Identity theft protection: Do I really need it?

It's time in a busy week for reader questions.

This is a twofer, actually: You get a peek at other people's financial quandaries; I bail myself out with a column.

The lessons? Think twice before someone tries to sell you identity theft protection. It's probably best to sell instead of donating that junker. And it might pay to double-check your state tax return if you used software to prepare it.


Does ID theft

protection pay? 


Jen Konopka writes:

I read

. A few years ago, a banking representative talked me into signing up for identity theft protection. I get about $13 a month automatically deducted from my checking account. I get a quarterly statement mailed with credit scores from

,

and

. I do not know what to do with this information because the data is not explained. I am wondering if this is a waste of money (in the same category as the extended warranty on a piece of electronic equipment)?

Answer:

Probably. You can get very similar protection for little cost by

on your credit report and credit score with the three major credit reporting bureaus you've listed. Each freeze costs $10; that's $30 for all three agencies.

A credit freeze prevents anyone from opening a credit card or loan in your name without your knowledge. Banks check your report before granting such credit, and you'll have to unfreeze the account before the bureaus will release your credit history.

The catch is that when you apply for a new credit card or loan or switch cellphone providers, you'll have to pay to unfreeze your credit file -- $10 each time. On the other hand, this is a good deterrent to opening too many credit accounts.

Credit freezes don't stop a thief from using your existing credit or bank accounts. But an ID theft protection service won't, either. You have to police this by checking your account statements regularly.

The

. Steer clear of any that use scare tactics or don't disclose contact information on their websites, the advocacy group says.

Finally, Consumers Union, the nonprofit publisher of Consumer Reports,

: "If you are already paying for credit monitoring, consider getting a security freeze instead."


Do I donate, sell or junk this broken-down car? 

Jeff Fishburn  of Camas, Wash., writes:

"Our car unexpectedly died. It doesn't make financial sense to replace the crank shaft since the motor is burning up oil, and the body and car aren't in the best shape to make the investment. We are trying to figure out whether to try and sell it as is on

or junk it for the cash or donate it to a non-profit. When donating to an organization how much can you write off on taxes? It's a 1990 Toyota Camry, for your information, or if you should want it if you are a gear head hobbyist."

Answer:

Selling it is likely the way to go.

First, you must itemize to deduct the value of a donated vehicle.

Second, your actual tax savings will be much less than the value of your donation. To figure out how much you'll actually save, you need to multiply the vehicle value by your effective tax rate. I'm guessing that's somewhere between 15 and 28 percent. On a $2,500 vehicle (generous for a 1990 Camry), that's less than $650.

How do you value a vehicle? IRS instructions say you must use the model's private party sale price listed in such guides as the

. "However, the fair market value may be less than that amount if the car has engine trouble, body damage, high mileage, or any type of excessive wear," IRS instructions say.

also get a bit tricky for vehicle deductions of more than $500. For instance, if the charity resells the vehicle at an auction, you must report that price even if it's lower than the vehicle's Blue Book value at the time of donation. The charity will send you

with the final sale price, and you must include part of that form in your tax return. There are a few exceptions to this, so consult a tax adviser if you have any questions.

Epilogue:

Fishburn said he ended up selling the clunker last week through Craigslist after a Portland auto-salvage yard offered him only $367. Fishburn said two people arrived simultaneously to buy the car and bid each other up from $800 to $1,000.

"I kind of think I could've gotten a bit more," he said Friday. "Now I just need a new car."

Double-check those state tax refunds

Bob Sulek's son got his state tax refund check in the mail this month, and for some reason, Sulek felt an urge to check the amount with the one TurboTax figured on his return.

Imagine the Beaverton resident's surprise when TurboTax produced a state refund amount that was $300 higher than both his check and the return TurboTax originally produced.

What happened?

It all goes back to Oregon's tax reconnect issue and Intuit, Inc.'s lethargy updating

's software to account for the changes.

As you might not care to recall, Oregon

to account for changes in federal laws made by Congress in December. Those changes extended certain tax breaks, including the tuition deduction, of which Sulek claimed $3,200. The Oregon Legislature adopted those changes March 8.

TurboTax

to account for those changes until the weekend of March 26. Two of its competitors updated theirs a week earlier.

Sulek's son Jon had filed his return on March 18, so he missed the update. His son is now filing an amended return.

"Who goes back into TurboTax and redoes their taxes?" Sulek asks.

It's a good reminder that -- especially this year, even after receiving your refund -- double-checking your tax return might be a good idea.

--

welcomes questions about his column or blog. Reach him at 503-221-8359, or on

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