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Tax ID theft warning, 529 plan change deep-sixed

Busy week, busy weekend, so I'm cutting right to the chase as to last week at my other tax blog.

Bankrate Taxes Blog icom The first topic was the growth of tax-related identity theft. As I note in the post, the best defense against someone using your tax data to file for a fake refund is to not fall for crooks seeking that data.

But it still happens, even to the most careful taxpayers.

The IRS has programs in place to help victimized taxpayers get their rightful refunds. The tax agency issues identity protection personal identification numbers, or IP PINs, to the real filers. So far, the IRS has issued around 1.5 million IP PINs.

The IRS also has a special Web page dedicated to tax identity theft prevention, detection and victim assistance.

529 plan deep-sixed: Also over at Bankrate Taxes Blog last week, I looked at the Obama Administration's decision to pull its proposed tax on 529 college savings plans.

These accounts are named for the Internal Revenue Code section under which they were created. Every state administers at least one 529 plan. Many colleges offer plans, too.

Contributions to a 529 plan aren't tax deductible, but the money you invest in the plan accumulates tax-free. And when you withdraw account funds to pay for qualified education costs, those distributions are not taxed.

Although Obama's 2009 stimulus bill beefed up 529 options, he is, or rather was, suggesting tax changes released before his latest State of the Union address that the tax-free status be dropped on new plans. Existing 529s would be grandfathered.

Public outcry, however, ended the president's plan before it even got off the ground.

You can keep up with Bankrate Taxes Blog news on Tuesdays and Thursdays (most weeks). If you miss them there, check for highlights and links here the following weekend.


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