Excellent articlea on election to treat a decedent's trust as an estate for tax purposes under IRC 645.
http://goliath.ecnext.com/coms2/gi_0199-3035781/Electing-to-treat-a-revocable.html
http://www.manningfulton.com/Page.aspx?Doc_ID=1430
Sunday, March 30, 2008
Wednesday, March 26, 2008
When to Start Taking Social Security
Article from Journal of Accountancy:
http://www.aicpa.org/pubs/jofa/jul2006/garnett.htm
A video presentation by Jonathan Clements of the Wall Street Journal:
http://www.blogmyway.org/entry.php?w=andy&e_id=11525
Jonathan's home page:
http://www.jonathanclements.com/links.html
And here is another article from the Wall Street Journal with an excerpt below:
http://online.wsj.com/public/article_print/SB119514459625294332.html
The most frequently asked question about Social Security in financial advisers' offices
"When should I file for benefits?" Invariably, that's the question planners hear first.
When it comes to the answer, the conventional wisdom is changing. Where many advisers once recommended grabbing benefits at age 62 (at which point your monthly check is reduced permanently by as much as 25%), experts today say extended life spans and the demise of traditional pensions argue for waiting until your full retirement age, or later, to collect a paycheck. (You get your largest possible benefit at 70.)
Even "foolproof" strategies are no longer looked upon as foolproof. "Let's say your doctor tells you that you have six months to live," says Bruce Schobel, a New York actuary who worked in the Social Security Administration in the 1980s. "So, it's obvious: You take benefits at 62, right?" Maybe not. Because of Social Security rules involving spousal benefits, Mr. Schobel says, "taking a reduced benefit at 62 could serve as a cap on the surviving spouse's payout, reducing that person's future benefits by tens of thousands of dollars."
"So even an apparently simple decision becomes complicated," he says.
Calculators, of course, can help. (We discuss some of the better ones below.) But first, take a few minutes to read a new report: "Rethinking Social Security Claiming in a 401(k) World," written by James Mahaney and Peter Carlson, retirement specialists at Prudential Financial Inc. It's the best discussion we've seen about filing for benefits and possible strategies for doing so. (Note to the give-me-my-money-at-62 crowd: The authors conclude that changes in Social Security in recent years "make the value of delaying the receipt of...benefits greater than in the past.")
The report, published in August, can be found at the Pension Research Council, part of the Wharton School at the University of Pennsylvania. (Go to pensionresearchcouncil.org9 and click on "Working Papers" and 2007. Registration is free.)
Coolest strategies you've never heard of for claiming benefits
One way many couples can maximize Social Security benefits over their lifetimes is for wives to claim benefits at age 62, and for husbands to delay filing until almost 70, says Alicia Munnell, director of the Center for Retirement Research at Boston College. (That's based on a number of factors, including income levels, life spans and survivor benefits.) You can find Dr. Munnell's research in the June issue of the Journal of Financial Planning. (See fpanet.org/journal10 and click on "Past Issues and Articles.")
Of course, 70 is a long time to wait for Social Security. So, here's a way -- courtesy of Steve Potter, a retired public-affairs specialist at Social Security -- to avoid the wait and still get a sizable benefit at age 70.
The scenario: George, at his full retirement age of 66, expects a benefit of $2,000 a month. His wife, Martha, at her full retirement age of 66, expects a benefit of $1,000 a month.
The strategy: Martha files for a reduced benefit on her own at age 63, or $800 a month. George, at age 66, files for just a spousal benefit, based on Martha's earnings. He would get $500 a month as Martha's spouse. (Yes, Social Security allows George to get half of what Martha was projected to receive at her full retirement age.) Then, at age 70, George applies for benefits based on his earnings history. With the "delayed retirement credit" (the additional dollars one receives for waiting until age 70 to claim Social Security), George's benefit would be 32% higher, or $2,640 a month.
