E*Trade Brokerage Buying BrownCo -- Stay Or Go?

I've been a customer of BrownCo (originally Brown & Company) since 1993. They had the cheapest commissions then, and every few years they'd go down even further, till they finally were charging only $5 for online market orders ($10 for limit and stop orders). They were the deepest of the "deep discount" brokers.

I remember when I first applied for authorization for options trading. A week or so after mailing in the form, I was anxious to know if I'd been approved, and so called them up. A phone representative told me "Not yet, but we've given it to Mr. Brown and he should get to it pretty soon." Wow, was I impressed that the head of the company himself was taking such a personal involvement in the process. It was also a nice clue about the small size and corresponding lack of bureaucracy in the firm.

Later they were bought by J.P. Morgan, but mostly kept the "Brown" identity.

Then last year they announced they were being acquired by E*Trade. You can stay with them and become an E*Trade customer, or transfer your account to another brokerage. But if you want to avoid account termination fees, you need to let them know by April 28, 2006.

Well, for me, it's bye-bye Brown. They have guaranteed to keep the same commission schedule until the end of 2006, but after that you know they're going to raise them to the standard E*Trade commissions (currently $12.99 unless you have more than $50,000 in assets or make more than 29 trades in a quarter). The lowest rate is $6.99 if you trade 1,500 times in a quarter.

And Brown had no inactivity fees, nor any fees to make partial transfers out of the account. This is a function I've used several times, not only for simple moving things around, but also for charitable donations (in case you didn't know, there's a big tax advantage if you do your donations that way). But for a smaller account, E*Trade charges $40 per quarter inactivity fee, and $25 for a partial transfer out.

No, thanks. I'll transfer one account to Scottrade. I already have an account with them anyway, and their commissions are only $7, no inactivity fees, and no fee for partial transfers. They seem to be the current cheapest "deep discount" broker.

There there are the more specialized "super discount" brokers that cater to active traders, such as Interactive Brokers, which only charges $1 minimum commission. I actually use IB more than anyone else these days, and I'm transferring another BrownCo account to them. I still keep a Scottrade account for mutual funds, and also every now and then there's a stock I want to short that IB can't do for some reason (I guess they don't have enough shares). But Scottrade virtually always either has shares to short, or can get them from another broker if I call my rep.

Free help with IRS problems - Taxpayer Advocate

If the IRS is on your back, and you don't know how to cope with them, there's help. It's called the Taxpayer Advocate Service. Here's what their web site says:

"If you have an ongoing issue with the IRS that has not been resolved through normal processes, or you have suffered, or are about to suffer a significant hardship/economic burden as a result of the administration of the tax laws, contact the Taxpayer Advocate Service."

"Your assigned Case Advocate will listen to your point of view and will work with you to address your concerns."

"The Taxpayer Advocate Service not only helps individual and business taxpayers settle disputes with the IRS, but also tries to repair the larger, systemic flaws that cause trouble for taxpayers and IRS employees alike."

So who sponsors this wonderful organization? Surprise -- the IRS! Yes, the Taxpayer Advocate Service is "an independent organization within the IRS" to "help taxpayers resolve problems with the IRS and recommend changes that will prevent the problems."

Emphasis on the word "independent." No, they aren't going to screw you; they're going to try to figure out the best way to solve your problem. And it's free.

For more information see their site at http://www.irs.gov/advocate/.

Get a tax credit for your IRA -- even a Roth!

Many people don't know that lower-to-middle income taxpayers can get a tax credit of 10% to as much as HALF of the money you put into an IRA.

Traditional IRAs are tax-deductible when you contribute (except for higher-income folks), but the Roth is not (instead, all withdrawals are tax-free, which generally makes it a better deal). But this is a completely separate tax credit, and it applies to either one! Let Uncle Sam pay you to save -- such a deal!

You have till April 17, 2006 to contribute for 2005 (and then of course till April 2007 to contribut for 2006, and so on). For 2005, you can contribute $4,000 (or $4,500 if you turned 50 or more in 2005), but only up to your total employment income for the year (note I said income from employment, not self-employment, and not investments, etc.). If you worked, your spouse can contribute too, even if he or she didn't work.

However, only $2,000 for each person is eligible for calculating the tax credit.

Just to make this clear: If you deposit $2,000 into an IRA, and meet the income qualifications, Uncle Sam will put between $200 and $1,000 straight into your pocket (depending on income) in the form of that tax credit. And your spouse can turn around and do the same.

So don't delay -- put that money to work for you. Don't depend on "Social Insecurity" to bail your out. Its financial problems are notorious, and there's basically nothing Congress can or will do that will rescue it enough to prevent benefits from being reduced and/or delayed in the future.

And don't forget that tax credit on Line 51 of that Form 1040. You get the full benefit if your your Adjusted Gross Income is less than $15,000 ($25,000 if married and filing jointly), and it phases out as income rises past $25,000 ($50,000 if married and filing jointly).

Don’t miss old income tax refunds

It's income tax time again. If you didn’t file a tax return for prior years, and you’re worried about being in trouble, consider this: Most people don’t have to pay extra; instead they get refunds (because they had more than enough tax withheld by their employer). The penalty for late filing is merely a percentage of the tax not already paid. If you don’t owe anything more, guess what? No penalty.

In fact, you’d better hurry up and file, to get your money. If you wait more than 3 years, it’s gone forever. So you just have from now till April 15 to file your back returns for 2002, or else you can kiss that refund goodbye.

More information is on the IRS site at http://www.irs.gov/businesses/small/article/0,,id=108327,00.html

While you're at it, get those old returns filed for 2003, and 2004 -- and of course the current return for 2005.