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How Medical Bill Advocates Can Slash Your Costs

By Cheryl Welch

Learn more about Cheryl on NerdWallet’s Ask an Advisor

Being sick is stressful and painful, and high health-care bills only make a bad situation more difficult. It’s even worse when you’re being charged excessively or erroneously. By some estimates, up to 80% of medical bills contain overcharges.

A medical bill advocate can significantly reduce costs for individuals, employers and employees. They do this by reviewing medical bills for abusive, fraudulent and erroneous billing practices.

Benefits for employers

Medical bill advocates offer great advantages to employers:

  • Reduced health plan costs: Lower medical claim costs for employees translate into lower costs for employers.
  • Increased employee productivity: Investigating medical bills can be time-consuming and frustrating. Billing departments are typically available only during business hours, and calling them takes employees away from work. A bill reduction service can free up employee time and eliminate frustrations.
  • Improved employee satisfaction, loyalty and retention: Saving money makes employees happy. Receiving assistance with health-care providers improves their satisfaction as well.
  • Reduced burden on human resources: In the absence of a medical cost reduction service, many employees go to their human resources department with problems. Employers can proactively address employee questions by offering them the right resources.

When you use a medical bill advocate, the amount of the reduced bill plus the commission will be less than the original bill. If an advocate is unable to reduce the patient’s costs, the advocate won’t charge.

Benefits for employees

It’s not only employers that benefit from medical bill advocacy. Besides saving on medical costs, employees receive:

  • Confidential support: Employee data is safe, and all cases are 100% confidential.
  • Time savings: Sorting medical bills and health insurance appeals takes hours. Medical bill advocates handle this so that employees can focus on other responsibilities.
  • Power to make informed decisions: Advocates educate employees to make better health-care choices.
Services offered by medical bill advocates

Services vary by company, but you should look for these benefits:

  • Bill audits: The advocate analyzes bills for errors and overcharges.
  • Bill negotiations: The advocate employs experienced teams that negotiate and reduce out-of-pocket expenses.
  • Insurance claims: The advocate appeals denied insurance claims to ensure the patient is being treated fairly.
  • Education: The advocate holds speaking engagements and one-on-one coaching sessions to improve clients’ understanding of medical costs and plans.
Case study

Let’s look at a real-life example. An employee cut his finger while making dinner and went to a network hospital. He received five stitches from a plastic surgeon. Insurance covered everything except for the out-of-network surgeon. His bill was for $8,500.

Our firm convinced the surgeon to accept the amount paid by the patient’s insurance company as payment in full. That amounted to a 94% discount and a savings of $8,000.

Medical bill advocates provide employers and employees with a simple solution. They connect patients with a team of highly trained experts to take the frustration out of dealing with the medical system. Their knowledge and negotiation skills reduce the stress of sudden illness. This allows patients to focus on what matters most: feeling better.

Cheryl Welch is the president of Hudson Valley Medical Bill Advocates.

How to Find a Good Tax Preparer (and Write Off the Bad Ones)

Tax preparers do a big chunk of America’s tax returns — more than 80 million a year, according to the IRS — but if you’re nervous about handing confidential information to someone in a largely unregulated field, you’re not alone. Here are some tips to help you find a good tax preparer and reduce the risk of expensive errors and exposing your finances.

Decide if you really need a tax preparer

Everyone’s tax situation is different, but many millions of them are simple enough — some W-2 forms from work, mortgage interest or a few other obvious tax deductions — to handle in-house. If that’s the case, it might be cheaper and faster to buy software and do your taxes yourself.

“Obviously the more you have going on, the more I would say go see a preparer,” says Trish Evenstad, president of the Wisconsin Society of Enrolled Agents.

» MORE: The best tax preparation software

If you do need a preparer, be choosy

“I wouldn’t just simply go through the phone book and pick someone randomly,” says Melissa Labant, director of tax policy and advocacy at the American Institute of CPAs. Asking friends, family or colleagues for recommendations can quickly reveal a preparer who’s caused headaches, she said.

Tax attorneys and enrolled agents specialize in or have passed exams on tax rules, and many certified public accountants also specialize in tax preparation. At a minimum, Labant says, a legitimate preparer should have a Preparer Tax Identification Number, or PTIN, from the IRS.

Never assume that because someone works at a big tax-prep company he or she must be an enrolled agent or a certified public accountant, Evenstad warns. And don’t assume a PTIN is valid, either — a 2014 Government Accountability Office study caught some unscrupulous preparers using fake PTINs or ones that didn’t belong to them. You can verify PTINs and professional credentials on the IRS website, and you can check accounting and law licenses on state-level CPA and bar association websites. The National Association of Enrolled Agents also maintains a directory.

» MORE: 7 tips to find the best tax preparer near you

Know what to look for

The IRS requires paid tax preparers to put their name and PTIN on returns they prepare. Not doing so, or asking you to sign a blank return first, suggests a preparer is up to no good, Evenstad said. Directing your refund to a bank account that’s not yours is another red flag. And make sure your return doesn’t say “self-prepared.”

