Intuit Inc. Is Offering Compelling Portfolio And Increasing Dividends

AlphaHunter for Seeking Alpha writes: The application software market is a very sensitive one and has been characterized by rapid technological change, shifting customer needs, and frequent new product introductions and enhancements by competitors. Over the past several years, the widespread availability of the Internet, mobile devices, and the explosion of social media have stepped up the pace of change and revolutionized the way that customers learn about, evaluate, and purchase products and services.

About the Company

Intuit Inc. (INTU) is a leading provider of business and financial management solutions for small businesses, consumers, accounting professionals, and financial institutions primarily in the United States, Canada, the United Kingdom, India, and Singapore. Its flagship products and services include QuickBooks, Quicken, Mint.com, and TurboTax, which simplify small business management and payroll processing, personal finance, and tax preparation/filing. ProSeries and Lacerte are the company's leading tax preparation offerings for professional accountants.

Business Segmentation:

The company's products and services are divided into seven business segments including financial management solutions (17 percent), employee management solutions (12 percent), payment solutions (10 Percent), consumer tax (35 percent), accounting professionals (10 percent) and financial services (9 percent), respectively.

Analysis

Rising trend in Revenues:

(click to enlarge)

This graph shows the company's revenues and its operating margins since 2008. As you can see, Intel has experienced a constant growth in revenues over the years, indicated by a linear line, with a CAGR of 6.18 percent. Over the years the company has managed to grow its operating margins from 21 percent in 2008 to 28.4 percent in 2012, respectively. The company has also managed to increase its revenues through successful acquisitions in recent years.

DuPont Analysis:

(click to enlarge)

The DuPont analysis indicates that the ROE is viewing an upward trend in the long run, presented by the linear line, and it is majorly supported by net margins. The company has managed to grow its ROE by reducing its financial risk, which is reflected by the decreasing financial leverage ratio of the company and increasing its asset turnover. The increase in asset turnover is also a good sign for investors, which shows that the company is efficiently utilizing its assets to generate its revenues.

Dividends and share buyback:

Before fiscal year 2012, the company paid no cash dividends to its stockholders. In fiscal year 2012, the company paid its first ever cash dividends, which totaled $0.60 per share of outstanding common stock, or $178 million. In August 2012, after a period of one year, the company raised its quarterly cash dividend by 13.33 percent to $0.17 per share. The company has consistently repurchased its shares under a plan announced on August 18, 2011-$2 billion in stock over the three-year period ending on August 15, 2014. At the end of July, 2012 the Board of Directors added up to $1.7 billion to the program. The increase in dividends is a sign of company's confidence in its financial strength and its future cash flows. On the other hand, a company usually begins repurchasing shares when it believes its share price is undervalued.

Multiple Analysis:

(click to enlarge)

The table above indicates a comparison among valuation metrics of Intuit, the respective industry, and the S&P 500, along with Intuit's own five-year average. We can clearly see that the stock price of the company seems to be undervalued across P/E and P/cash flow measures, compared to its competitors and the industry. Compared to its five-year average, the company stock price also evidently indicates that it is currently trading below its five-year average and will begin to increase in the near future.

Forward-looking Guidance:

For the fiscal year 2013 the company expects 10 to 12 percent growth in revenues ($4.55 billion to $4.65 billion), and an EPS of $2.76 to $2.82, for a total growth of 6 to 8 percent. By business segments, the company expects its small business group revenues to grow by 16 percent, consumer tax to grow by 9 percent, accounting professionals by 6 percent, financial services by 7 percent and other businesses by 2 percent, respectively.

Conclusion:

The company is doing business in a very competitive market in which entry barriers are very low, but most of its competitors are offering limited services to its customers. The company has a strong products and services portfolio that not a single competitor can match, which is a huge competitive edge. As mentioned above, the company generates most of its revenues from its consumer tax segment, which is seasonal in nature. But with the help of its strong business segments, it can easily manage this seasonal effect. An important point to note here is that the company's financial performance was not affected by the 2008 crisis, which indicates its business strengths, globally. With its strong financial position, compelling portfolio and increasing dividends, I recommend a buy rating to this stock.