Social Security would stop George's spousal benefit of $500 a month because he's entitled to the $2,640, based on his own earnings, at age 70. Again, for this to work, George must wait until his full retirement age or later to file for a spousal benefit.
The nice part about this strategy is that George -- if he's trying to maximize his and Martha's combined benefits -- doesn't have to wait three or four years beyond his full retirement age for a paycheck; he can start collecting benefits at 66 based on Martha's earnings history -- and jump to a considerably bigger benefit at age 70. As far as the "break-even" point goes -- the age at which the accumulated value of benefits from this strategy will start to exceed the accumulated value from both spouses filing for full benefits at age 66 -- it's 79. Beyond that age, the 63-66 strategy yields a larger total return. (This example assumes George and Martha are the same age.)
Note: Some Social Security representatives we spoke with weren't aware of this strategy. If you try this at your local Social Security office -- and if the staff balks -- ask them to confirm the strategy with Social Security headquarters in Baltimore, which confirmed it for us.
Best calculators and sources of information
Start with the Social Security Administration and its Web site, ssa.gov.
The calculators alone are worth the visit. Three benefits calculators -- "Quick," "Online" and "Detailed" -- estimate payouts using different retirement dates and levels of future earnings. (Click on "Calculate your benefits" on the home page.)
In addition, an "Earnings Limit" calculator illustrates how a salary -- if you file for benefits before full retirement age and are still working -- might affect your monthly check from Uncle Sam. A "Retirement Age" calculator shows how retiring early reduces your monthly payout (as a wage earner or spouse). And a "Break-Even" calculator shows the age at which the accumulated value of higher benefits -- for a person who claims Social Security, say, at age 66 -- will start to exceed the accumulated value of lower benefits for a person who opts for Social Security, say, at age 62.
The site also provides extensive lists of frequently asked questions in 24 categories; offers access to dozens of forms and publications; and, perhaps most important, allows you to perform a number of tasks online -- including filing for benefits (and, thus, avoiding a trip to the Social Security office). In all, a very valuable tool.
Another useful resource is analyzenow.com, a Web site devoted to retirement issues. Started by Henry K. "Bud" Hebeler, a retired aerospace executive and author of two books about retirement planning, analyzenow features a number of helpful articles about Social Security and two calculators that can help users determine the best age to file for benefits.
Two other online resources: The National Committee to Protect Social Security and Medicare, a Washington advocacy group, has a spot on its Web site called "Ask Mary Jane" (www.ncpssm.org/maryjane). There, you can email a question to Mary Jane Yarrington, a congressional caseworker who joined the group in 1986 as a senior policy analyst. (Before you write, check the archives for earlier questions and answers.)
Second, Stanley A. Tomkiel III, a New York lawyer, is the author of the "Social Security Benefits Handbook" -- the contents of which are available free at socialsecuritybenefitshandbook.com.
Finally, if you prefer print, Mr. Matthews, the San Francisco lawyer, is co-author of "Social Security, Medicare and Government Pensions," one of the best general guides to the program.
http://www.aicpa.org/pubs/jofa/jul2006/garnett.htm
A video presentation by Jonathan Clements of the Wall Street Journal:
http://www.blogmyway.org/entry.php?w=andy&e_id=11525
Jonathan's home page:
http://www.jonathanclements.com/links.html
And here is another article from the Wall Street Journal with an excerpt below:
http://online.wsj.com/public/article_print/SB119514459625294332.html
The most frequently asked question about Social Security in financial advisers' offices
"When should I file for benefits?" Invariably, that's the question planners hear first.
When it comes to the answer, the conventional wisdom is changing. Where many advisers once recommended grabbing benefits at age 62 (at which point your monthly check is reduced permanently by as much as 25%), experts today say extended life spans and the demise of traditional pensions argue for waiting until your full retirement age, or later, to collect a paycheck. (You get your largest possible benefit at 70.)
