption amount will be taxed.

In contrast, New York taxes the entire value of an estate that exceeds the exemption amount. This means that just having a dollar over the exemption amount can make a huge difference on how much estate taxes should be paid.

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The New York State Society of Certified Public Accountants (NYSSCPA) raised some strong objections against a law that, to many, seemed too complex. Without reforms, the new estate tax laws could drive the wealthiest New Yorkers to move to other states: exactly what the reforms of Gov. Cuomo seek to prevent.

Isidor Hefter is a respected authority on estate tax planning and representation. For more discussions on estate tax issues in New York and other states, follow this Twitter page.

REPOST: An immodest proposal: A global tax on the superrich

Does global tax on capital make sense?  Know the rationale behind this business tax proposal from this Businessweek article.

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Bill Gates washes his own dishes, as we learned this year from his Ask Me Anything session on Reddit, but he’s certainly not trying to save money. The world’s richest person is doing everything in his power to decrease his fortune. He stopped working for a living. He sold most of his stake in Microsoft (MSFT). And he’s poured $28 billion so far into the family foundation, which is fighting AIDS, polio, tuberculosis, and hunger. Despite all that, Gates’s pile keeps getting higher. His wealth as of April 8 totaled $79 billion, according to the Bloomberg Billionaires Index. That’s up $16 billion in just the past two years.

Image source: Businessweek.com

Gates is just the most extreme example of the polarization of wealth in the U.S. The top hundredth of 1 percent of U.S. taxpayers—that’s 16,000 people—have a combined net worth of $6 trillion. That’s as much as the bottom two-thirds of the population. Meanwhile, a quarter of American families say they have no money in a checking or savings account to cover an emergency, according to Bankrate.com (RATE).

The growth of inequality can sometimes feel as inexorable as the subterranean shifting of tectonic plates. It may be driven by powerful forces, but ultimately it’s a choice, not a fact of nature. What allows Gates to keep getting richer in spite of himself is a web of human-designed institutions and practices, from the tax system to patent law. So the question is not whether society can reduce inequality, but whether it wants to. If the answer to that is yes, the next question is how.

Thomas Piketty, a 42-year-old professor at the Paris School of Economics, has scored a surprise publishing hit, Capital in the Twenty-First Century, that proposes an unusual, possibly impractical, yet intriguing response to what he calls “the central contradiction of capitalism”: the tendency of wealth to grow faster than the gross domestic product, creating inequality that undermines democracy and social justice.

In a review last year, World Bank economist Branko Milanovic wrote that “we are in the presence of one of the watershed books in economic thinking.” In March, New York Times columnist Paul Krugman wrote that Piketty’s 685-page tome “will be the most important economics book of the year—and maybe of the decade.”

Most of the coverage of Piketty’s book has focused on his diagnosis, but the most interesting part is the cure. He proposes a global tax on capital—by which he means real assets such as land, natural resources, houses, office buildings, factories, machines, software, and patents, as well as pieces of paper, such as stocks and bonds, that represent a financial interest in those assets. In his terminology, capital is essentially the same as wealth. So taxing capital is taking a chunk of rich people’s money. His tax would start small but rise to as high as 5 percent to 10 percent annually for fortunes in the billions. The proceeds in Piketty’s view should not fund an expansion of government: “The state’s great leap forward has already taken place: there will be no second leap—not like the first one, in any event,” he writes.

It doesn’t take a Ph.D. to see that Piketty’s tax is a far stretch—or in his words, “utopian.” Today most countries tax the income produced by wealth—dividends, rents, capital gains—but they don’t go after the wealth itself. Doing so smacks of confiscation, which was widely practiced in the French Revolution but not the American one. Even if Congress did pass a wealth tax, the IRS would have trouble collecting because the wealthy might transfer title to their assets abroad. Piketty recognizes that, which is why he insists that the tax be global. But getting every tax haven on earth to tax equally and to share data is highly unlikely.

Spain has a wealth tax of up to 2.5 percent of assets but keeps trying to repeal it. France also has a “solidarity” tax on wealth, but it causes more capital flight than the government earns in revenue, according to tax expert Eric Pichet of Kedge Business School in Marseille and Bordeaux, France. “This is typically a French utopia (as you probably know, we are the unquestionable leaders in this field …),” Pichet wrote in an e-mail.

