Changes to U.S. Savings Bonds: Frequently Asked Questions
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1. What changes are happening to the way U.S. Savings Bonds are sold?
Paper Series EE and I Savings Bonds will no longer be sold through financial institutions or mail-in orders after December 31, 2011. Savings bonds aren’t going away, though. You can purchase electronic savings bonds online through TreasuryDirect at www.treasurydirect.gov.

2. Why is the U.S. Department of the Treasury ending sales of paper savings bonds?
Ending sales of paper savings bonds will save taxpayers an estimated $70 million over the next five years. In addition, unlike paper savings bonds, electronic savings bonds aren’t easily lost or misplaced. And with TreasuryDirect, you can manage your savings securely online, anytime.

3. Does this change end all sales of paper bonds?
Yes, with the exception of the Tax Time Bond Program introduced in 2010. Tax filers can purchase paper Series I Savings Bonds with their federal tax refunds. Otherwise, there will be no other way to buy paper savings bonds.

4. I already have paper savings bonds. What will happen to them?
Existing paper savings bonds are valid issues of the Treasury Department and will earn interest for 30 years from the issue date or until redeemed. You can redeem paper bonds at most local financial institutions. You also can convert your paper savings bonds to electronic savings bonds in TreasuryDirect using a program called SmartExchange. There's no charge to convert paper bonds. No earned interest will be lost, and the bonds will keep their original issue dates and current interest rate terms.

5. I’ve been buying paper bonds to pay future college expenses. Can I still do so?
While paper savings bonds no longer will be available, the same education tax benefit and rules apply to electronic savings bonds in TreasuryDirect.

6. I like to give savings bonds as gifts. Can I still do so?
Yes. You can buy electronic savings bonds as gifts in TreasuryDirect. You can hold the bonds in your gift box area in TreasuryDirect until you’re ready to electronically deliver them to the gift recipient. The recipient must have a TreasuryDirect account (or be named on a minor linked account if under 18 years old.)

7. What is TreasuryDirect?
TreasuryDirect is a secure web-based system through which you can establish accounts to purchase, hold, and manage Treasury securities online, anytime. In TreasuryDirect, you can purchase Series EE and I Savings Bonds, Treasury bills, notes, bonds and TIPS (Treasury Inflation-Protected Securities).

8. Why should I use TreasuryDirect?
You can buy, manage and redeem Treasury securities online 24/7, from the convenience of home, work, or wherever you have secure Internet access. In addition to savings bonds, you can buy and manage marketable Treasury securities: Treasury bills, notes, bonds and TIPS (Treasury Inflation-Protected Securities). You can establish multiple registrations in one account. You can set up a simple payroll savings plan to automatically invest in savings bonds. You can schedule recurring purchases for savings bonds and marketable securities. Your savings bonds purchases are generally added to your account in just one business day.

Since the securities are electronic, there is no paper to lose, and no need to go to a local financial institution to redeem them.  When the funds are needed, and after the minimum holding period has been reached, you can redeem part or all of your savings bonds. The payment will be deposited to your checking or savings account, and the funds should reach your financial institution in just one business day.  You can establish accounts for minor children and for specific purposes such as education or vacations.  You can view and print your account summary, including recent purchases, payments and account balance.

9. How do I sign up for a TreasuryDirect account?
You can apply for a TreasuryDirect account in just three steps which take about 10 minutes at www.treasurydirect.gov. You will need to provide a few pieces of personal information, including your Social Security number or taxpayer identification number, e-mail address, and bank account and routing number. Finally, you will choose a password, password reminder and security questions. Once you complete all three steps, you will receive an e-mail from TreasuryDirect with your account number and an access card will arrive in the mail within 14 days that will enable you to manage your account. To view a video about opening a TreasuryDirect account, visit http://www.treasurydirect.gov/indiv/tools/tools_video.htm.

10. To use TreasuryDirect, do I need to have a bank account, Internet access and an e-mail account?
Yes. You will need to have an account at a financial institution to receive direct deposit payments and as a potential funding source for purchases. You also will need Internet access to view and use your account. Finally, an e-mail address is necessary so you can receive important messages about your account. TreasuryDirect is Section 508 compliant to meet the needs of persons with disabilities.

11. Is the TreasuryDirect website safe and secure?
Yes. The infrastructure TreasuryDirect resides on is well protected and the TreasuryDirect system uses several features to ensure the safety of the information you provide and the transactions you perform. For example:

Secure Sockets Layer Technology (SSL): TreasuryDirect uses SSL which is a common protocol for sending payment information securely over the Internet. SSL works by using a private, mathematical key to encrypt (or scramble) data transferred between your web browser and the website you're visiting.

Access Card: When you open a TreasuryDirect account, we'll send you an access card in the mail within two weeks. Your account number, password, and access card are needed each time you log in to your TreasuryDirect account. You can view a demonstration of how an access card works at www.treasurydirect.gov/indiv/help/TDTutorial/tutorial.htm.

Virtual Keyboard: TreasuryDirect uses a virtual keyboard to help protect your password.

Password: You choose your own password and can change it any time.

Customer Hold: As an added security feature, TreasuryDirect allows you to place a hold on your account if you feel your account access information has been compromised.

Paper Forms: For your protection, changes to your bank information and certain security transfers require the submission of a signed and certified paper form.

12. Will the annual savings bond purchase limit change, in light of the decision to stop selling paper savings bonds?
No. Savers can continue to purchase up to $5,000 of electronic Series EE Savings Bonds and $5,000 of electronic Series I Savings Bonds. Tax filers could purchase an additional $5,000 paper bonds using their tax refund.

