IRS tips to avoid identity theft

Security Summit: Tax pros can help clients battle identity theft risk

WASHINGTON – The Security Summit partners today concluded a special summer education campaign by outlining steps tax professionals can take to help clients from becoming statistics in identity-theft related tax-fraud scams.

The IRS, state tax agencies and the tax industry – working together as the Security Summit – have been combatting identity theft since 2015. This is the final part in a five-part summer series sponsored by the Summit partners to highlight critical steps tax professionals can take to protect client data. The “Protect Your Clients; Protect Yourself” campaign is an effort to urge tax professionals to secure their computer systems and protect client data following the pandemic and its aftermath.

“Identity thieves always seem to find a hook to lure victims, and we increasingly see tax professionals as a target given the sensitive client data they handle,” said IRS Commissioner Chuck Rettig. “Tax professionals have their hands full taking care of their clients and staying on top of the latest in professional developments. But they shouldn’t overlook the basics of protecting their data and their systems. Missing these basic steps can be devastating to a tax pro – and their clients. But a few common-sense steps and being aware of security basics can go a long way to provide important protection.”

While many may be working from home either full- or part-time, the IRS and Security Summit partners urge the use of virtual private networks, or VPNs, to securely conduct business.

Online business/commerce and banking should only be done while using a secure browser connection -never at a coffee shop, restaurant or other business offering ‘free wifi.’ One way users can tell if they’re using a secure browser is by looking for a small lock visible in the lower right corner or upper left of the web browser window.

Some additional considerations:

  • Be cautious of email attachments and web links. Do not open a link or attachment that arrives unexpectedly. Always call the sender to confirm receipt and validity of any unexpected links or attachments before opening.
  • Use separate personal and business computers, mobile devices and email accounts. This is particularly important for those who may share hardware with other family members, especially children, who may not be aware of safety protocols.
  • Do not send sensitive business information to personal email devices. Do not conduct business, including online business banking, on a personal computer or device. Likewise, do not engage in web surfing, gaming or video downloading on business computers or devices.
  • Do not share USB drives or external hard drives between personal and business computers or devices. Never connect an unknown/untrusted piece of hardware into the system or network. Also do not insert any unknown CD/DVD or USB drive. Disable the “Autorun” feature for USB ports and optical drives on business computers to help prevent malicious programs from being installed.
  • Be careful with downloads. Do not download software from an unknown web page. Always exercise caution with freeware or shareware.
  • Use strong passwords. Never give out usernames or passwords to others. Strong passwords consist of a random sequence of letters to include upper and lower-case, numbers and special characters. Ideally, passwords should be at least 12 characters long. For systems or applications that have sensitive information, use multiple forms of identification (multifactor or dual-factor authentication).
  • Change default passwords. Many devices come with default administrative passwords. Change them immediately and regularly thereafter. Default passwords are easily found or known by hackers.
  • Change passwords often. Every three months is recommended. Consider using a password management application to store passwords. Passwords to devices and applications that contain business information should not be reused.

Additional resources
In addition to reviewing IRS Publication 4557, Safeguarding Taxpayer Data, tax professionals can also get help with security recommendations by reviewing Small Business Information Security: The Fundamentals by the National Institute of Standards and Technology. The IRS Identity Theft Central pages for tax pros, individuals and businesses have important details as well.

Publication 5293, Data Security Resource Guide for Tax Professionals, provides a compilation of data theft information available on

New Job? Great time to start planning, so dive in!

Starting a new job can be nerve-racking , but it’s also exciting. You’re embarking on a new future, positioning yourself to write a fresh story on a clean slate.

-Adena Friedman

When you accept your first job, you will probably get a packet of information someone from someone in the Human Resources department detailing your options on health insurance, dental and disability insurance, vacation time, flex savings, HSA accounts, retirement contributions, and company policies.

Reviewing this packet can be overwhelming.  However, it also provides an excellent time for long-term financial planning!  So, dive in – your future self will be glad you did.