Boston University economist Laurence Kotlikoff prefers a tax on consumption, which he says effectively shrinks great fortunes by decreasing the value of what each dollar or euro can buy. Of Piketty’s plan, Joel Slemrod, a University of Michigan tax economist, says: “I’m the kind of person who doesn’t spend too much time on policy proposals that have zero chance of happening, and I think this is one of those.”

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This Isidor Hefter blog site has more articles about different kinds of taxes.

REPOST: 5 Ways to File Your Taxes With Less Stress

This article gives tips on how to lessen the stress during tax season.

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The April 15 tax deadline is closing in and the exercise of filing your return can be stress-inducing even if you’ve done it for years. To ease your tension and lower your 2013 and 2014 taxes, try these five strategies:
 
Strategy No. 1: Get organized. Whether you’ll be completing your own return or hiring a pro, turn your mass (mess?) of financial records into a coherent arrangement that will let you see if you have every document you need.
 
Otherwise, you might fail to report to the Internal Revenue Service all the 2013 income, interest or dividends you earned. Then you could be hit with IRS penalties and interest or, worse, find yourself targeted for a tax audit.
 
(MORE: How to Claim Tax Breaks for Supporting Your Parents)
 
So pull out a copy of your 2012 tax return and make a list of every income source you reported on it. Then, make sure you have all the documents — 1099s, W-2s, interest statements — that align with these sources for 2013.
 
If you made new investments last year or earned income from any new employers, be certain you have those records, too.

Create a desktop folder on your computer and fill it with all the tax statement PDFs you received online from your bank, broker and mutual funds.
 
To double check that you haven’t missed any 2013 expenses you can write off or income you need to include, you might want to consult an online tax checklist, such as the one on the H&R Block site. Or you could download a tax software program that’ll ask you questions to jog your memory about things you purchased that could slim your tax bill.
 
Strategy No. 2: Seize every opportunity to lower your taxes due to work. The federal tax code is filled with opportunities to claim tax credits and deductions for the self-employed and employees. Take the time to track them down.
 
If you’re self-employed, there’s still time to open and fund an SEP IRA (Simplified Employee Pension Individual Retirement Account) for 2013. That’ll lower your ’13 taxes and defer taxes on investment gains in the future. You can invest up to 25 percent of your self-employment income or $50,000, whichever is less.
 
You may want to get guidance from a financial adviser before setting up an SEP IRA, to be sure you don’t run afoul of the rules.
 
(MORE: Secrets of Claiming a Home Office Deduction)

If you have a side enterprise, you may be able to write off many of its costs including, perhaps, home-office deductions. Just be sure the IRS will view it as a true business and not just a hobby: You needed to have a reasonable expectation of earning a profit. The IRS presumes that’s true if you made a profit in at least three of the last five years.
 
If you work for a company and used a flexible spending account to help pay for health care or child care expenses last year, the amounts you contributed to the accounts won’t be taxed. So your 2013 taxable earnings may be less than you think. For 2014, you can put up to $6,550 in a family health care flexible spending account ($7,550 if you’re 55 or older), if your employer offers this benefit. Just remember that you’ll forfeit any amount you contribute but don’t spend.
 
Strategy No. 3: Review your tax return’s figures to avoid IRS red flags. It’s never fun to see an envelope from the IRS in your mailbox. I’m a financial adviser and one of my clients received an IRS notice saying his entire child care deduction had been disallowed because he’d rounded it up by $15. It took months of tedious correspondence to clear up the issue.
 
Double checking your tax return for accuracy helps in two ways.
 
First, it limits the likelihood of problems like my client’s and inadvertent red flags that might trigger an audit. Second, if you’re expecting a refund, you’ll receive it faster.
 
Your return could set off alarm bells at the IRS if the work-related deductions you claim seem way out of line for others in your profession with incomes like yours. So don’t go overboard with these write-offs.
 
If you’ll be claiming a charitable contribution that might seem unusual to the IRS or is much different from the donations you’ve written off in previous years, get an explanation in writing and attach it to your return.
 