Leaving on a Jet Plane…But First, as an Expatriate, Have You Paid Your US Exit Tax? / The tax implications of being an expatriate are a complicated minefield to navigate.

Jason S. Ansel for the National Law Review writes: For whatever the reason, each and every day people make the decision to move away from their native country to pursue a life elsewhere. Whether it is a dual citizen looking to give up their passport of one country, or someone looking for a fresh start, the tax implications of being an expatriate are a complicated minefield to navigate.

The reality is not all US expatriates need to worry, only those considered to be “Covered Expatriates”, under the Internal Revenue Code (“IRC”) rules. These people must take careful consideration of expatriate taxes, among other possible issues, before packing their bags to determine if the cross border tax and estate planning implications of leaving are worth the final destination.

Anyone thinking about leaving the United States permanently must first see if they meet any of the criteria of the IRC Tax Liability Test (the ”Test”). First, what was the expatriate’s average annual net taxable income over the last five years? If the answer is greater than $151,000, then that person will meet the Test and be considered a Covered Expatriate. Secondly, even if the income of our expatriate falls below this exempted limit, they may still be caught under the Test and considered a Covered Expatriate should their net worth be in excess of $2,000,000 on the date of US expatriation. Another test is used to determine the value of ones beneficial interest held in a trust, which will form part of their net worth.

Unfortunately, even if one doesn’t meet any of the criteria of the Test, there is still an additional hurdle to overcome. Has the expatriate met all their US tax liabilities over the last five years? If the answer is no, filing back returns will be a must before loading the U-Haul. The US government will require all expatriates to file IRS form 8854, which under the penalty of perjury the expatriate must attest to satisfying this requirement.

There are of course always exceptions to the rules. Even Covered Expatriates can slip away without any tax consequence. A dual citizen expatriating, who became a US citizen at birth, along with that of another country, will be exempt from tax liability if (1) the expatriate is still a taxed citizen of that other country on the date of departure and (2) the expatriate has been a US resident for no more than 10 of the last 15 years. Another example would apply to those looking to expatriate before attaining the age of 18 years 6 months. In this case, provided the expatriate has been a resident for no more than 10 years, departure can be achieved without much consequence. In both examples, residence is based on the Substantial Presence Test found under Section 7701(b)(3) of the Internal Revenue Code.

The United States also has many resident taxpayers who are not citizens, but merely green card holders. These green card holders can also be considered expatriates if they decide to no longer be a resident of the US and have had a green card for at least 8 of the last 15 tax years. When calculating the number of years one held a green card, it is important to note that holding a green card for any period of time in a calendar year will constitute a full year for the purpose of this test.

It is important to seek the appropriate advice before simply leaving the US. Cross border tax and estate planning advice is essential. Determining whether one is a Covered Expatriate is important, as all Covered Expatriates are subject to the Exit Tax rules and tax, depending on the extent of their accrued capital gains. A proper analysis would be needed to determine exactly what the Exit Tax would be.

Pack the U-Hual, get on that jet plane, even if you don’t know whether you’ll be back again, but first make sure you’re really ready to leave.

Attention Business Owners: Just How Active Are You? / Owners of businesses set up as S corporations can shield the income from a new 33.8% tax by being active owners.

Arden Dale for the Wall St Journal writes: Financial advisers have a simple question for some of their clients who own businesses: Are you an active or passive owner?

For clients whose businesses are set up as S corporations, the answer is crucial if they want their income from those businesses to be shielded from a 3.8% tax that took effect this year as part of the 2010 Affordable Care Act.

The tax is applied to dividends, capital gains and other investment income for married joint filers who have more than $250,000 in adjustable gross income, or singles with more than $200,000 in adjustable gross income. But for those who own S corporations, the Internal Revenue Service imposes the tax when it thinks the owners are playing more passive roles—like investors—a determination based partly on how much time they spend on the job. Active owners don't have to pay the tax.

Doctors, lawyers and other professionals have made S corporations one of the most popular business structures, along with others who use them to run businesses of all sorts, from manufacturing to retail. S corporations provide liability protection while allowing profits to pass through to the owners' personal tax returns.