Start easy – get the free stuff

Most employers use group purchasing power to get benefits at a discount.  This usually includes health, disability and life insurance but can also include club memberships, banking and more.

Get health insurance:

You need health and dental insurance, unless someone already provides that for you, so sign up.

If your spouse has insurance, then review your new plan to see if the benefits are better or the cost is less.

Life and Other Insurance

Most employers provide some amount of life and disability insurance.  Again, take what’s free.

If you have others who depend on your earnings to survive, then you may need to enroll in additional group life and disability insurance, if offered.  If there is no additional insurance or it is not sufficient, then you have other estate planning work to do!

Retirement – check for “free” money

Retirement may seem far off, but planning now will pay off because of the impact of compounding.

If your employer matches what you contribute, you really need to push to contribute so you get that match.  How else can you get that kind of return on your money at the front end?  (and if what I just wrote makes no sense to you, you really need to brush up on your Financial Literacy!)

As for investing, you can use the default investment option, but real long-term planning would be best.  That is, pick a fund that is geared to your anticipated retirement age if you must, but doing your own asset allocation among funds by investment objective will work out better over time.

As with other cash management decisions, you don’t want to sacrifice too much today for your future; strike a balance between enrolling in payroll deductions and having enough in your paycheck to keep enjoying yourself now.

Other Benefits – continuing education

If you are offered continuing education, take the chance to improve your skills.  This makes you more marketable for when you want to advance or change jobs.

Flex Spending and Credit Union

If you can sign up for an HSA account or other flex spending, do so to cover any uninsured medical bills that you could have during the year.  You will need to revisit each year, so you do not contribute too much, leaving funds never used in the plan.

A credit union may provide benefits too, so check that out.

So, what about your Student Loans?

Putting part of your paycheck into important benefits may mean less left to destroy those student loans in a matter of months the way some bloggers tell you they have done.  However, debt management is only part of a total financial plan.  You need benefits like health insurance and should contribute to retirement if your employer matches, so keep everything in balance!

Work on your Financial literacy

If you have questions on any of this post, then please check out our other posts and please let us know what is not clear!

Thanks, and good luck with your new job!


How can you plan to take a year off and still saving for retirement?

“Quote relating to subject matter, search on:, Select the quote text and then hit the quotation button to create.” – Quote’s Author

Here is a tough financial
planning challenge:

How do you save to take a year off as a sabbatical, or go a big (expensive) vacation, and
still stay on track with saving for your retirement?  

What if you also have student loans you desperately want paid?  

Answer: it depends on your situation! 

If you get a large capital influx

The easy solutions would be some massive influx of capital, such as stock options in a company that skyrockets in value or a huge inheritance  … or winning a major lottery prize.  Such an influx of capital would provide funds to pay off the debt, invest for retirement and cover the costs of a sabbatical or round-the-world vacation. 

If your spending is meager

At the other end, the problem might be soluble if your needs at retirement are quite modest.  Meager needs would require less saving to reach retirement, allowing you to spend more now and even take off from work for a period of time. 

Everyone else

If you’re spending is average, and you don’t have the fortune of a major capital influx, then you really need a good plan that plots out how you will pay off the debt, save money for the sabbatical or vacation, and still save and invest enough to meet your retirement needs.

Possible strategies

Obviously, one strategy would be to delay retirement.  This way you need to save and invest less now to fund your lifestyle when you do retire.  

Another strategy would be to commit to saving a great deal now and after the sabbatical or vacation.  This would mean serious cost cutting on expense so you can save more when you are earning.  

Using debt more is another strategy.  That is, you can’t do it all immediately, so you may have to live with the student loan debt longer than planned.  If you can keep saving for retirement, you may want to borrow to fund the sabbatical or vacation, with a plan of
paying it off afterwards.  

