Friday, May 13, 2016

Credit Protection

Pathways Advisory Group, Inc.
Jeff Karst, CFP®

In case you missed it from the June 2015 Newsletter...

It seems that every other week there is a story about data breach at a major company.  Perhaps you’ve already been affected by it.  With so much of our lives online, it’s easier than ever for hackers to steal our information.  How do you protect yourself?  There are credit monitoring services such as LifeLock (which I’m sure you’ve heard of).  You can place a Fraud Alert on your credit report to have them contact you if anyone (including you) attempts to open credit in your name.  However, those alerts only last 90 days.

There is an alternative to these methods and that is a credit freeze.  A credit freeze puts your credit on “lockdown” and the credit agency will not release your information to anyone.  Without a credit report, thieves cannot open credit in your name even if they have your Social Security number.  The freeze does not impact your ability to access the credit you already have open (credit cards, line-of-credit, etc.) – it prevents new credit.

How do you do it?  You must contact each agency to place a freeze on your credit.  When you place a freeze on your account they will provide you with a Personal Identification Number (PIN).  You will need to write this number down and keep in a safe place.  It will be required if you need to temporarily or permanently lift the freeze.  The freeze can be temporarily lifted for specific dates or specific parties when you need to obtain new credit.

A credit freeze is not for everyone.  There are fees to put the freeze on and fees to lift the freeze.  If you access credit frequently those fees can add up.  Also, you will need to plan ahead.  In some cases it takes 3-5 business days for a temporary lift to be established.  While the fees vary by State, the following is a list of fees for California residents:

All of these services are free if you’ve been the victim of identity theft.  You must provide the credit agency with a copy of the Law Enforcement Identity Theft Report.

If you don’t access new credit very often, a freeze may be the simplest and least costly method to protect yourself.

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Friday, May 6, 2016

Tax Form 5498

Have you received a tax form in the mail recently? If not, then disregard this post. If, however, you did receive a 2015 IRS Tax Form 5498 recently, do not panic. Form 5498 is generated by investment custodians every May for Traditional IRAs, Roth IRAs or Educational Savings Accounts with activity during the previous tax year and usually does not lead to an amended tax filing.

Tax Form 5498 is informational. The IRS reconciles this activity with your Tax Return. If you received this form, ask yourself: Did I contribute to a Roth or Traditional IRA last year? Did I roll money into an IRA last year? Did I contribute or initiate activity out of an Educational Savings Account last year? Did I convert IRA money to a Roth IRA last year? If any of this activity applies to you, you received Form 5498.

Contribution information is typically requested on an accountant's questionnaire. IRA rollovers and conversions generate a 1099-R. Either way, your accountant should already be aware of the activity. Then what should I do with my copy? In most cases, simply add it to your freshly started tax folder for 2016. As your accountant reviews next year's tax file, he or she can confirm that the activity was addressed.

The above explanation is summarized and generic. Please consult your tax professional with any specific questions.

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