Before the tax strategy can be employed, advisers need to examine their business-owning clients' K-1 forms to determine whether they are actively involved or only have a passive role like an investor.

The IRS uses a series of tests to decide whether a business owner is active or passive. Among them: spending annually 500 hours or more in a trade or business activity, being its sole participant, or, in the words of the IRS, being involved on a "regular, continuous, and substantial basis."

"I think it's very significant—there are a lot of people out there who truly shouldn't be paying this tax," says John Evans, a principal at Truepoint Inc. in Cincinnati, which has about $1.2 billion under management.

One client, according to Mr. Evans, will save at least $4,000 in taxes a year by spending more time working in two of his S corporations that own hair salons. Now retired, the man will still have time to play golf and relax. But he will take on some jobs like negotiating leases and managing personnel that show the IRS he is truly an active owner.

Mr. Evans says his fellow advisers need to be mindful of the strategy. Business owners often simply rely on an accountant to file a tax return, and may miss big savings this way. Accountants, he says, need to communicate with advisers and clients so everyone is on the same page.

Adviser John D. Smith says anyone who plans to switch from being a passive to an active owner must understand the IRS rules and "be able to document your activity in the business." Mr. Smith is a wealth manager at Balasa Dinverno Foltz LLC, an advisory firm in Itasca, Ill., with about $2.1 billion under management.

Check your Deductibility Quotient

Greg Roberts for the AthensPatch writes: Now that the dreaded April 15th tax filing deadline is far behind us, most of us are breathing sighs of relief. But more than a few of us may have missed some tax deductions we could have claimed if we had only known. Others of us will have claimed deductions that will ultimately be disallowed by the IRS.

Here is a short quiz to determine your deductibility quotient. Divide your correct answers (don’t peek) by the number of questions in the quiz, and check out how well you measure up at the end of the quiz.

1. You are a CPA and donate your time by preparing income tax returns for needy persons in your community. The time that you spend X a reasonable hourly rate would be deductible. Y or N

2. All legitimate casualty losses are deductible. Y or N

3. Even though you had to pay someone to prepare your income tax returns, that expense is all deductible. Y or N

4. You accept a new job that requires you to move, and you incur moving expenses as a result. When you add up your moving expenses, they amount to $4500; but when you add them to your other itemized deductions, the total does not exceed $11,900 (you are married). No deduction? Y or N

5. Child support payments by a divorced dad are deductible. Y or N

6. The costs to send your children to private school are not deductible. Y or N

7. If you worked all of 2012 in England, the income that you earned is taxable in the U.S. Y or N

8. You have a love of feral cats and spent $2,500 in 2012 to feed them in your back yard. That expense is a deductible charitable expense if you have records. Y or N

9. If you received $19,000 from Social Security last year and that was all the income you received, you are not required to file a tax return. Y or N

10. You paid the interest on your son’s college student loan. That interest expense is your deduction. Y or N

11. Alimony payments you make to your ex-spouse are deductible. Y or N

12. Your widowed mom died and left you the family farm. The original cost was $200,000, but your parents spent another $100,000 on improvements. Your mom had the farm appraised before she passed, and the value was $600,000. If you decide to sell the farm, what is your cost basis: $200,000, $300,000 or $600,000?

ANSWERS: 1:N, 2:N, 3:N, 4:N, 5:N, 6:Y, 7:Y, 8:Y, 9:Y, 10:N, 11:Y, 12: $600,000

Percentage correct

100% - tax genius
75-92% - tax expert
50-67% - tax tyro
Fewer than - 6 you need professional help

Look Beyond the 529 Plan for College Savings

DAN YU for the Wall St. Journal writes: Many people rely on 529 plans to save for college tuition, but they aren't always a one-stop solution.

I tell my clients it's best to start contributing to a 529 plan when children are very young in order to maximize the benefit of tax-free, compound growth. But by the time a child reaches his or her teens, 529 contributions make less of an impact. At that point it's usually wise to move to a more conservative asset allocation, which means slower growth. Also, there is less time for compound growth to be effective.

It is very possible that a client who puts away $10,000 a year starting when a child is born and earns 4% to 5% interest will have enough saved by the time the child turns 15 years old to pay for most or all of college.