Good preparers will also ask for last year’s return, Labant says. “If they don’t, then you’ll know right away this person is not exercising due diligence and they could easily be missing several key items that need to be reported on your tax return.”

The preparer should provide a secure portal for sending information, too.

“If someone called me and said, ‘Just email me a copy of your driver’s license,’ that would make me a little nervous about how well they’re protecting taxpayer identification information,” Labant says.

» MORE: Tax prep checklist

Report bad apples

If, despite your efforts, a preparer wrongs you, you have a few options. You can complain to the IRS by filling out Form 14157 and sending along supporting documents. Alerting the National Association of Enrolled Agents, the National Association of Tax Professionals and other professional groups might also spark an internal investigation if the preparer is a member, Evenstad says.

Getting restitution, though, might be harder. According to Council of Better Business Bureaus data, just 66 percent of customer complaints against tax preparers in 2015 were resolved — well below the national average of 79 percent across all industries, according to BBB spokesperson Katherine Hutt. By comparison, the cellular industry and banks usually have 98 percent and 97 percent resolution rates, she notes.

“Most of the time, when people are unhappy with a service like that, it’s because they didn’t check out the company ahead of time. Their complaints are usually the same thing that previous customers have complained about,” Hutt says.

If a preparer steals from you, call the police and file a complaint with the IRS.

“If they’ve stolen your identity, you definitely want to turn them in to the [IRS] Office of Professional Responsibility,” Evenstad says. “Because if they’ve stolen yours, they’ve probably stolen other people’s.”

Good preparers who make honest mistakes usually will pay your penalties, though any extra taxes will likely be on you, Evenstad adds.

» MORE: How to detect and report tax scams

Tina Orem is a staff writer at NerdWallet, a personal finance website. Email:

This article was written by NerdWallet and was originally published by The Associated Press.

Mortgage Rates Jan. 23: Lower; Weighing Trump’s FHA and Future Housing Policies

Thirty-year fixed, 15-year fixed and 5/1 ARM rates are all lower Monday, according to a NerdWallet survey of mortgage rates published by national lenders this morning.

Mortgage Rates Today, Monday, Jan. 23 (Change from 1/20) 30-year fixed: 4.41% APR (-0.05) 15-year fixed: 3.80% APR (-0.04) 5/1 ARM: 3.84% APR (-0.02) How will President Trump’s policies impact housing?

With the stroke of a pen just minutes after his inauguration, President Donald Trump reversed some long-standing as well as last-minute initiatives of the Obama administration. One of note immediately impacting the housing industry: the reversal of a 0.25% FHA mortgage insurance premium cut announced Jan. 9.

The premium discount, paid by FHA borrowers to protect lenders in the case of a loan default, was to go into effect Jan. 27.

In a letter announcing the action, General Deputy Assistant Secretary for Housing Genger Charles said more analysis regarding the premium rate cut was required.

“FHA is committed to ensuring its mortgage insurance programs remain viable and effective in the long term for all parties involved, especially our taxpayers. As such, more analysis and research are deemed necessary to assess future adjustments while also considering potential market conditions in an ever-changing global economy that could impact our efforts,” Charles wrote.

Fannie Mae chief economist Doug Duncan believes it’s nearly impossible to predict how future policy changes made by the new Trump administration will impact the economic expansion — and housing — in 2017.

“Incoming data suggest improving consumer spending, diminished labor market slack and advancements in wages, but until we can more clearly read the political tea leaves, it’s difficult to say whether this late-cycle expansion will continue into its eighth year,” Duncan wrote in an analysis.

Fannie Mae expects mortgage rates to rise gradually in 2017, ultimately reaching a fourth quarter average of 4.3%. According to the analysis: “There is risk that rates could rise faster and higher than forecasted, but the impact on housing could be offset by strengthened income growth.”

“We expect housing to remain resilient and continue its recovery in 2017,” Duncan added, “with affordability standing out as the industry’s greatest obstacle, particularly for first-time homeowners.”

Homeowners looking to lower their mortgage rate can shop for refinance lenders here.

NerdWallet daily mortgage rates are an average of the published annual percentage rate with the lowest points for each loan term offered by a sampling of major national lenders. APR quotes reflect an interest rate plus points, fees and other expenses, providing the most accurate view of the costs a borrower might pay.

Hal Bundrick is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @halmbundrick.

Mortgage Rate Newsletter Get daily mortgage rate updates delivered straight to your inbox!

Excuses, Excuses When Delaying Retirement Savings

By Gregory S. Ostrowski

Learn more at NerdWallet’s Ask an Advisor

Make no mistake about it, most Americans working in the private sector are on their own when it comes to saving for retirement.