Even "foolproof" strategies are no longer looked upon as foolproof. "Let's say your doctor tells you that you have six months to live," says Bruce Schobel, a New York actuary who worked in the Social Security Administration in the 1980s. "So, it's obvious: You take benefits at 62, right?" Maybe not. Because of Social Security rules involving spousal benefits, Mr. Schobel says, "taking a reduced benefit at 62 could serve as a cap on the surviving spouse's payout, reducing that person's future benefits by tens of thousands of dollars."
"So even an apparently simple decision becomes complicated," he says.
Calculators, of course, can help. (We discuss some of the better ones below.) But first, take a few minutes to read a new report: "Rethinking Social Security Claiming in a 401(k) World," written by James Mahaney and Peter Carlson, retirement specialists at Prudential Financial Inc. It's the best discussion we've seen about filing for benefits and possible strategies for doing so. (Note to the give-me-my-money-at-62 crowd: The authors conclude that changes in Social Security in recent years "make the value of delaying the receipt of...benefits greater than in the past.")
The report, published in August, can be found at the Pension Research Council, part of the Wharton School at the University of Pennsylvania. (Go to pensionresearchcouncil.org9 and click on "Working Papers" and 2007. Registration is free.)
Coolest strategies you've never heard of for claiming benefits
One way many couples can maximize Social Security benefits over their lifetimes is for wives to claim benefits at age 62, and for husbands to delay filing until almost 70, says Alicia Munnell, director of the Center for Retirement Research at Boston College. (That's based on a number of factors, including income levels, life spans and survivor benefits.) You can find Dr. Munnell's research in the June issue of the Journal of Financial Planning. (See fpanet.org/journal10 and click on "Past Issues and Articles.")
Of course, 70 is a long time to wait for Social Security. So, here's a way -- courtesy of Steve Potter, a retired public-affairs specialist at Social Security -- to avoid the wait and still get a sizable benefit at age 70.
The scenario: George, at his full retirement age of 66, expects a benefit of $2,000 a month. His wife, Martha, at her full retirement age of 66, expects a benefit of $1,000 a month.
The strategy: Martha files for a reduced benefit on her own at age 63, or $800 a month. George, at age 66, files for just a spousal benefit, based on Martha's earnings. He would get $500 a month as Martha's spouse. (Yes, Social Security allows George to get half of what Martha was projected to receive at her full retirement age.) Then, at age 70, George applies for benefits based on his earnings history. With the "delayed retirement credit" (the additional dollars one receives for waiting until age 70 to claim Social Security), George's benefit would be 32% higher, or $2,640 a month.
Social Security would stop George's spousal benefit of $500 a month because he's entitled to the $2,640, based on his own earnings, at age 70. Again, for this to work, George must wait until his full retirement age or later to file for a spousal benefit.
The nice part about this strategy is that George -- if he's trying to maximize his and Martha's combined benefits -- doesn't have to wait three or four years beyond his full retirement age for a paycheck; he can start collecting benefits at 66 based on Martha's earnings history -- and jump to a considerably bigger benefit at age 70. As far as the "break-even" point goes -- the age at which the accumulated value of benefits from this strategy will start to exceed the accumulated value from both spouses filing for full benefits at age 66 -- it's 79. Beyond that age, the 63-66 strategy yields a larger total return. (This example assumes George and Martha are the same age.)
Note: Some Social Security representatives we spoke with weren't aware of this strategy. If you try this at your local Social Security office -- and if the staff balks -- ask them to confirm the strategy with Social Security headquarters in Baltimore, which confirmed it for us.
Best calculators and sources of information
Start with the Social Security Administration and its Web site, ssa.gov.
The calculators alone are worth the visit. Three benefits calculators -- "Quick," "Online" and "Detailed" -- estimate payouts using different retirement dates and levels of future earnings. (Click on "Calculate your benefits" on the home page.)
In addition, an "Earnings Limit" calculator illustrates how a salary -- if you file for benefits before full retirement age and are still working -- might affect your monthly check from Uncle Sam. A "Retirement Age" calculator shows how retiring early reduces your monthly payout (as a wage earner or spouse). And a "Break-Even" calculator shows the age at which the accumulated value of higher benefits -- for a person who claims Social Security, say, at age 66 -- will start to exceed the accumulated value of lower benefits for a person who opts for Social Security, say, at age 62.
