How SIPC Insurance Works

With the recent news surrounding E*Trade Financial, it may be time to take a look at how your holding with brokerage firms are protected.

Authorized by Congress in 1970, the SIPC was created to protect investors from fraud and theft by failed brokerage firm. Unlike the FDIC, the SIPC does not protect you from market losses, but rather works to return customer's cash and securities missing from customer's accounts in the event of a failure.

Let me point out that E*Trade is no fly-by-night firm and even if they were to fail, odds are the customer accounts would be handled without the need for SIPC involvement.

Coverage is $500,000 per account ($100,000 cash). For full details see: http://www.sipc.org/how/brochure.cfm

Don't Fall for this Phishing Scam!

One of our clients recently received an email from someone claiming to be the IRS and further claiming to have a refund which would be forfeited in 48 hours if they did not reply.

This is an example of phishing - fraudulent emails impersonating real businesses or agencies in order to get personal information from an unwary recipient - in this case the SSN and a credit card number. I've received these from others alleging to be my bank and PayPal among others.

Here's the message from the IRS - for more IRS-related scams see their site.


Updated Sept. 19, 2007 — Another recent e-mail scam tells taxpayers that the IRS has calculated their "fiscal activity" and that they are eligible to receive a tax refund of a certain amount. Taxpayers receive a page of, or are sent to, a Web site (titled "Get Your Tax Refund!") that copies the appearance of the genuine "Where's My Refund?" interactive page on the genuine IRS Web site. Like the real "Where's My Refund?" page, taxpayers are asked to enter their SSNs and filing status. However, the phony Web page asks taxpayers to enter their credit card account numbers instead of the exact amount of refund as shown on their tax return, as the real "Where's My Refund?" page does. Moreover, the IRS does not send e-mails to taxpayers to advise them of refunds or to request financial information.

Back-to-School Tax Breaks Help Teachers Pay Classroom Costs; Aid Parents, Students With College Tuition

This reminder from the IRS:

WASHINGTON — With the new school year now under way, the Internal Revenue Service today reminded teachers, parents and students that saving receipts and keeping good records can help them take advantage of various education-related deductions and credits on their 2007 federal income tax return.

“The start of the school year is a good time to remind parents, students and teachers to save all receipts related to tax-advantaged education expenses,” said IRS Acting Commissioner Linda Stiff. “Good recordkeeping makes sense because it can help avoid missing a deduction or credit at tax time.”

Deductions reduce the income on which tax is figured. Credits reduce the overall tax. Though both can lower a person’s year-end tax bill or increase their refund, credits normally result in greater tax savings.

The educator expense deduction allows teachers and other educators to deduct the cost of books, supplies, equipment and software used in the classroom. Eligible educators include those who work at least 900 hours during a school year as a teacher, instructor, counselor, principal or aide in a public or private elementary or secondary school.

Worth up to $250, the educator expense deduction is available, whether or not the educator itemizes their deductions on Schedule A. In tax-year 2005, teachers and educators deducted just over $893 million of these out-of-pocket classroom expenses. Under current law, this deduction is scheduled to expire at the end of this year.

Three key tax breaks—the tuition and fees deduction, the Hope credit and the lifetime learning credit—help parents and students pay for the cost of post-secondary education. All three are available, regardless of whether an eligible taxpayer itemizes their deductions. Under current law, the tuition and fees deduction is scheduled to expire at the end of this year, but the two credits remain in effect. In tax-year 2005, taxpayers claimed tuition and fees deductions totaling nearly $11 billion and education credits of almost $6.2 billion.

Normally, a taxpayer can claim tuition and required enrollment fees paid for their own and their dependent’s college education. A taxpayer cannot take both an education credit and the tuition and fees deduction for the same student in the same year. Income limits and other special rules apply to each of these provisions. Education credits are claimed on Form 8863, and the tuition and fees deduction for 2007 will be claimed on new Form 8917.

IRS Publication 970, Tax Benefits for Education, can help eligible parents and students understand the special rules that apply and decide which tax break to claim. The publication also describes other education-related tax benefits, including qualified tuition programs (also known as 529 plans), the student loan interest deduction, Coverdell education savings accounts and the education savings bond program.

Publication 970 is posted on IRS.gov or can be obtained, without charge, by calling the IRS toll-free at 1-800-TAX-FORM (829-3676).

Get a C.L.U.E

Many of you are familiar with the provisions of the Fair and Accurate Credit Transactions Act (FACT Act) that lets you get a free copy of your credit report from each of the three credit reporting bureaus each year. You should be aware, however, that the credit reporting agencies aren't the only ones keeping tabs on you. If you have property insurance, you're going to show up on something called a C.L.U.E. report.

C.L.U.E. stands for the Comprehensive Loss Underwriting Exchange, a database of consumer claim information provided by insurers and maintained by ChoicePoint, a data aggregation firm. The database contains policy information (name, DOB, policy number), claim information (date of loss, type of loss, and amount paid, if any), and a description of the covered property. Thus a history of claims for your home and automobile is available on the data base.

Who can get to it?

Any insurer who is a contributing member to the database has access to the information. This means the company you are shopping to has access to your claims history with your existing carrier.

How long is the information kept?

The database contains up to 5 years of claims history.

What should I be doing as a consumer?

  • Be honest: Don't be tempted to fudge a question about your past history on an application. In addition to being sleazy and fraudulent, you will most likely get caught and that could leave you without coverage if there is a legitimate claim in the future.
  • Zip your lip: Are you calling your agent to see if it's worth your while to file a claim? Well, as far as the insurance company is concerned you just did. Whether you decide to pursue a claim or not, that contact is now part of your history and can find its way into the data base. Part of this is due to the fact that if an insurer knows of a loss, they must take certain actions within a specific timeframe. Just remember, the agent works for the insurer, not you.
  • Know what's in your report: Like your credit report, you are entitled to a copy of your CLUE report annually. To get one, use the contact info below. If there's an error, ChoicePoint is obligated to work with you and the reporting insurer to resolve the issue. In addition, the consumer is allowed to add notations to their individual reports.

To request your C.L.U.E. report:

On the web: http://www.choicetrust.com/

By phone: 866.527.2600

By mail:
ChoicePoint Consumer Disclosure
P.O. Box 10510
Atlanta, GA 30348-5108