According to a study released in 2013 by the Bureau of Labor Statistics (BLS), as of 2011, only 18% of this segment was participating in a pension (or defined benefit) plan. About two decades prior it stood at 35%, almost double. What’s more, only 10% of private industry firms even offer a pension plan.

Why have once solid pension plans been eroding from the private sector?

One reason is that labor has shifted more to global markets, making it more challenging for companies that employ domestic workers to compete. In developing countries, labor is less expensive and companies often don’t need to pay for pensions.

To remain competitive, firms employing workers in the U.S. have been trying to manage costs, which includes saving on labor. Cutting or eliminating pension plans has been their version of low-hanging fruit.

Problem is, individual Americans have been slow to keep up with this trend and have not shifted the onus onto themselves as much as they need to.

For some, 401(k) plans sponsored by their companies are a good start, but they won’t solve everything.

The BLS reported last year that only 66% of private sector companies offer access to retirement benefits, and only 49% of private sector employees participate.

What about Social Security? Well, it helps, but whether it will keep people in decent financial shape is open to debate.

If you don’t have a pension and have been slow in getting your 401(k) funded, now is the time to start considering other ways to have an income stream for your future self.

Three reasons (OK, excuses) people cite for not saving more earlier in their careers: They can’t afford to; their investments won’t add up to anything; and they don’t know how.

Let’s look at each and offer some solutions.

I can’t afford to save

Expenses. We all have them. Maybe they’re what’s keeping you from putting extra money away. Maybe you feel that you just don’t have any extra to go around each month.

There are financial realities we can’t avoid: housing costs, food, clothing and, for many, student loans. But we don’t have to live in an area we can’t afford or shop at a pricey online retailer for a new pair of jeans.

First take a look at where your money is going. Here are some examples of what the average family (defined by the Bureau of Labor Statistics as a household of 1.8 adults and 1.9 children under 18) spends on different items each month:

● Housing — $1,535 (includes shelter, utilities, furnishings and equipment) (BLS, 2015) ● Vehicle, gas and maintenance — $500 (BLS, 2015) ● Cable TV — $99 (NBC News) ● Smartphones — $140 (J.D. Power and Associates, 2013) ● Netflix — $10 (Standard plan) ● Food away from home — $250 (BLS, 2015) ● Coffee — $92 (Time/The Consumerist, 2012) ● Apparel and services — $155 (BLS, 2015) ● Soft drinks — $70 (Time/The Consumerist, 2012)

These figures may or may not be what you spend. For example, you may not drink soda, so you won’t have any soft drink expenses. But you may spend much more on meals on the go or dinners out.

Also, I haven’t included things like vacations, since they’re more of a one-time purchase per year. But don’t overlook them — there’s real savings to be had if we shop smarter and take more manageable trips.

The idea is to look at each of these categories and ask, “Do I need this?”

Can you drive a slightly less expensive car? Or move to a slightly more affordable area with a shorter commute? You’ll be surprised where you can find money.

Let’s say you can lower your rent by $100 by moving somewhere less expensive, find a better cell phone plan and cable package for another reduction of $50, cut out a few coffees and make dinner at home one extra night for another savings of $50. That’s $200 a month.

My savings won’t add up to anything

Another reason people delay funding their 401(k)s is they don’t believe what they’re investing is going to make an impact.

Let’s go back to our example. If we take that $200 each month and invest it, starting when we’re 25 through the time we’re 65, here’s what we get:

● Annual contributions — $2,400. ● Total years — 40. ● Total principal contributed — $96,000. ● Interest rate — 5%. ● Total interest — $209,000. ● Total principal and interest — $305,000.

So, by moving two towns over, not paying for data you don’t need or shows you don’t watch, and planning meals a fraction more, you’ve managed to create over $300,000 for your nest egg. That’s pretty good.

I don’t know how to save

This is where today’s investing landscape is vastly different from before. The barriers to putting money away are lower than ever, and you don’t need huge sums of cash to give to a broker to buy stock for you.

If you have an employer-sponsored 401(k), start there. Sometimes you’ll get to take advantage of a company match, which is essentially the closest thing to free money you can find. Establishing your 401(k) account is often as easy as a visit to your employer’s human resources office or signing up online.

If you’re struggling with putting anything away, start with even 1% of your income and increase it incrementally. It doesn’t sound like a lot, but it will add up.

If you don’t have access to a 401(k), open an individual retirement account, or IRA. There are numerous IRA providers, so consider consulting a financial advisor to see what options make sense for your personal situation. You’ll need to work other investments into your portfolio over your career, but it’s a great start, especially if you’re just beginning to invest.

If you’re not ready for either, make sure you’re at least putting money consistently into a savings account. While this by itself is certainly not a recommended long-term strategy, it will get you in the habit of putting something away while you’re deciding on your next step.

While there are challenges in saving for retirement, you don’t need to put it off. Start today and your future self will thank you.