Cost-out your goals

How do you pick and implement the best strategy?  First, quantify your options.  You can calculate what you need to save for retirement.  This includes what you set aside in your 401(k) or 403(b) plan and any Roth IRA or SEP-IRAs. 

When you cost out saving for the sabbatical or vacation, you cannot count on the return you expect from retirement savings.  You have short time horizon and cannot take as much risk. 

Review your student loan debt to see the interest rate.  If it is low, you want to delay paying anyway.  See Let’s really talk about risks

Devising a plan – the goal and resource mash up!

Any planning problem can be solved; it just requires pushing around all the possible resources and variables so that you fit the square peg in around hole. 

You sort through the cost of the goals compared with the total you have decided to save for the goals.  If what you can save doesn’t allow you to meet your other goals and still take a full year off, then maybe you would have to settle for nine months, or a less expensive vacation.

Okay, now get going and good luck (and send us a postcard when you do go away).

When “free” is not free, when paying is worth it

“Quote relating to subject matter, search on:, Select the quote text and then hit the quotation button to create.” – Quote’s Author

Nothing on the internet is truly

Many sites are lead generation sites, and most social media websites track our every move to get paid.  If you any doubts, please read this article:  “Mark Zuckerberg, Let Me Pay for Facebook – ‘Free’ social networking sites cost more than we think.”

If you search financial planning and other sites on the web for retirement calculators, you will find many options.  See our prior post explaining why one line calculators can differ so much.

On of these websites provides “free” use of a gamified retirement calculator.  However, when you delve deeper (I read the company form ADV as of May, 2015), you learn that the website may receive compensation from vendors for referring users to financial products and solutions in order to fulfill action steps, such as lenders for a user who needs to refinance her mortgage.  The website receives a referral fee from the mortgage lender. The same for a rollover of a 401(k), a fee from Schwab, Fidelity or TD Ameritrade, or for life insurance, a fee from the insurance.

Furthermore, management of the website own a registered investment adviser and many are insurance sales people. 

Hardly sounds free – it’s a leadgen portal!

Websites like this are lead generation portals.  Compare to those “free” seminars on estate planning put on by insurance salesmen to sell life insurance and other products.

In contrast, there are good tools, for which you pay.  One example is the investment firm Betterment, which introduced a tool some time back that was available to its paying customers called “RetireGuide.”

The firm describes it as “a new planning tool, available for free to all Betterment customers, that helps investors work through scenarios, like …. RetireGuide provides sophisticated  retirement guidance that is easy to understand, always up-to-date, and simple to change as your life changes.  RetireGuide uses information you provide and the balances from your Betterment accounts, as well as assets outside of Betterment, to answer these questions. It also provides a seamless way to start saving more in a globally diversified portfolio of ETFs based on your retirement plan’s recommendations  … This planning tool merges an advice engine with a way to automatically save and invest in a diversified portfolio.”

RetireGuide looks very good, as a tool to help you keep with your retirement plan. 

Where are we at WokeMoney in all this?  We had designed tools and how to steps to help you create your own plan for free.  However, that website was never launched. 

What do you think of this?  Your comments would interest me, thanks. 


If you help support others, you need life insurance and more – really

If a child, a spouse, a life partner, or a parent depends on you and your income, you need life insurance. 

-Suze Orman

She’s right:  If you help support others, examine your priories.

Purchasing adequate life insurance and doing your estate plan, viz. signing a will and creating a trust, are probably low on your list. They should be at the top.  Especially in a Pandemic.

Two good reasons that you should review and act:

I saw the confusion and pain wife had to address when she lost her husband, before he bought the life insurance he had promised to obtain, and had to help her kids adjust to the massive change of lifestyle as they sold their home and downsized because they could no longer afford what their dad, the chief income earner of their family, had provided them. If they had proceeds from his life insurance, they would have only been dealing with the
grief of losing him, not radical life changes as well.

I saw adult children deal with the probate process so they could be appointed administrators of their mom’s estate just to be able to access bank accounts, pay funeral expenses and then sell and distribute the remainder of her assets, making their own decisions in place of knowing what she would have wanted.