The site also provides extensive lists of frequently asked questions in 24 categories; offers access to dozens of forms and publications; and, perhaps most important, allows you to perform a number of tasks online -- including filing for benefits (and, thus, avoiding a trip to the Social Security office). In all, a very valuable tool.
Another useful resource is analyzenow.com, a Web site devoted to retirement issues. Started by Henry K. "Bud" Hebeler, a retired aerospace executive and author of two books about retirement planning, analyzenow features a number of helpful articles about Social Security and two calculators that can help users determine the best age to file for benefits.
Two other online resources: The National Committee to Protect Social Security and Medicare, a Washington advocacy group, has a spot on its Web site called "Ask Mary Jane" (www.ncpssm.org/maryjane). There, you can email a question to Mary Jane Yarrington, a congressional caseworker who joined the group in 1986 as a senior policy analyst. (Before you write, check the archives for earlier questions and answers.)
Second, Stanley A. Tomkiel III, a New York lawyer, is the author of the "Social Security Benefits Handbook" -- the contents of which are available free at socialsecuritybenefitshandbook.com.
Finally, if you prefer print, Mr. Matthews, the San Francisco lawyer, is co-author of "Social Security, Medicare and Government Pensions," one of the best general guides to the program.
Tax Scam Email
The IRS has warned taxpayers to beware of email messages purported coming from them. Here is what they publish on their web site:
If you receive an unsolicited e-mail communication claiming to be from the IRS, please forward the original message to: phishing@irs.gov.... You may not receive an individual response to your e-mail because of the volume of reports we receive each day.
▸ The IRS does not initiate taxpayer communications through e-mail. In addition, the IRS does not request detailed personal information through e-mail or ask taxpayers for the PIN numbers, passwords or similar secret access information for their credit card, bank or other financial accounts.
▸ Do not open any attachments to questionable e-mails, which may contain malicious code that will infect your computer. Please be advised that the IRS does not initiate contact with taxpayers via e-mails.
For more details, visit http://www.irs.gov/newsroom/article/0,,id=155682,00.html
Recently, Symantec reported that there have been email messages claim to come from a suspicious-looking e-mail address called fannyxxx@turbotax.cn:
From: "TurboTax Support"
Subject: New TurboTax Update
Dear TurboTax User,
Due to changes in IRS requirements, we are requiring all TurboTax users to update their software to the current version. The process takes less then 30 seconds, and is done completely in the background. To begin the update, please visit turbotax.com/update and click "Open" when asked to begin the download. After doing so, no further action is required on your part. Thank you for your cooperation regarding this matter.
Sincerely,
TurboTax Customer Support
Instead of linking to the fictitious update site, the messages actually take users to a site with an alphabetically randomized address that contains a blank page with a pop-up that asks the user to download a file that could expose them to identity theft.
Symantec warns users about this message, as well as an e-mail message that purports to come from the Internal Revenue Service telling recipients to download tax software in order to receive their tax refund. The e-mail instead links them to a virus.
For more info, visit http://www.symantec.com/enterprise/security_response/weblog/2008/03/spammers_impersonate_irs_and_o.html.
If you receive an unsolicited e-mail communication claiming to be from the IRS, please forward the original message to: phishing@irs.gov.... You may not receive an individual response to your e-mail because of the volume of reports we receive each day.
▸ The IRS does not initiate taxpayer communications through e-mail. In addition, the IRS does not request detailed personal information through e-mail or ask taxpayers for the PIN numbers, passwords or similar secret access information for their credit card, bank or other financial accounts.
▸ Do not open any attachments to questionable e-mails, which may contain malicious code that will infect your computer. Please be advised that the IRS does not initiate contact with taxpayers via e-mails.