Gregory S. Ostrowski is a certified financial planner and managing partner of Scarborough Capital Management.

This Trick Will Help You Finally Pay Off Your Credit Card Debt

In 2017, one-in-four Americans say they’re thinking about money more than just about anything else. Does that sound like you? One of the best ways to clear some of your head space may be to pay down credit card debt. Less debt means fewer minimum payments, which means an easier time managing your day-to-day cash flow.

That’s not the only benefit of paying off credit card debt early either. With annual percentage rates (APRs) in excess of 15%, credit cards can cost you a big chunk of change in interest. Plus, high credit card balances can do big damage to your credit. (You can see the effect of your current balances by viewing two of your free credit scores, updated every 14 days, on

A Big Trick for Paying Off Credit Card Debt

Paying off credit cards takes planning and discipline. But you can also use a few tricks to make the process easier.

One big trick to make paying off credit card debt both easier and faster is using 0% APR balance transfer offers. It’s a simple strategy that can save you hundreds, or even thousands, in interest, not to mention allows you to potentially pay off your debt sooner.

You’ve got to leverage the offer correctly, however. Here are the basic steps to using this strategy.

  1. Apply for a card with a 0% introductory APR offer on balance transfers.
  2. Move some or all of your balance from an interest-bearing card to the card with the 0% APR. (Wondering what card to use? You can view our picks for the best balance transfer cards here.)
  3. Pay down that card as quickly as you can.
  4. If the card still has a balance when the introductory offer is up, consider applying for another 0% introductory APR card, and transfer the balance again. (More on this in a minute.)

That’s the gist of the strategy. It’s a great option for those with credit high enough to qualify for 0% introductory APR offers. Before you dive in, though, read through these additional tips and tricks.

1. Watch the Balance Transfer Fees

First off, it’s essential that you look at and understand balance transfer fees. Most balance transfer deals come with an upfront fee that gets tacked onto your balance once you make the transfer. This is how credit card companies come out on top with balance transfer deals.

Many times, transferring the balance to the 0% interest card will still save you money. But that may not be the case if you’re transferring a relatively small balance or if you’ll pay off the debt quickly either way.

To know whether or not a balance transfer will save you money, you’ll need to calculate your break-even point. First, estimate how many months it will take you to pay off the transferrable balance. Then, figure out how much interest you’d pay in that period of time if you did not transfer the balance. Finally, calculate the total fee you’d pay on the balance transfer.

If the balance transfer fee is more than the interest you’d pay in your current situation, it’s not worth your while.

2. Keep Track of Timing

Because balance transfer deals typically last between six and 18 months, you’ll need to keep careful track of when each introductory offer ends. If you’re running multiple balance transfer offers to pay off a lot of debt, keep a spreadsheet of offer end dates, current APRs, and future APRs once the offer is up.

Have a look at your spreadsheet each month. When a card’s offer period is about to end, decide whether to roll the remaining balance to a new balance transfer deal, or to leave it where it’s at.

Remember, it’s in your best interest to pay your transferred debt off in full by the time the 0% introductory offers expires. While you could potentially move the debt to another balance-transfer credit card, you’ll likely have to pay another fee. Plus, you’ll incur another hard inquiry on your credit report, which could ding your credit score. That’s why the next step is particularly important.

3. Know Your Credit Situation

This debt payoff strategy won’t work for everyone. You’ll likely only qualify for good balance transfer deals if you have good credit in the first place. And it’s difficult to say for sure how this scheme will affect your score.

On one hand, the hard inquiries generated by additional credit card applications will ding your score. But having a higher overall credit limit will improve it. These two may balance one another out over time.

The key is to keep track of your credit score throughout this process. If your score isn’t currently high enough to qualify for a 0% introductory APR deal, you may want to take time to polish up your credit before you apply.

4. Don’t Add New Debt

The number one key to making this strategy work for you is to not add any new debt. If you can’t avoid temptation to spend because you now have more available credit, you’ll just add to your mountain of credit card debt. One option is to shred your cards, even if you don’t close your accounts. This makes it harder to impulse spend on those cards that now have no balance once you’ve completed the transfer.

As long as you keep from adding new debt and follow the steps outlined here, 2017 could be a great year for getting free from debt.

This article originally appeared on

8 Tips for Refinancing as Mortgage Rates Rise

So you want to refinance, but mortgage rates are rising. Don’t worry — you haven’t missed the boat on your refi opportunity. Mortgage rates are still historically low, and they aren’t expected to exceed 5% in 2017, according to many economists and mortgage analysts.

Here are eight tips to help you successfully refinance your mortgage as rates rise.

1. Make your move fast

Even though rates aren’t expected to shoot through the roof this year, they’ll likely stay on a steady, upward trajectory.

“If you’re thinking about refinancing, now probably is the time to do it,” says Lauren Lyons Cole, a certified financial planner and money editor at Consumer Reports, adding that rates are probably not going to be lower than they are right now.