Sure, you hope the money spent on life insurance is a waste – because the earner lives on – but better to have the protection than add financial suffering on top of grieving!  Plan for those who may survive you!

As for signing a will, trust and other estate plan documents, please consult an attorney for help in determining what is necessary and appropriate. 

So please think again.

If you have not obtained life insurance to replace your earning power, which helps support your family, and if you have not executed a will, along with a trust, medical directive and other documents that may be appropriate, you are not just avoiding an inconvenient imposition on your time and the payment of premiums and fees, you are failing to properly think of the consequences of not acting and the impact that could have on your loved ones.


Should you “simplify your finances”? No, just gain control & understand your finances

Truth is something which can’t be told in a few words. Those who simplify the universe only reduce the expansion of its meaning.

-Anais Nin

After reading a recent article in Kiplinger’s Finance Magazine 
on simplifying your finances, I wondered if your personal finances can really be made simple.  Sure, many of us hope so ….

But, I am not sure that “simple” is best.


However, gaining control of your finances and a better understanding does make sense.

Here are some ways that help you gain control that may also “simplify” your life:

Cash management and Debt

Set up automatic payments with vendors so they use your bank or credit card, or set up payments using your bank website.

·       If the payments are regular, and of similar amounts, you save time and can plan on the withdrawals.

·      However, if you change banks, sorting and resetting auto-pay at the new bank can be a major headache. Similarly, if you change credit cards, you need to update information with all vendors.

You can also automate tracking of your spending by using websites like Mint or Personalcapital.  Or, you can use Quicken or QuickBooks software from Intuit to track your bank and credit card accounts.  You can download from your bank and credit card websites into the program and then review to analyze your cash flow and spending.

Setting up direct deposit for payroll into your checking is great.  You can also split part so it goes to savings or even have some go to your investment accounts.  You will then need to follow up to invest the cash that accumulates, but having money set aside saves it from being spent, and adds to your investments.


Kiplinger’s recommended consolidating retirement accounts to avoid low balance fees.  It also makes updating beneficiary designations easier.

While avoiding fees makes sense, am not sure that putting all investments into a single retirement account does.  You cannot do this if you have Roth and pre-tax accounts like a 401(k) plan, and you probably should not do it if you have contributory IRA and 401(k) accounts that are subject to different tax rules.

Kiplinger’s also recommended using one broker for your taxable accounts.  This makes more sense, in that you have a higher balance which should mean lower fees and more attention from the broker.  However, I prefer using exchange traded funds, or ETFs, and avoiding most broker fees, which means essentially no attention from a broker.

One article said that your investment plan should be to “sign up and forget it.”  While avoiding investment pitfalls like second-guessing yourself out of panic when a fund goes down is good, I do think you need to review and re-balance your investments once
a year.

Another article recommended using an “all in one” fund for investing.  Now, this really troubles me.  If your sole goal is retirement, then an age-targeted fund could make sense.  But, if you are saving for goals with different time horizons, this is a bad idea.

If you use an age-targeted fund, do your homework on the funds.  For example, if the fund plans to suddenly shift to bonds when you retire, that will not serve you well because you are likely to have several decades for which you will need the growth from stocks.

Protecting your information

Having a master password for access to all your other passwords reminds me of the joke about the student who repeatedly distilled his notes down, first to an outline, then to note cards, and finally to one word.  How did he do on the day of the exam?  He forgot the word.

Nonetheless, having passwords is clearly important so having a way to manage them is as well.  Check out this recent review of apps for managing your passwords PC Magazine Best Password Managers for 2015.

You can manage the passwords yourself by creating a document that you save as a PDF and then encrypt.  But don’t forget the password you used for the PDF!