For more details, visit http://www.irs.gov/newsroom/article/0,,id=155682,00.html
Recently, Symantec reported that there have been email messages claim to come from a suspicious-looking e-mail address called fannyxxx@turbotax.cn:
From: "TurboTax Support"
Subject: New TurboTax Update
Dear TurboTax User,
Due to changes in IRS requirements, we are requiring all TurboTax users to update their software to the current version. The process takes less then 30 seconds, and is done completely in the background. To begin the update, please visit turbotax.com/update and click "Open" when asked to begin the download. After doing so, no further action is required on your part. Thank you for your cooperation regarding this matter.
Sincerely,
TurboTax Customer Support
Instead of linking to the fictitious update site, the messages actually take users to a site with an alphabetically randomized address that contains a blank page with a pop-up that asks the user to download a file that could expose them to identity theft.
Symantec warns users about this message, as well as an e-mail message that purports to come from the Internal Revenue Service telling recipients to download tax software in order to receive their tax refund. The e-mail instead links them to a virus.
For more info, visit http://www.symantec.com/enterprise/security_response/weblog/2008/03/spammers_impersonate_irs_and_o.html.
Saturday, March 22, 2008
Withdrawing Excess Contribution to Retirement Accounts
Tax law generally requires any excess contributions to retirement accounts be withdrawn by April 15th of the year following the tax year, along with related earnings. For IRA's, how the related earnings is calculated is based on Regulations 1.408-11 and IRS Notice 2000-39
Thursday, March 6, 2008
Supreme Court Overturns Tax Evasion Case
http://www.webcpa.com/article.cfm?articleid=26978&pg=cpaw
The Supreme Court has unanimously overturned a decision by the Ninth Circuit court in a criminal tax evasion case.
In the case, Boulware v. United States, Michael Boulware was charged with criminal tax evasion and filing a false income tax return for diverting funds from a closely held corporation, Hawaiian Isles Enterprises, of which he was the president, founder and controlling shareholder.
To support his argument that the government could not establish the tax deficiency required to convict him, Boulware sought to introduce evidence that HIE had no earnings and profits in the relevant taxable years, so he in effect received distributions of property that were returns of capital, up to his basis in his stock, which are not taxable under Sections 301 and 316(a) of the Tax Code.
The District Court granted the government's motion to bar evidence supporting Boulware's return-of-capital theory, relying on the Ninth Circuit's decision in an earlier case, Miller v. United States, that a diversion of funds in a criminal tax evasion case may be deemed a return of capital only if the taxpayer or corporation demonstrates that the distributions were intended to be such a return.
The court later found Boulware's proffer of evidence insufficient under Miller and declined to instruct the jury on his theory. In affirming his conviction, the Ninth Circuit held that Boulware's proffer was properly rejected because he offered no proof that the amounts diverted were intended as a return of capital when they were made.
However, the Supreme Court held that a distributee accused of criminal tax evasion may claim return-of-capital treatment without producing evidence that, when the distribution occurred, either he or the corporation intended a return of capital.
"Sections 301 and 316(a) govern the tax consequences of constructive distributions made by a corporation with respect to its stock," Justice David Souter wrote in the court's majority opinion. "A defendant in a criminal tax case does not need to show a contemporaneous intent to treat diversions as returns of capital before relying on those sections to demonstrate no taxes are owed."
The Supreme Court has unanimously overturned a decision by the Ninth Circuit court in a criminal tax evasion case.
In the case, Boulware v. United States, Michael Boulware was charged with criminal tax evasion and filing a false income tax return for diverting funds from a closely held corporation, Hawaiian Isles Enterprises, of which he was the president, founder and controlling shareholder.
To support his argument that the government could not establish the tax deficiency required to convict him, Boulware sought to introduce evidence that HIE had no earnings and profits in the relevant taxable years, so he in effect received distributions of property that were returns of capital, up to his basis in his stock, which are not taxable under Sections 301 and 316(a) of the Tax Code.