It’s worth doing your research to see what rate you can get and then acting swiftly before it’s too late.

» MORE: Calculate your refinance savings

2. Prepare in case rates drop

You’ll want to get your refinance application in as soon as possible, not only to catch low rates before they rise, but also to avoid a backup in refinance applications should rates suddenly fall, according to Casey Fleming, author of “The Loan Guide: How to Get the Best Possible Mortgage.”

“This is the biggest mistake I think people make,” Fleming says. “If you’re not in the pipeline ready to go when the interest rates start moving down, all of a sudden you have to get in the back of the line, and oftentimes you miss the dip in the rates.”

Fleming says that you’re not obligated to lock in a rate when you submit your application. You can wait and watch the market for as long as you want.

If you’re not ready to submit your application just yet, work on keeping your credit score up, have your financial documents ready to go, and save money for the upfront refinancing fees. Just remember that rates are rising slowly but steadily.

3. Make sure your credit score is in good shape

Acting fast on a refinance may not be worth it if your credit score isn’t in top shape. Your credit score plays a big part in the rate you can get on a mortgage. Just because low rates are out there doesn’t mean you’ll qualify for them.

Lyons Cole says that, in some cases, your credit can be easily bolstered. “I’ve seen people’s scores go from the 500s up to the 700s in about three months just from [quick changes] on your credit report.”

Some ways that you can work on your credit include checking your credit report for errors, paying your bills on time and keeping a safe distance from your credit limit.

“Mortgage rates aren’t going to go up a full point between now and the next three months,” Lyons Cole says. “Taking the time to get your credit score to a place where you qualify for the best possible rate could make a huge difference over the course of a 30-year mortgage.”

4. Use rising home prices to your advantage

Along with rates, home values are rising. Now might be a good opportunity for you to tap into your home’s equity through a cash-out refinance. If you do so, proceed with caution. It’s risky to spend the proceeds from a cash-out refi on things that don’t rebuild your equity, like a car.

You can also access your home’s increasing value through a home equity loan or home equity line of credit.

5. Refinance into an ARM

Refinancing into an adjustable-rate mortgage in a rising rate environment can make sense since these loans tend to come with lower initial interest rates than fixed mortgages. They’re especially useful if you plan on staying in your home no longer than the fixed term of the loan.

Jenny Erdmann, a certified financial planner and vice president of Guide My Finances in San Diego, says that as long as an ARM makes sense for you and you’re aware of the drawbacks with this type of loan — like the possibility that your rate may eventually increase — you should try to get the lowest rate you can.

6. Refinance to a shorter term

Refinancing into a shorter-term fixed-rate loan can save you money in two ways: the interest rate is lower than a 30-year fixed-rate loan, and the shorter term means you’ll save more money over the life of the loan by paying less interest.

Here’s an example: Using NerdWallet’s refinance calculator, we plugged in the numbers for a 30-year, $300,000 mortgage taken out in 2010 with a 4.75% fixed interest rate. We refinanced it to a 15-year mortgage with a 3.50% fixed interest rate. Savings equated to $52,975 over 15 years. While your original monthly payment of $1,565 would take on an extra $311 each month, you would save more money in the long run and build equity faster.

Take into account that if a 3.50% interest rate went up a quarter of a percentage point, your savings would decrease to $47,145 over a 15-year period, and your monthly payment would increase by $344.

7. Pay points

Before your loan closes, you’ll have the option to pay points on your mortgage, which is paying money upfront, to permanently lower your interest rate. Fleming says that “if the additional cost makes sense, then absolutely pay points.”

While one point equals 1% of your loan amount, you won’t always have the option to pay in full points. The amount of money you have to pay to buy down your rate depends on the interest rate market, according to Fleming. He says that if the market is volatile, then you’ll probably have to pay more to buy down the rate. But if the market is stable, then you’ll pay less. Fleming says that it might make sense for you to wait until rates stabilize so you can pay less.

8. Refinance out of an ARM, HELOC

If you’re concerned about the interest rate rising on your adjustable-rate mortgage or on your home equity line of credit, refinancing to a fixed-rate product can allow you to lock in a new rate to make your monthly payments more predictable.

Fleming says that borrowers with a HELOC should watch out for the recast period. That’s when the draw period ends and you can no longer pay just the interest on the loan. Since rates are increasing, “anybody with a HELOC should definitely look at their options,” says Fleming.

Your options include calling your bank and seeing if you can switch your HELOC to a fixed rate, though the rate may go higher if you do. You can also refinance the HELOC into a home equity loan at a fixed rate. Another option is to refinance your first mortgage and wrap the second mortgage into it. However, Fleming says if you end up refinancing to a higher rate, this strategy wouldn’t make much sense.

Michael Burge is a staff writer at NerdWallet, a personal finance website. Email:

Investing Apps Can Foil Financial Planning

New investors need at least two things: money and confidence. But many beginners, especially younger people, lack both.

