Taxes, Stocks, Traffic Safety, Real Estate, Retirement, Investors, Fraud
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Beginning in September, the IRS will audit fewer than 50,000 taxpayers, in order to update its criteria for selecting returns to be audited. Some returns will be checked without contacting the taxpayers, some will be checked through an exchange of letters, and some payers will be invited for face-to-face meetings about specific items. About 2,000 returns will be audited line by line, though taxpayers won't be required to back up each line with receipts or other documentation, as in the old "audits from hell."
The IRS generally audits tax returns that contain errors or unusual entries, and it estimates that the government lost an estimated $278 billion in unpaid taxes in 1998, the latest figure available. The agency promises that the new audits will be less agonizing than the painstaking examinations last conducted in 1988.
Standard & Poor's is creating a new stock index, the S&P 1000, that will make it easier to invest in smaller companies. The new index combines the existing MidCap 400 and SmallCap 600 indexes into a single benchmark, lumping small and middle-sized companies together. Tracking the performance of smaller companies will be simpler with the new index, which was introduced to meet the demands of investors who want to split their assets between large companies and other firms.
The Department of Housing and Urban Development is cracking down on home finance kickbacks and fees charged for services to homebuyers that weren't performed. It's illegal for mortgage lenders to add a surcharge to a fee charged by a service provider, such as a termite inspector or credit bureaufor example, charging you $200 for an appraisal when the lender paid only $150 for the work. Lenders are also breaking the law if they charge customers for not using a service, such as a title search, from an affiliated company. If you think you've paid a fee for which the lender did little or nothing, send a written complaint to the HUD office nearest you (located in the blue pages of your local phone book).
The death rate for motorcycle riders aged 40 and older jumped nearly 70 percent from 1997 to 2000, says the Insurance Institute for Highway Safety, compared with only a 20 percent rise for riders younger than 40. The overall death rate for motorcycles is four times that of passenger vehicles.
Surveys show that many bike owners are at risk as they get older. In fact, the typical US motorcycle rider is now about 38, says the Motorcycle Industry Council.
The repeal of helmet laws in some states has contributed to the rise in fatalities, according to the IIHS. Only 20 states and the District of Columbia require that riders of all ages wear helmets.
Most people don't realize how much long-term care costs or how ill-prepared they are to pay for it, says a survey conducted by AARP (formerly the American Association of Retired Persons). Only 15 percent of people age 45 and older accurately estimated the average monthly cost of nursing home care at $4,650; more than half underestimated the cost. Only one in four correctly guessed the cost of assisted living facilities, which average between $2,000 and $2,500 a month.
Most of those in the survey also overestimated their chances of getting long-term care paid for. More than half incorrectly said Medicare pays for long-term nursing home stays, and 40 percent mistakenly said Medicare would cover assisted living.
About half of the participants in 401(k) plans expect stocks to gain an average annual 10 percent over the next 20 years, although a sizable number are a lot more optimistic, according to a survey conducted by The Vanguard Group, a mutual fund firm: Almost one-quarter of respondents are dreaming of gains of 30 to 100 percent a year.
Despite a two-year slide in the stock market, 85 percent say they haven't made any investment changes in their 401(k) plans and only half say they track the market at least once a week. Those participants who make investment changes or frequently track the market are more likely to be high-income, better-educated males with large retirement plans and personal asset balances.
Don't fall for a sales pitch offering huge returns if you invest in a "prime bank" portfolio, warns the North American Securities Administrators Association. There is no such thing as a prime bank, and promoters are lying if they claim that your investment in such a bank would be guaranteed or secured by insurance. State regulators have brought actions on behalf of more than 41,000 people who invested at least $470 million in prime bank scams, in which investors are promised access to secret, high-yield investments. Before making any investment, state securities regulators say you should ask the following questions:
? Are the seller and the investment licensed and registered in your state? Visit www.nasaa.org to find the name of your state securities regulator so you can check the investment out.
? Has the seller given you written information that fully explains the investment? Make sure you read the prospectus or offering circular before you buy.
? Are the claims realistic? Use your common sense and get a professional, third-party opinion. Promises of very high returns often signal investment fraud.
Yvonne Wollenberg. Financial Beat. Medical Economics 2002;5:15.