Financial Beat

June 18, 2001

Tax Fraud, Traffic Safety, Taxes, Investing, Entertainment

 

Financial Beat

Jump to:Choose article section...Tax Fraud: Trusts that promise big savings can lead to big penalties Taxes: Have you paid too much? Traffic Safety: Photos of scofflaws are a good deterrent Entertainment: No more waiting in line for movie tickets Investing: Can you get even with incompetent brokers?

By Yvonne Chilik Wollenberg

Tax Fraud: Trusts that promise big savings can lead to big penalties

Watch out for marketers of fraudulent trusts, who often target high-income taxpayers and charge up to $70,000 for their services. In a typical scam, you'd be advised to create an asset management company and put your business or corporation into a trust. You'd then claim business deductions for expenses for homes, furniture, education, entertainment, and other personal expenses. Some schemes use offshore bank accounts to further hide income.

The IRS warns that personal living expenses not deductible before a trust was created aren't deductible afterward. If you're caught investing in one of these schemes, you'll probably owe back taxes, plus interest and civil penalties as well. Since 1999, 69 people have been convicted for illegal trust schemes; another 136 criminal investigations are still open.

Taxes: Have you paid too much?

More than 500,000 taxpayers overpaid their 1998 taxes by about $610 each, for a total of $311 million, according to a new General Accounting Office study. The GAO found that many people who took the standard deduction could have cut their taxes by itemizing.

If you didn't itemize on a recent return, add up what you paid during the year for mortgage interest, real estate and state and local income taxes, charitable donations, and other deductible items. If the total exceeds the standard deduction, you probably overpaid. You have three years from the date of filing to obtain Form 1040X from the Internal Revenue Service and amend your return.

Traffic Safety: Photos of scofflaws are a good deterrent

Camera enforcement of traffic laws can significantly reduce car accidents, according to a study by the Insurance Institute for Highway Safety. Accidents involving injuries dipped 30 percent in Oxnard, CA, when cameras were installed at intersections and drivers who ran red lights were mailed tickets. For the kind of accident most often associated with running a red light—front-into-side collisions involving injuries—the rate dropped a stunning 70 percent. What's more, driver behavior improved citywide, even though only 11 intersections were equipped with a camera.

IIHS surveyed residents of some cities that use cameras and some that don't; in both cases, the majority supported photographing traffic violations. Only California, Colorado, Delaware, Hawaii, Maryland, New York, North Carolina, Oregon, Virginia, and the District of Columbia currently allow the cameras, which are used in about 40 communities.

Entertainment: No more waiting in line for movie tickets

Now you can buy tickets to even the hottest blockbuster movie without leaving home. Just log on to Moviefone.com or MovieTickets.com, which offer online access to more than 85 percent of the theaters that allow Internet sales. You can buy tickets several days in advance, as long as the movie schedule for the day you want is available on the site. Moviefone charges a service fee of $1 per ticket, while Movietickets.com charges up to $1 per ticket depending on the theatre chain. At both sites, you pay with a credit card. Some chains allow you to print the ticket with your home printer; at others you pick up the tickets at the theater.

Investing: Can you get even with incompetent brokers?

Complaints against stockbrokers have increased 15 percent since last year, says the National Association of Securities Dealers. Claims of unauthorized trading, misrepresentation, and incompetence are on the rise, as investors watch their portfolios shrink in a volatile market. Many clients say their brokers got carried away in last year's trading frenzy and filled their portfolios with inappropriate investments. Brokers are legally required to keep customers' financial goals and needs in mind when recommending investments, according to NASD regulations.

If you have a beef with your broker, however, you probably can't sue. Most brokerage customers sign agreements that prohibit them from taking disputes to court, requiring instead that squabbles be ironed out by NASD-sponsored arbitrators. Investors won slightly more than half of the cases arbitrated last year. On the other hand, many awards are never paid, says the GAO; some of the losing companies file for bankruptcy or simply disappear. In 1998, nearly half the awards were unpaid and another 12 percent only partially repaid.

The author is a freelance writer in Teaneck, NJ.

 

Yvonne Wollenberg. Financial Beat. Medical Economics 2001;12:16.