When I renovated my kitchen, I gave my old kitchen cabinetry and appliances to a local youth club. Since this was a fairly large and one-time charitable contribution, I attached a letter from the organization to my tax return to head off potential questions.  
 
Strategy No. 4: Don’t go it alone. If you’re confused about completing any portion of your tax return, don’t wing it. Call in a trained tax preparer for assistance.
 
(MORE: Can You Claim Your Adult Children on Your Taxes?)
 
You may be able to get free tax help locally in one of three ways:

• The IRS’s Volunteer Tax Assistance program offers free tax prep support to people earning less than $52,000 annually.
• Tax Assistance for the Elderly, another IRS-sponsored program, provides free tax service for those age 60 and older.
• Tax-Aide, sponsored by the AARP Foundation in cooperation with the IRS, assists older, low- to moderate-income taxpayers; there are no specific income or age thresholds, though special attention is given to people 60 and older.

Chances are that one or more of these programs are available near you. Check with your town hall, library or community or senior center.
 
Strategy No. 5: Pave the road for an easier tax season in 2015. While you’re wrestling with your current taxes, think about how great it would feel if you were better prepared next year at this time.
 
The key is to begin adopting smarter methods to keep your tax records organized.
 
You could go the low-tech way, collecting receipts in a basket with envelopes marked for specific tax categories, like investments, medical expenses and work expenses.
 
Or if you’re comfortable with technology, scan into your computer any paperwork that’ll help you take tax deductions and credits (like receipts and charitable contribution confirmations).
 
Saving these files to an online storage or cloud system will help ensure that your documents will survive if your computer crashes, another stress you don’t need.

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Read more articles about tax planning from this Isidor Hefter blog site.

REPOST: GOP loves tax reform, in theory. In reality? Not so much

How did Republicans act towards the Tax Reform Act of 2014? This CNN.com article has the details.

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Washington (CNN) – Republicans, who have spent years clamoring for tax reform, were much less enthusiastic Wednesday when faced with a sweeping tax overhaul plan in an election year, reticent to discuss whether the proposal from House Ways and Means Chairman Dave Camp, R-Michigan, should even get a vote.

Camp’s “Tax Reform Act of 2014” would lower tax rates for most Americans, but presents conservatives with an uncomfortable tradeoff: It raises the tax bill for large banks and the wealthy.

“This is the beginning of the conversation,” House Speaker John Boehner told reporters. When asked about the tax increases in the draft, he dismissed the question, answering, “Blah, blah, blah, blah.”

When CNN asked whether the 979-page bill will get a vote, the Republican leader from Ohio seemed to indicate it’s too early to discuss that, too. “We are going to start the conversation today,” he said.

All conversation, no action?

“The Boehner response was essentially a vote of no confidence,” said Stan Collender, a former House and Senate budget staffer who is now an Executive Vice President with Qorvis Communications in Washington.

“It’s really very simple,” Collender asserted. “Republicans cannot possibly vote on a tax increase before the 2014 election.”

Collender sees the timing and politics surrounding the Camp plan and its politically tricky tax increases as reaching into the presidential cycle.

“I think this puts the nail in the coffin of tax reform until after the 2016 election.” Collender said.

Rank-and-file Republicans were still reading the details of the Camp plan Wednesday, but those few who had seen the proposal were reserving substantive comment for the moment.

“We’re starting this debate, we’ll see how far it can go,” said House Budget Chairman Paul Ryan, R-Wisconsin. “This is the beginning, this is a discussion draft.”

A holy grail quest

Comprehensive tax reform has achieved near-holy grail status in the Capitol, which has not seen substantial tax overhaul since 1986. It is a difficult topic, fraught with political hazards on all sides. As a result, comprehensive proposals such as Camp’s are exceedingly rare.

The conservative Heritage Action for America group gave Camp high marks for putting a plan on the table, but acknowledged that his effort is hitting walls with lobbyists and special interests whose clients could lose tax exemptions or see taxes go up in the proposal.