Store files in one place

We did a post on using cloud storage when you do not need originals.  Here is another site to check out:  Shoeboxed

Credit cards

In addition to downloading transactions as noted above, you can track your credit score and credit history by using sites like Credit Karma

Estate planning

For insurance purposes, and for your estate plan, having a record of possessions, you can list all your property using sites like Know your stuff home inventory.

Conclusion? Too simple may be a bad result

Setting simplification as your primary goal risks distorting your finances. There are ways to gain better understanding of your finances that also make your finances simpler.

Use our website to improve your
financial literacy and if you get stuck, ask us questions!

Sermons, partying, hangovers, diets, …. and financial planning

One day I woke up with an atrocious hangover, and it hurt so badly that I told myself, ‘It’s time to stop. I can’t do it anymore. It’s not good. It hurts too much.’

-Jordan Knight

Okay, bizarre title, but bear with me:

Financial planners often feel as if they preach sermons to encourage needed planning.

And like most “you should be doing this!” sermons, their preaching is met with serious resistance.

So here’s a different approach:

In college, you must have had at least one morning where you woke up with cobwebs in your head, regretting all the partying you did the night before.  Not only did you feel sick, you couldn’t believe how you acted or worse, had no recollection.  And to make all this worse, your bank account is overdrawn and you maxed out your credit card.

It’s not that you didn’t know better.  Of course you did.  But you told yourself, “hey, I’m young, now’s my time to live!”

Okay, now imagine that we are talking about you waking up at age 60, after several decades of living it up, with more than cobwebs in your head and an empty wallet:  you don’t have enough to retire.  In fact, you have to work much longer than you ever hoped.

You spent decades eating out, entertaining, going on costly vacations, buying expensive clothes and such instead of saving what you needed.  Unlike partying in your 20s, where you can catch up on by being frugal later, at age 60 you can’t catch up and you don’t get to go back a few decades to make up what you needed.

Just as you know better than to party all the time, you know that you should be planning for retirement, even if it is many decades away.  At the same time, you don’t need to sacrifice everything today for the future.

What you do need to do is find a balance in your spending and saving.

And that is where planning comes in.

Here’s one example: managing your cash flow:

Preparing a budget requires some serious work and isn’t that fun.  You need to review 12 months or more of spending, analyze it and then use it to project and inform future pending.  You will see where every dollar came in and went out.  That can enable you to shift where some dollars go, so you save more for future goals.

Preparing a budget is unpleasant and having the discipline to follow it is challenging.  But, like following a diet to lose weight, your financial health will improve.  If your doctor says your health depends on a diet, you follow it.

So now, when a financial planner tells you that your future financial health requires action now, will you take that seriously?

I hope so.

Don’t Worry About Your Student Loan Debt

Too many young people graduate laden with debts that take years, if not decades, to pay off. 

-Robert Reich

Posts recommending “paying off student loans” do not present a plan.  

Paying off debt may be part of a plan, but it is not a complete plan.  Would you tell me that your favorite sports team won on defense alone, not needing any offense?  I didn’t think so. 

Being debt-free is a very short-term, near-sighted plan.  

You might want to retain debts with low after-tax interest rates to invest more excess cash flow.  If you have a mortgage with an interest rate of 4% and earn an annualized 7% on retirement investments, you should not be accelerating the payoff of that mortgage.  Doing so is giving up the 7% return in favor of the 4% return, which clearly is not wise. 

Similarly, budgeting or other means by which you reduce spending now to increase savings may be good – or it may involve living foolishly frugal.  Deciding which depends on your overall long-term goals.

Merely reducing spending to increase cash reserves does not mean you are necessarily better off.  It means you are frugal, have a lower standard of living and have cash in the bank.  If it makes you happy, I just hope it makes you equally as happy 10, 20, and 30 or more years from now. 

The same goes for blog posts on the need to create an emergency fund.  Stashing away cash that earns less than the rate of inflation, on an after-tax basis, is rarely prudent. 

If you planned well and bought a home, you may have enough equity in your home to set up an equity line of credit.  You will just need a plan to pay off any debt if you draw on the equity line. 