What they do have are investing apps, carefully designed to plug those holes by removing minimum investment requirements and adding a little encouragement. One company, Acorns, will literally invest your small change.

These apps bring what has historically been a rich person’s game to the masses — fund companies, brokerages and financial advisory firms have long locked out small-dollar investors. The problem: Many people may not be ready to invest, and if they are, an investing app alone isn’t the best place to do it.

Ignoring the financial big picture

Advisors frequently compare financial planning to building a house: First, you lay the foundation — an emergency fund, insurance coverage and a balance sheet free of high-interest debt. An app can upend that, says financial technology expert Bill Winterberg.

“For these apps, the answer to the question of ‘what should I do with my money,’ 100% of the time, is that you should invest. An advisor, on the other hand, says, ‘Should you pay down debt? Do you need more insurance coverage? Do you have enough money in an emergency fund?’” Winterberg says. “Those might be really good ways to use extra money.”

Acorns, which rounds up dollar amounts from users’ everyday purchases and invests that change in a managed portfolio, says its technology reframes this issue. By focusing on extra pennies, investing “can happen alongside traditional financial building blocks,” says Heather Gordon, the app’s brand manager.

The scenario Gordon describes is the best way to use these apps; investing rounded-up change or another small amount is innocuous and even helpful as an educational exercise. But Acorns says over half of its users make recurring investments beyond the rounded-up amounts. Other apps, like Robinhood, which offers free stock trading, and Stash, which serves educational content to help users build a portfolio of exchange-traded funds, accept only traditional lump deposits.

Erica Bentley, content manager for Stash, says the service isn’t trying to answer all financial needs. “It would be great if [users] started with paying off debt, or having an emergency savings account built up, but for a lot of people Stash is the first entrance into thinking about saving, and with our content, they learn they should also be considering an emergency savings account.” The question is whether a service like Stash is well-suited to being that first entrance.

Shortchanging retirement accounts

Much as in financial planning, there’s a widely recommended order for how to invest your dollars: Tax-advantaged options, like 401(k)s and individual retirement accounts, come first.

The paradox is that as investing apps target young, beginner investors, many offer only taxable brokerage accounts, directing dollars away from the tax-free or tax-deferred growth of traditional and Roth IRAs.

“If they’re directing these investors to a traditional brokerage account, it doesn’t have those tax advantages, and over time, that could compound to tens of thousands of dollars — potentially hundreds of thousands of dollars if we have a bull market,” says Winterberg.

Acorns and Stash both plan on adding retirement accounts in the next year.

Understanding the risks

Apps typically use a questionnaire to identify an investor’s goals, time horizon and appetite for risk. But “even the process of asking people about their risk tolerance doesn’t have much follow-up to verify that the person — who may be new to investing — really understood the questions, and the risks involved,” says Michael Kitces, director of wealth management at Pinnacle Advisory Group.

Robinhood adds additional risk with “Robinhood Gold,” a fun name for margin trading, or the ability to buy stocks on borrowed money. Robinhood says the service, which charges a flat fee, is reserved for “experienced investors” — federal regulations require a $2,000 account minimum — but the app is bare-bones and provides little education about the risks besides a disclosure and an FAQ. In this kind of trading you can lose more than you’ve deposited.

Margin trading is offered by many brokers, who frequently charge interest rather than Robinhood’s more user-friendly fee. Robinhood says its app is used by many investors as an “educational experience” — but engaging in margin trading could quickly make it a costly one.

Fees drag down small portfolios

Finally, there are the fees. Robinhood offers free trading if users avoid the aforementioned margin activity, and Acorns is free for college students. Otherwise, Acorns and Stash have the same fee structure: $1 a month for accounts under $5,000, and 0.25% per year for accounts of $5,000 or more.

Neither service communicates that flat fee to users as a percentage of assets — which is how most investments are priced — but when sliced that way, $1 a month is 2.4% a year on $500, much more than a financial advisor would charge.

The argument from these apps is that most financial advisors and even online brokers won’t handle an investment as small as $500. Even if a broker has no deposit requirement, mutual fund minimums are rarely under $1,000. And that may be by design.

“People who don’t have $1,000 to invest are people who don’t have $1,000 to invest, and there’s a reason for that,” says Winterberg. “They may be spending more than they earn, or they may have credit card debt. Perhaps investing isn’t the right choice for them right now.”

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Arielle O’Shea is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @arioshea.

This article was written by NerdWallet and was originally published by USA Today.