“Too many people in this town are afraid of putting their cards on the table.” said Dan Holler, Heritage’s communications director. “So to the extent that Camp produced a document that will get a bunch of people on K Street upset, that’s a positive.”

All of this adds up to a powerful document containing tough choices, but for the moment seems to be going nowhere.

A fellow Republican’s comments even undercut the Camp report a full day before it was released.

Senate Republican Leader Mitch McConnell, who faces a tough re-election battle in Kentucky, told reporters Tuesday that Republicans and Democrats are too far apart for tax reform to be possible this year.

By Wednesday morning, some House conservatives were shaking their heads at the possible limbo for tax reform, and the state of the legislative process in general.

“I don’t like the idea of doing nothing,” said Rep. Jason Chaffetz, R-Utah. “The problem in this town is it’s always an election year.”

He sighed as he walked down a basement hallway. “We have to get past the idea that we have an election on the horizon,” he concluded.

Avoid big surprises on tax day by getting tips from this Isidor Hefter Twitter page.

Innovation accounting: Buoying startups even before they go into the water

In his book titled, “The Lean Startup,” bestselling author and blogger Eric Ries coined the term “innovation accounting,” which is a principle that aims to increase the success rate of a business.

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As a business process, innovation accounting identifies “macro metrics” that detail every phase of customers’ engagement with a business. Spotting the leading indicators that lead to revenue enables business owners to implement earning strategies early and determine the phase where revenue-boosting practices are most needed. Furthermore, this accounting style also allows business owners to define and measure customer value even before the business makes an actual sale.

According to Ries, a startup requires a degree of fluidity that won’t hold up in the traditional business approach. Unlike established businesses, a startup needs to have more in-depth analyses of its business cycle. The business blogger added that through innovation accounting, entrepreneurs can prove objectively whether or not they are growing towards sustainable operations.

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Innovation accounting works in three basic steps:

First, one has to identify a variable called, “minimal viable product” or MVP. This is critical is establishing real data on where the company stands at given juncture. Furthermore, it is also the fastest way to build customer feedback with minimal output effort. The goal of MVP is to test a businesses’ hypothesis.

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The second step is using the MVP in many attempts to reach a decision point. Once the company has arrived at one, this is where the third step comes in, which is deciding whether to continue or start over.

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REPOST: Facebook Enables Starred Reviews for Some Businesses

Read about Facebook’s new innovative feature where consumers can review businesses by means of stars. Read about it in this SmallBizTrends.com

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Facebook is entering the review game, but in the social network’s case it includes a star rating system, Facebook starred reviews. Facebook introduced the feature recently for businesses with physical addresses. So for those Web entrepreneurs who only have a website, this doesn’t seem an option at the moment.

The process seems fairly easy, according to directions found in the Facebook Desk Help section :

Just visit the Facebook page of the business you want to review.
Scroll down to the review section on the right hand side of the timeline.
Fill in the number of stars (total of five) that reflect your experience with the business.
Fill in a written review as well in the space that asks “What do you think about this place?”
You can mark your review public or select the friends, acquaintances or other connections you want to be able to see it.
Then hit “Review” and you’re done.

Page owners be aware. You automatically enable the Facebook star reviews feature by adding your physical address on Facebook. Facebook warns you cannot remove individual reviews. So the only option is to remove the review function completely by taking your address off your page.

How Facebook Starred Reviews are Different

It’s impossible to think about the new Facebook review feature without considering all the controversy now surrounding online reviews.

In September, small businesses in New York state faced $350,000 in fines after the attorney general’s office said they had hired freelancers to write fake online reviews.

Around the same time, a study revealed 16 percent of reviews on Yelp might be fakes and Yelp sued a law firm claiming it had faked reviews as well.

Meanwhile, the Better Business Bureau is rolling out what it claims is a more credible process to ensure reviews are written by real customers.

Facebook allows only those with an account to write a review. But how many fake Facebook accounts are out there is anyone’s guess. At best, the new Facebook starred reviews feature should probably be viewed as another way to collect feedback and generate social interest rather than an objective measure of customer sentiment.

Isidor Hefter is a certified public accountant and a senior partner at Rosen Seymour Shapss Martin & Company LLP. For more business updates, visit this blog.