Stocks, Insurance, Taxes, Travel, Medical School Debt, Cars
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Sometime later this year or early next year, the stock market will begin its long-awaited conversion to decimal pricing. Eventually all US stocks will be quoted in increments of five cents or less, rather than the currently used fractional increments of 1/16th.
That's good news, because it will make stock prices easier to understand. You won't have to convert 1/16th to 6.25 cents, for example.
More important, because stocks will be priced in smaller increments, decimal pricing will narrow the spread between bid and asked prices. With a smaller spread, you'll sell at a higher price and buy at a lower one. Your trading costs will decline, and the dealer will make less.
The remaining question is what size to make the basic increment. With stocks now quoted in increments of 1/16th, there are 16 prices, or "ticks," at which a single issue can trade per dollar. That number jumps to 20 with increments of a nickel, and to a whopping 100 with increments of a penny. The smaller the increment, the greater the competition among brokers and dealers, and the greater the opportunity for you to get a better price. Decimalization should also enhance your access to foreign stocks, which already trade in decimals.
When the conversion is complete, the stock exchanges, including Nasdaq, must submit a report to the Securities and Exchange Commission documenting how well the new system is working. The SEC also wants to know whether the exchanges believe a single increment should be adopted for all stocks, and what it should be. The commission has set a Jan. 1 deadline for the changeover to decimals following a phase-in period. That date could be delayed, however, because the Nasdaq isn't ready to handle the extra trading volume and quote traffic.
Expect to pay more for a term insurance policy that guarantees a fixed premium for at least 15 years. Costs for these policies, called level-premium term, have increased anywhere from 5 to 70 percent this year as a result of new regulations requiring insurance companies to maintain larger reserves, according to InsuranceQuote Services, an Internet insurance brokerage.
Some companies have even stopped selling long-term level-premium policies. Others have created a two-tiered guarantee, offering a fixed premium for only five or 10 years, rather than 15 or 20. After the first phase, the insurer resets the premium for the remainder of the term, presumably at a higher rate.
The extent of these changes depends on how well prepared individual insurance companies were for the new reserve regulations, known as triple X, and where they operate. Some states, such as New York, have required hefty reserves for a while. Companies selling level-premium term policies there were already charging high premiums and won't have to raise rates now, says Burke Christensen, vice president of Quotesmith.com, another Internet insurance brokerage.
So far, 28 states have adopted the new regulations and about seven others are actively considering them, according to the National Association of Insurance Commissioners. Since most insurance companies operate in several states, they have raised reserves and adjusted their policies across the board. If the economy should slow down, premiums could rise even further because insurance companies would realize smaller investment returns, says Christensen.
Going to court is no longer the only way you can appeal a decision from the Internal Revenue Service. The tax agency has started two new programs to resolve disputes more quickly.
Fast-track mediation can be used in three situations: to settle disputes involving tax bills of $100,000 or less; offers by taxpayers to settle for less than $50,000, known as offers-in-compromise; and failures by businesses to pay withheld income taxes, withheld Social Security taxes, and collected excise taxes.
A taxpayer who disagrees with any or all of the IRS findings can request mediation, in which a third party gathers information from him and the manager of the IRS staffer who issued the findings. Both parties have to agree to mediation, but neither has to accept the mediator's decision, and the taxpayer can continue to appeal his case. This option is currently being tested in Denver, Hartford, Houston, and Jacksonville.
Binding arbitration is a two-year pilot program designed to expedite cases that are stalled in the appeals process due to disputes about the facts. When all other issues about a case have been resolved except factual ones, arbitration can be used, so long as the taxpayer and the IRS representative request it.
Both parties must agree to be bound by the decision of the arbitrator, whom they select together. The arbitrator can be an IRS representative or someone from outside the agency. If an outsider is chosen, the taxpayer and IRS will share the cost of his fee and expenses.
In addition to these initiatives, the IRS has expanded its offers-in-compromise program. Taxpayers can settle with the IRS by paying only part of their debt if they can't afford to pay it all. And those who agree to fork over the entire amount can now pay in fixed monthly installments. Previously, the amount fluctuated, due to changing interest rates. The IRS expects to collect more money as a result.
Now is a good time to take that trip to France, Italy, or any of the nine other European countries that have adopted the euro as their currency. The euro has dropped below $1 from its debut price of $1.17 at the dawn of 1999. That means you'll save at least 15 percent this year, simply due to the currency exchange.