Alternatively, there are many emergencies for which insurance is far more effective than amassing cash.  You don’t amass cash for the possibility of having a catastrophic illness or the risk of being sued as a homeowner, do you? 

With a complete plan, you’ll be far better off than “debt-free” and “emergency fund” bloggers. 

The point is that a comprehensive financial plan uses ALL tools, cash management, debt management and more to provide a reasonable quality of life now and for the future.

Ignore All the Financial Planning Rules

I always say that it’s about breaking the rules. But the secret of breaking rules in a way that works is understanding what the rules are in the first place.

-Rick Wakeman

General rules of thumb for
financial planning rarely work.

Here are some with my critiques:

“Stocks minus your age should equal 100” – Bad rule – your investment allocation depends on your risk tolerance, the rate of return required to achieve your goals, when you add to investments from annual savings or stock option exercises and when you remove investments to fund lifestyle needs.

“Life insurance must equal six times compensation” – Bad rule – your spouse or partner would use all of your resources, including insurance, to fund lifestyle needs after you die.  If you review this and determine a short-fall, that is the amount to be funded by insurance.  It could be more or less than the six-fold multiple but ensures that your survivors have adequate resources to be protected.

“Save 10% of income annually” – Decent rule – however, some may need to save even more and others may have no savings need.  As with life insurance, the question is whether the return from assets plus annual savings over your life expectancy will fund your lifestyle.

“You only need 70% of income in retirement” – Bad rule – in fact, many people spend more in the first years of retirement as they travel more while spending far less in their 70’s and 80’s as their needs become fewer.  This can be further complicated by estate planning goals of gifting to children or charities.

“Hold six months after-tax income for a rainy day” – Decent rule – however, this depends on liquidity, borrowing ability (e.g., home equity line) and cash flow.  If annual income permits substantial savings, such that you could pay for a new roof without affecting lifestyle, your “rainy day” reserve can be much less.

“Monthly payments on debt should not exceed 20% of income” – Decent rule – in fact, the rule is somewhat irrelevant in that most lenders apply rules to limit mortgage payments plus home insurance and property taxes to a percentage of income.  As with the savings rule, your level of debt may be more or less depending on assets available, risk tolerance and lifestyle costs.

“Do not refinance until rates drop 2%”– Bad rule – the test is simple: how soon will the cost of refinancing be recouped by lower payments?  With no points/no closing cost loans, this can be a year or less.  Buying down a rate by paying points will make sense if the pay-off is in 12 to 24 months and if you plan to stay in the residence for seven years or more.

“Delete collision coverage on a car more than 7 years old” – Decent rule – as with the “rainy day” reserve, this depends on cash flow and other resources.  It also depends on whether the car is your “antique.”

“Do not spend more than 7% of income on long-term care insurance”– Uncertain rule – some people may have sufficient assets to self-insure.  Some people will not risk nursing care due to bad family health history; they will want to pay for full insurance.

Are you going to break the rules?

While breaking rules may or may not work for you, creating and sticking to a financial plan will! (The future you will be glad you did!)

What is Retirement?

I actually think the whole concept of retirement is a bit stupid, so yes, I do want to do something else. There is this strange thing that just because chronologically on a Friday night you have reached a certain age… with all that experience, how can it be that on a Monday morning, you are useless?

-Stuart Rose

Does “retirement” mean no more paycheck and collecting social security?

What if you don’t want to wait until you are in your 65 to “retire”?

Financial Independence

When you have enough money to retire, whether you choose to stop working or not, you are financially independent. So, “saving and investing for retirement” typically means taking some of what you earn to invest so that you have more funds in the future from which you can withdraw to pay for lifestyle expenses, without relying on anyone else for support.

Use of Insurance

Retirement is different from being disabled, where you cannot work, for which you may buy disability insurance, and from early death, for which you can buy life insurance to help take care of your family.