13. Tax filers can purchase paper Series I Savings Bonds with their tax refunds. Will those purchases count against the purchase limit through TreasuryDirect?
No, paper Series I Savings Bonds purchased with tax refunds have a separate purchase limit of $5,000 per year per Social Security number.

14. How can I learn more about electronic savings bonds, Treasury securities, or TreasuryDirect?
Visit www.treasurydirect.gov for more information.

TreasuryDirect and SmartExchange are registered marks of the U.S. Department of the Treasury.

Protect Yourself from Credit Card Tricks
Lately we’ve been watching some of the new tactics credit card companies are implementing to take advantage of loopholes in the Credit Card Act.  We wanted to make you aware of some of the new rules, and some of the workarounds card issuers are adopting.

Recent Scams in the Berkshires
Adams Community Bank has been notified by both the FDIC and its customers that there are a few scams occurring in the Berkshires.  All of these scams feature some common themes—a notification through email or the Internet to make or win money, and targeting individuals that are out of work.

“Adams Community Bank wants our customers and the Berkshires to be attentive to their personal and financial information,” urged CEO Charlie O’Brien. “The FDIC, our institution and the other banks in the region would never request information through an email message.”  READ MORE

Have you received email with a similar message? It’s a scam called “phishing” — and it involves Internet fraudsters who send spam or pop-up messages to lure personal information (credit card numbers, bank account information, Social Security number, passwords, or other sensitive information) from unsuspecting victims.  READ MORE

While electronic filing can help some of this, the old systems adage of "garbage in, garbage out" certainly applies. If you meant to report $15,000 in income but only reported $1,500 due to a typo, filing electronically is not going fix the problem.

Avoid Certain Deductions, Forms, and Schedules
While there is no published list of IRS "red flags", many tax preparers speculate on the impact of certain deductions on your return. Some believe that taking more than the average deduction for a business return of similar size can trigger an audit, but there does not appear to be any proof of this. However, personal returns can be selected on this basis.

The bottom line is this…if you or your business is entitled to a deduction, take it. Just be prepared to defend your right to the deduction in case it is questioned down the road.

Your Other Returns Can Trigger Audits
If your personal return is audited and issues are found, an audit of your business activities is likely not far behind. Likewise if your state return is audited and improprieties found, don’t be surprised if you hear from the IRS.

Change Your Business Type
Did you know that Schedule C filers are ten times as likely to be audited as S Corporations? The move from a limited liability company to an S-Corp is not cheap; it does bring the benefit of greater personal liability protection and a reduction in the chance of being audited.

Conclusion
No matter how careful you are, random audits happen, so plan for them. Keep good records and maintain them for at least three years. And, keep your business and personal accounts separate.

Put your Tax Rebate Check to Good Use - Consider a Certificate of Deposit
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Uncle Sam is about to cut you a check for a change. Rebate checks from the economic stimulus package will start being distributed as early as May to tax filers. Individuals will get up to $600, working couples $1,200 and those with children, an additional $300 per child. For a typical dual income working family with two children, that means $1,800 back. So, what will you do with the extra money? What is the best use of this windfall or any extra money for that matter?

Should you choose to invest this money with a local bank, a good option may be a certificate of deposit (CD).

Consider CDs
CDs are a good choice for those looking for a short to mid term investment with a guaranteed rate of return. CD terms generally range from a few weeks to several years. In most cases the longer the maturation period the higher the interest rate that you’ll be paid since your money will be tied up a longer amount of time. Generally the advice is that if rates are low, go for shorter time frames in case they rise. If rates are expected to drop on the other hand, select a longer time frame.

CDs are a popular investment tool for the elderly, but they are a wise instrument for the savvy investor of any age, since they preserve capital and are fully insured. The Federal Deposit Insurance Corporation (FDIC) insures CDs held at banks up to $100,000 per depositor. In Massachusetts, mutual community banks are also covered by the Depositors Insurance Fund which picks up where FDIC insurance leaves off.

Another advantage of CDs is that they are easy to establish. They can be opened in person at any bank branch and some can even be opened online. Be mindful that there is often a significant penalty for early withdrawal so plan ahead to be sure you won’t need cash before the CD reaches maturity.

Types of CDs
There are traditional CDs which pay a fixed interest rate over a specified period of time for a fixed amount of money. Then, there are non-traditional CDs. Bump-up and variable rate CDs are two of the more common non-traditional types. Bump-Up CDs allow you to take advantage of a more favorable rate, should interest rates rise. Banks usually only allow one bump up per term. You may sacrifice a lower initial rate for this privilege however. Variable Rate CDs adjust periodically based on market conditions.

Laddering
If you have a significant amount of money you’d like to invest in a safe and reliable manner, consider laddering. For example with a $10,000 investment, you may choose to invest $2,000 each in ladders of 1 year, 2 years, 3 years, 4 years and 5 years. At the end of every year, part of your money ($2,000) will come due. Then rather than cashing that money out, roll it over or

reinvest that money in the term farthest out, in this case 5 years, getting the best possible rate (since the longer the term, the higher the return generally).

A strategy of this type allows you some short term access to your money and the ability to continually reinvest your money at current market rates. It protects your money against market fluctuations because you never have all your money tied up in the long term or lower than market rates. CD ladders can be as long or short as you like. All laddering uses a similar principle—investments are spread out over time to reduce exposure to fluctuations in interest rates.

CD rates are set according to open-market competition among banks and other financial institutions. Check your print or online news outlet for current advertisements or visit individual bank websites to find out what is being offered. In addition, rate and product comparison tools offered by credible sources, such as www.bankrate.com are useful and easy to use.

One of the most inexpensive, secure and accessible resources you have at your disposal is your local bank. Some banks may offer their current customers the best CD rates if they already have a minimum investment at that institution. If you already have a banking relationship where you have substantial deposits, then you may find your best investment is right there.