This price advantage, coupled with attractive airfares and a strong US economy, is expected to draw more Americans to Europe in 2000 than ever before, says Einar Gustavsson, chairman of the European Travel Commission.
Besides France and Italy, Euroland comprises Austria, Belgium, Finland, Germany, Ireland, Luxembourg, the Netherlands, Portugal, and Spain.
If you're planning to visit more than one of them, you can use euro-denominated traveler's checks and avoid having to change your US dollars or dollar-denominated traveler's checks into the local currency when you arrive. You can't use actual euros, because they won't go into circulation until Jan. 1, 2002. By July of that year, the euro will have replaced all local currencies in Euroland.
Currently, hotels and merchants in those 11 countries can price goods and services in the local currency or in euros. You'll find the same bargains whichever you pay, because each of the 11 currencies has been fixed against the euro, so they've all fallen against the dollar as much as the euro has. Merchants who require payment in local currency also post the equivalent euro price, making it easier for you to compare charges within Euroland. Bon voyage!
If you're a salaried worker in a hospital that has canceled part or all of your medical school debt in exchange for your services, don't forget to include the value of the debt forgiveness in your tax return. The IRS considers canceled debt income, according to a recent agency memorandum. And your hospital will include the dollar amount on your W-2 form.
If you're a contract worker, the rules are slightly different. If the hospital is operated by a federal agencya veterans' facility, saythe debt cancellation will be included on a Form 1099, so long as it totals $600 or more. You'll have to declare that amount on your tax return. Private hospitals aren't required to report debt cancellation for contract workers.
Shopping for a car online has never been easier. You can visit the sites of manufacturers like Ford and General Motors, or those of traditional dealers like the ones in your neighborhood. Then there are online-only marketers, such as CarPoint and Autobytel.com.
Most marketers act as brokers between buyers and dealers, funneling information from consumers to a nearby dealer who then contacts them. Some online automobile services, like CarsDirect.com, however, sell directly to customers. You tell them what you want, submit a deposit, and they find the car at a dealer and deliver it to your home. You never have to speak with the dealer.
Almost all the sites let you customize your order, choosing model, color, and options, just as you'd design a computer purchased online. Usually there's no haggling about price, although you can name your own at some auction sites, such as priceline.com and UautoBid.
The attraction here is convenience. In general, you don't save money buying a car online. In fact, a study by CNW Marketing/Research, a Bandon, OR, firm, found that consumers who purchase new vehicles online pay about 6.5 percent more on average than those who visit traditional dealers and bargain for the best price.
"If you want the best possible price, go online, collect all the information you can about the vehicle you want, including the dealer's cost, then go in to the dealer and say, 'Here's what I want, and this is the price I'll pay,' " suggests Art Spinella, vice president of CNW.
You can find dealer costsand information about any available rebates or incentivesat Kelley Blue Book, www.kbb.com. Remember also that while most online merchants don't collect state sales tax, you must pay that tax when buying a vehicle online.
Here is a list of popular car-buying sites on the Web, with ratings based on their customer service, on-site information resources, and ease of use. The ratings, which use a scale of 1 to 10, are from Gomez Advisors, a Lincoln, MA, firm that reviews Internet sites.
|Site||Overall score||Key benefit||Key shortfall|
|CarsDirect.com||7.32||Strong consumer service, the ability tocustomize your order, and guaranteed prices||Some computer glitches|
|Autobytel.com||7.06||Many products and services, large dealer network||Reps not always available|
Tons of information and some entertainment, including an online version of NPR's Car Talk radio show
|DriveOff.com||6.67||Guaranteed prices, will deliver to your door if state law allows||Indecipherable options, doesn't reply to e-mail|
Easy to use, sophisticated filtering tools to help narrow your choices
|CarOrder.com||6.21||Guaranteed prices, home delivery if state law allows||Weak auto reviews, difficult to connect to home page|
|Autoweb.com||6.19||Good customer service, you can choose specific dealers to contact you (usually dealers are anonymous)|
Interactive home page is very slow
|DealerNet.com||5.82||In-depth car reviews, info on rebates and other incentives, e-mail answered promptly||No customer service phone number|
|Carclub.com||5.62||Strong expert advice from resident consultants|
Charges $249 for locked-in quotes and pricing information ($179 for Carclub.com members)
|Stoneage.com||5.17||Reviews on new-car test drives, link to Kelley Blue Book|
Very basic request forms, customer service reps often not available
Bernice Napach. Financial Beat. Medical Economics 2000;7:23.