Tax Identity Theft


Computers and the Internet have become mainstays in virtually every area of American life in the 21st century. There are tremendous benefits and conveniences to this, of course, but there are also some downsides — such as the increased risk of identity theft that arises as we share more of our personal information online. In fact, identity theft has been called "the crime of the 21st century," consistently ranking at the top of the Federal Trade Commission's list of complaints every year. While there are many ways for identity thieves to strike offline, the Internet has made it that much easier for them to steal sensitive personal information from unsuspecting and careless individuals online. A New Kind of Identity Theft With tax-filing season now coming up, there's another kind of identity theft you should be watching out for: tax identity theft. In this scheme, identity thieves enter stolen personal information (primarily Social Security numbers) on fraudulent tax returns that claim tax refunds. They then cash the refund checks themselves, leaving the victims spending weeks or months trying to clear up the confusion with the IRS and get their own legitimate tax refunds. "You can't necessarily monitor tax ID fraud, because of the fact that so much of our information is out there," says Greg McBride, Chief Financial Analyst at "Somebody can have your Social Security number and they could have been sitting on it for a while, and you would have no idea until they go and file a bogus tax return under your Social Security number. You only find out at the point where your legitimate return gets rejected." On its website, the FTC states that tax or wage identity theft accounted for more than 45 percent of all identity theft complaints in 2015 — driving an increase of 47 percent in complaints from 2014. This makes tax identity theft "the largest category of identity theft complaints by a substantial margin," the FTC notes. Recent news reports have featured a number of stories highlighting the different ways that thieves have stolen personal information from victims and used it to commit tax identity theft. For example: A part-time data entry clerk stole tax returns she was working on and used the information to file fraudulent tax returns requesting large refunds. An employee at a collection agency stole the personal information of debtors and then sold it to professional identity thieves, who used it to file false returns seeking fraudulent refunds. A woman who worked as a customer service rep for a student loan processor gave the personal information of student loan borrowers to a tax preparer, who in turn used the data to file fraudulent returns requesting large refunds. Steps to Take The next couple of months are prime time for tax identity theft, as millions of individuals file their personal tax returns leading up to the April 18 filing deadline. Here are some precautions to help protect yourself, as well as steps to take if you believe you have been victimized: Read any IRS notices you might receive very carefully. It's likely that any mail you receive with a return address that begins "Internal Revenue Service" is going to get your attention, but you should pay especially close attention to these due to the heightened risk of tax identity theft. If a thief uses your Social Security number to obtain a fraudulent tax refund or a job, you will likely receive a notice from the IRS telling you that you were paid by an employer you don't recognize, that you under-reported your income, or that more than one tax return was filed using your Social Security number. Any of these scenarios is a strong indication that you may be the victim of tax identity theft. Don't reply to any emails, texts or social media messages asking for your personal information. The IRS will never initiate contact with you in this way to ask for your Social Security number or any other sensitive personal information. Don't reply to or click on any links in any kinds of messages like this; instead, forward the message to the IRS at so they can investigate it further. Contact the IRS immediately if you are suspicious of fraud. If you encounter any of the scenarios described above, call the IRS at (800) 829-0433 to report the potential fraud. Trained specialists will help you sort out the mess, get your tax return filed properly, and receive any legitimate tax refund you are entitled to, as well as help you guard against becoming a victim again in the future. Take additional steps to limit the potential damage of identity theft. After you have talked to the IRS and worked with them to clear up any issues with your tax return and refund, file an identity theft complaint with the FTC and a police report with your local police department. Also put a fraud alert on your credit reports so that businesses must contact you to verify your identity before issuing credit in your name. Simply contact any one of the three major credit-reporting bureaus (TransUnion, Equifax or Experian) and they will alert the other two bureaus about your fraud alert. Like any swindle, it is always better to take steps to prevent identity theft from happening than to react to it after the fact. "To whatever extent you can, try to file your tax return early," advises McBride. "That's really what a lot of the tax ID thieves do — they file a tax return very quickly, claim a bogus refund under your name, and then when you go to file your legitimate tax return before the tax deadline, it gets rejected." Do your best not to become a victim, and then act quickly to rectify the situation if you do. If you would like to prevent becoming a victim of identity theft, check out our credit monitoring service. Photo ©

Originally Posted at:

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Protect Your Finances This Tax-Filing Season

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Top Tax Benefits of Home Ownership