The District Court granted the government's motion to bar evidence supporting Boulware's return-of-capital theory, relying on the Ninth Circuit's decision in an earlier case, Miller v. United States, that a diversion of funds in a criminal tax evasion case may be deemed a return of capital only if the taxpayer or corporation demonstrates that the distributions were intended to be such a return.
The court later found Boulware's proffer of evidence insufficient under Miller and declined to instruct the jury on his theory. In affirming his conviction, the Ninth Circuit held that Boulware's proffer was properly rejected because he offered no proof that the amounts diverted were intended as a return of capital when they were made.
However, the Supreme Court held that a distributee accused of criminal tax evasion may claim return-of-capital treatment without producing evidence that, when the distribution occurred, either he or the corporation intended a return of capital.
"Sections 301 and 316(a) govern the tax consequences of constructive distributions made by a corporation with respect to its stock," Justice David Souter wrote in the court's majority opinion. "A defendant in a criminal tax case does not need to show a contemporaneous intent to treat diversions as returns of capital before relying on those sections to demonstrate no taxes are owed."
Sunday, March 2, 2008
Shredding Can Save You From Identity Theft
http://finance.yahoo.com/banking-budgeting/article/104495/Shredding-Can-Save-You-From-Identity-Theft
Got any secrets?
Sure you do. How about your bank and credit card statements? Personal bills, canceled or blank checks, investment information and financial statements? And, then there are medical records, income tax records and credit reports.
Do you simply toss them in the trash when you no longer need them for your records? If so, you need to change your modus operandi. Start shredding.
Anything you wouldn't feel comfortable having someone pick up and read, you should shred, says Jerry Haas, vice president of sales and marketing for American Document Destruction Corp. in Tampa, Fla.
Criminals need very little information to steal your identity. With your Social Security number they can apply for credit cards, cellular phones, loans, bank accounts, apartments and utility accounts.
Garbages hold a plethora of information. Once your Social Security number or an account number hits the Dumpster, your identity is floating among the refuse, just waiting to be stolen. Shredding is a minimal inconvenience and minor expense compared to its alternative -- becoming an identity theft victim.
FTC is getting tough -- shred or else
The Federal Trade Commission issued the Fair and Accurate Credit Transactions Act in 2003, a law aimed at minimizing the risk of identity theft and consumer fraud. In November 2004, the FTC added the FACTA Disposal Rule to enforce the protection and disposal of sensitive consumer data.
The FACTA Disposal Rule says that "any person who maintains or otherwise possesses consumer information for a business purpose" must destroy discarded consumer information, whether in paper or electronic form.
Who must comply? Simply put, virtually everyone. Any business (whether employing one or thousands) using consumer information in its everyday operations or storing personal data as a business, such as banks, lenders, insurers, auto dealers, real estate agents, employers and record management companies, must safeguard consumer information. The law also applies to service providers that destroy information, from shredders, recyclers, waste management or technology disposal companies.
The disposal rule offers business owners a few choices. They must burn, pulverize or shred paper documents and completely erase or destroy all electronic media. Or, they can contract a third-party information-destruction company.
"The most important impact of the disposal rule is the attention it sheds on the problem of identity theft and proper information destruction," says Bob Johnson, executive director of the National Association for Information Destruction, a paper-shredding industry trade group.
"Many larger institutions, such as banks, investment companies or hospitals, have been working toward the issue of protecting consumer information, but too many smaller businesses, from auto dealerships, furniture stores and apartment landlords, have been flying under the radar.
"As a matter of fact, every household should have a shredder to destroy personal documents," he adds. "I see them as being as common as the washing machine and dishwasher."
It's quite a list
Financial documents aren't the only items that should be destroyed rather than tossed out with the trash. Mobile Document Shredding in Lewisville, Texas, provides a list that includes:
* Bank information
* Budgets
* Canceled or blank checks.
* Credit card offers
* Credit card information.
* Employee evaluations
* Financial statements
* Income tax records
* Insurance coverage
* Investment information
* Legal papers
* Medical records
* Personal bills
If you work out of a home office, you'll want to destroy even more. Consider accounts payable and receivable, bidding strategies, blueprints, building and computer access codes, customer lists, estimates and invoices.
Next, you need to decide whether to buy a shredder or hire a shredding service.
The wonderful world of shredders
Shredders come in many shapes and sizes and sell at a variety of prices. A quick survey of the Web sites of three office-supply stores and two department stores that sell shredders show that prices range from $20 to $2,650.
"Basically, there are two types of shredders sold for household use: a strip-cut shredder and a crosscut shredder," says David Bristow, general manager of Automatic Response Systems, a company in Berkeley, Calif., specializing in shredder sales, service and document destruction.
* Strip-cut: The most basic shredder, it strips paper into shreds of various thickness. It is the easiest shredder to maintain. "A strip-cut shredder is more of a deterrent than security," says Bristow.
* Crosscut: The crosscut shredder dices paper by cutting it in two directions and provides better security, says Bristow, but it requires more maintenance and handles fewer sheets of paper at a time than a strip-cut machine. You need to regularly oil a crosscut shredder to help it work better and last longer. Bristow recommends oiling once after every 20 to 30 minutes of use.
When selecting a shredder, consider:
* The speed at which it operates.
* The security level provided by the size of the shred.
* Whether the size of the opening will accommodate the paper you have.
* How many sheets of paper it will handle in one pass.
You also need to consider the condition of the documents you need to destroy. The finer the cut, the fussier the machine. Machines that make fine shreds dislike a diet of staples and paper clips. To prolong the longevity of any shredder, Bristow recommends removing these objects.
What about hiring a shredding service? If you have a lot of shredding, it might be easier to hire a shredding service to do it.
So what do you get?
Shredding services will either do the work in a truck on your property or remove your papers to a shredding facility. People in the business say it is more secure to have them shredded on your property because it assures they are illegible when they are transported.
You can schedule shredding service at regular intervals, or take collected papers and electronic data in when you clean out a filing cabinet of old records. Most companies will provide waste-paper storage bins for their regular clients. Prices increase with the size of the job. Some companies charge by the pound, some by the volume.
American Document Destruction Corp. bills by the pound -- about 16 cents per pound, Haas says. But the price per pound varies depending on quantity (the more shredding, the lower the per-pound price) and accessibility (the harder it is to get to, the higher the price).
"If you're only going to have 10 or 15 pounds in a month, if you're going to have half a box of paper," Haas says, "it's just not worth having a shredding service."
Copyrighted, Bankrate.com. All rights reserved.
Got any secrets?
Sure you do. How about your bank and credit card statements? Personal bills, canceled or blank checks, investment information and financial statements? And, then there are medical records, income tax records and credit reports.
Do you simply toss them in the trash when you no longer need them for your records? If so, you need to change your modus operandi. Start shredding.
Anything you wouldn't feel comfortable having someone pick up and read, you should shred, says Jerry Haas, vice president of sales and marketing for American Document Destruction Corp. in Tampa, Fla.
Criminals need very little information to steal your identity. With your Social Security number they can apply for credit cards, cellular phones, loans, bank accounts, apartments and utility accounts.
Garbages hold a plethora of information. Once your Social Security number or an account number hits the Dumpster, your identity is floating among the refuse, just waiting to be stolen. Shredding is a minimal inconvenience and minor expense compared to its alternative -- becoming an identity theft victim.
FTC is getting tough -- shred or else
The Federal Trade Commission issued the Fair and Accurate Credit Transactions Act in 2003, a law aimed at minimizing the risk of identity theft and consumer fraud. In November 2004, the FTC added the FACTA Disposal Rule to enforce the protection and disposal of sensitive consumer data.
The FACTA Disposal Rule says that "any person who maintains or otherwise possesses consumer information for a business purpose" must destroy discarded consumer information, whether in paper or electronic form.