Your home is your castle, and it is also a source of tax deductions. Yet, every year, Americans let these potential tax deductions pass by, not realizing how to take advantage of them. IRS Publication 530, titled "Tax Information for Homeowners", can fill you in on the deductions that are available to you for the 2016 tax year. Several of the most important tax benefits are listed below. Mortgage Interest – This should be the largest home-related tax deduction that is available to you unless you purchased your home in the 2016 tax year. You can deduct interest payments on either primary or secondary homes, up to the limit of $1 million in collective mortgage debt if married and filing jointly. The limits are $500,000 for single filers or married couples filing separately. The mortgage interest deduction applies to anything that meets the definition of a basic living space that you own. Condominiums, mobile homes, and even boats are included assuming that they meet the living space definition with at least one sleeping area, a kitchen, and a toilet. Details may be found in IRS Publication 936, "Home Mortgage Interest Deduction." Points – Any points that you paid at closing to lower the interest rate on your mortgage are deductible. Generally, the deductions must be amortized over the life of the mortgage, but there are circumstances where you may be able to deduct the entire amount of your points paid in the year of purchase. See Publication 530 for details. Property Taxes – You can deduct real estate taxes that are assessed uniformly (no taxes that reflect a special privilege or a service granted to you). Property taxes associated with the purchase of a home may also be deducted. Mortgage Interest Credit – Typically, mortgage interest is taken as a deduction. However, if you have a qualifying low income, you can claim mortgage interest as a credit instead. This subtracts the total directly from your tax bill instead of from your taxable income used to determine your tax bill. To claim this credit, you must have received a qualified Mortgage Credit Certificate from a suitable state or local agency. File Form 8396 along with your tax form to claim your credit. Home Equity Loans – When you borrow against your home equity, either with a loan or a line of credit (HELOC), the interest may be deductible depending on how the loan is used, the amount of the loan, and the value of your home. Forgiven Mortgage Debt – When a bank decides to accept a short sale for less than the value of a home and forgives the rest of the debt, that debt is usually considered as taxable income. In 2007, Congress created the Mortgage Forgiveness Debt Relief Act to reclassify the forgiven debt as non-taxable income, saving already distressed homeowners from a huge tax burden. After being renewed several times, this tax relief measure expired at the end of 2016 and has not been renewed by Congress. However, the good news is that if you're in the process of discharging mortgage debt and signed a written agreement with the lender in 2016, you're still eligible for this tax exemption when you file your 2016 return. What’s no longer covered is any mortgage debt cancelled in 2017 or beyond. Check the IRS publications and see if any of these valuable deductions apply to you. Take advantage of every tax deduction that you can. Otherwise, the government simply keeps more of your money. Photo ©

Originally Posted at:

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Prevent Identity Theft From Affecting Your Taxes


When your identity is stolen, you have so many potential issues to deal with — changing passwords, closing accounts, dealing with fraudulent charges, and placing fraud alerts with the credit bureaus — that you may forget about potential tax fraud. Armed with your personal information, identity thieves can file a fraudulent tax return in your name and receive a refund before you realize your information has been compromised. Sometimes taxpayers are unaware of the breach until they have problems filing their taxes. What do you do if you fall victim to tax-related identity theft? Start by responding to any IRS notice as instructed. Your first hint that there is an issue could be a notice from the IRS asking you to verify your identity because of a suspicious tax return with your Social Security number. Remember that almost all legitimate IRS contact will be through a letter in the mail. Since your information has already been compromised, you may receive threatening phone calls from scammers pretending to be IRS agents demanding immediate payments under threat of arrests or legal action. Do not fall for these scams. If you find that you cannot file your taxes electronically because a return has already been filed in your name, you need to take immediate action. To avoid potential penalties, file your taxes using a traditional paper return and pay any taxes that you owe. At the same time, file an IRS Identity Theft Affidavit (Form 14039). You can include the affidavit with the paper return or follow the form's instructions to send it separately by mail or fax. Only file Form 14039 if your e-filing is rejected because a fraudulent duplicate was filed or if your Social Security number has been stolen and the IRS has notified you that you may be a victim of tax-related ID theft. Once you are a confirmed victim of ID theft, you may be issued a separate and unique six-digit number known as an Identity Protection PIN (IP PIN). To ensure the integrity of your return, the IRS will send you a letter each year containing a new IP PIN. By taking common-sense steps, you can reduce the likelihood that you will fall victim to tax-related ID theft. Protecting your Social Security number is the first step. Never carry your Social Security card with you; keep it in a secure place in your home. Be cautious in providing your Social Security number, and only supply it when absolutely necessary. Protect your digital information with the same diligence. Make sure that all of your computers and mobile devices are protected with sufficient anti-virus and anti-spamming software. Use sufficiently complex passwords and change them regularly, do not use the same password for multiple accounts, and do not undercut your security by writing down all the passwords in a readily accessible area. Only transfer information using secure methods — avoid unsecure Wi-Fi connections or hot spots. These steps can help protect your personal information and foil potential tax fraud. For further suggestions on protective measures, see IRS Publication 4524, "Security Awareness for Taxpayers". You can also do your part to reduce tax fraud by reporting any suspicious tax-related activity to the IRS, even if you are not directly affected. For instructions on reporting tax fraud, follow this chart on the IRS Website. The IRS halted 1.4 million fraudulent returns in progress in 2015, saving $8.7 billion — but they can't do it alone. It takes a collaborative effort from everyone involved to beat tax fraud related to identity theft, including you. If you would like to prevent becoming a victim of identity theft, check out our credit monitoring service. Photo ©

Originally Posted at:

How to Avoid Being a Tax-Scam Victim

IRS Warns Taxpayers Of Scams

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