Who must comply? Simply put, virtually everyone. Any business (whether employing one or thousands) using consumer information in its everyday operations or storing personal data as a business, such as banks, lenders, insurers, auto dealers, real estate agents, employers and record management companies, must safeguard consumer information. The law also applies to service providers that destroy information, from shredders, recyclers, waste management or technology disposal companies.
The disposal rule offers business owners a few choices. They must burn, pulverize or shred paper documents and completely erase or destroy all electronic media. Or, they can contract a third-party information-destruction company.
"The most important impact of the disposal rule is the attention it sheds on the problem of identity theft and proper information destruction," says Bob Johnson, executive director of the National Association for Information Destruction, a paper-shredding industry trade group.
"Many larger institutions, such as banks, investment companies or hospitals, have been working toward the issue of protecting consumer information, but too many smaller businesses, from auto dealerships, furniture stores and apartment landlords, have been flying under the radar.
"As a matter of fact, every household should have a shredder to destroy personal documents," he adds. "I see them as being as common as the washing machine and dishwasher."
It's quite a list
Financial documents aren't the only items that should be destroyed rather than tossed out with the trash. Mobile Document Shredding in Lewisville, Texas, provides a list that includes:
* Bank information
* Budgets
* Canceled or blank checks.
* Credit card offers
* Credit card information.
* Employee evaluations
* Financial statements
* Income tax records
* Insurance coverage
* Investment information
* Legal papers
* Medical records
* Personal bills
If you work out of a home office, you'll want to destroy even more. Consider accounts payable and receivable, bidding strategies, blueprints, building and computer access codes, customer lists, estimates and invoices.
Next, you need to decide whether to buy a shredder or hire a shredding service.
The wonderful world of shredders
Shredders come in many shapes and sizes and sell at a variety of prices. A quick survey of the Web sites of three office-supply stores and two department stores that sell shredders show that prices range from $20 to $2,650.
"Basically, there are two types of shredders sold for household use: a strip-cut shredder and a crosscut shredder," says David Bristow, general manager of Automatic Response Systems, a company in Berkeley, Calif., specializing in shredder sales, service and document destruction.
* Strip-cut: The most basic shredder, it strips paper into shreds of various thickness. It is the easiest shredder to maintain. "A strip-cut shredder is more of a deterrent than security," says Bristow.
* Crosscut: The crosscut shredder dices paper by cutting it in two directions and provides better security, says Bristow, but it requires more maintenance and handles fewer sheets of paper at a time than a strip-cut machine. You need to regularly oil a crosscut shredder to help it work better and last longer. Bristow recommends oiling once after every 20 to 30 minutes of use.
When selecting a shredder, consider:
* The speed at which it operates.
* The security level provided by the size of the shred.
* Whether the size of the opening will accommodate the paper you have.
* How many sheets of paper it will handle in one pass.
You also need to consider the condition of the documents you need to destroy. The finer the cut, the fussier the machine. Machines that make fine shreds dislike a diet of staples and paper clips. To prolong the longevity of any shredder, Bristow recommends removing these objects.
What about hiring a shredding service? If you have a lot of shredding, it might be easier to hire a shredding service to do it.
So what do you get?
Shredding services will either do the work in a truck on your property or remove your papers to a shredding facility. People in the business say it is more secure to have them shredded on your property because it assures they are illegible when they are transported.
You can schedule shredding service at regular intervals, or take collected papers and electronic data in when you clean out a filing cabinet of old records. Most companies will provide waste-paper storage bins for their regular clients. Prices increase with the size of the job. Some companies charge by the pound, some by the volume.
American Document Destruction Corp. bills by the pound -- about 16 cents per pound, Haas says. But the price per pound varies depending on quantity (the more shredding, the lower the per-pound price) and accessibility (the harder it is to get to, the higher the price).
"If you're only going to have 10 or 15 pounds in a month, if you're going to have half a box of paper," Haas says, "it's just not worth having a shredding service."
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