But even if clients aren't sure they have saved enough by the time the child is 15, they should still stop contributing to the 529 plan because overfunding these plans can be costly. If the assets in the 529 plan aren't used up, the plan holder must pay a 10% penalty plus income tax on any earnings within the plan to gain access to the money.

At this point, I often advise clients to redirect 529 contributions to an investment savings account in their name. This account can be used to supplement a 529 plan, and any remaining funds can be used to supplement retirement income, penalty free.

Since not all of the money in the supplemental investment account is specifically set aside for college tuition, I can assume some of the assets have a longer time horizon to grow. That means I can set a more aggressive asset allocation and make up for any lost tax savings with higher returns.

In an ideal situation, a client would pay for his or her children's education using a combination of 529-plan savings, earned income and a supplemental investment savings account.

I believe it's also important that college students have some assets in their own name that they can use at their discretion for entertainment and other daily expenses not covered by tuition. Creating a Uniform Gift to Minors Account for children when they are young can be a great way to encourage them to start saving for themselves.

By the time they are ready to go to college, the account will transfer to their name. Even a few thousand dollars can really make a difference in the amount of financial independence they feel.

One final piece of advice: Advisers not working exclusively with high net-worth clients should always look into financial-aid and tax-credit opportunities that might lessen the burden of tuition for their clients.

Yelp Wanted: More E-Marketing Tools / Tax Preparers are exploring online tools to e-market with newcomers such as Yelp and Thumbtack.

Jeff Stimpson for Accounting Today writes: Preparers are exploring many online tools to e-market, and on the heels of familiar avenues such as Facebook, Twitter and LinkedIn have come newcomers such as Yelp and Thumbtack.   Yelp is a site where consumers go to read and write reviews about their favorite local businesses, such as tax prep firms, while on Thumbtack, vendors such as tax preparers pay a nominal fee to offer their services, in most cases surveyed about $8 per lead.

A recent Yelp search in Manhattan yielded almost 200 tax prep services reviewed by clients; a Thumbtack search for one Manhattan ZIP Code revealed nearly 100 tax prep services.

Reviews on such sites, of course, can range from ecstatic to damning, so how prepares approach and use such marketing sites is key.

Though such marketing might fly in the face of traditional marketing of tax prep, some preparers think it worth the effort. Others said that marketing on such sites can not only turn up no leads, but actually backfire.

Good and bad

“I have been very frustrated with Yelp and similar sites,” said Laura Strombom, EA, at All About Numbers in Stockton, Calif. “One client … came to us to amend a return, which we did.  Per the amendment, she should receive a $1,000 refund of the $2,500 previously paid. However, it turned out the original return she brought us, stating it had been filed, was never filed. Instead of getting a refund, she got a bill for $1,500. She proceeded to blast my firm on every Web site she could find, as well as file a complaint with the BBB.”

Yelp has this client’s negative review prominently posted, Strombom added, bringing up a major drawback to sites that practically cement clients’ negative reviews on their sites. “I’ve had clients read it and file counter, positive reviews. Yelp puts them in the filtered area. I began to look at other businesses I frequent in my area; I reviewed many businesses, realizing that if I want to have people review me, I should be reviewing others. I soon learned that all of my reviews were listed as filtered. I looked at some Yelp pages of some of my clients. They also had the good reviews as filtered, but negative reviews were displayed.”

“We’re listed on Yelp [but] it hasn’t provided anything to call home about,” added Jeffrey Schneider, an EA in Royal Palm Beach, Fla., and member of the National Association of Tax Professionals. “Every time we ask a new client where they found us (if via the Internet), they say Google or an Internet search.”

EA Steven Potts of Potts’ Taxes, in Fullerton, Calif., and a member of the National Association of Tax Professionals, said that he has used Thumbtack.com successfully recently. “Thumbtack provided me numerous leads, although I find the format for submitting quotes a little difficult with such limited information. I was able to pick up two new clients directly from Thumbtack and at least one referral from a client picked up from Thumbtack. For the amount of time, effort and money put in, Thumbtack was an interesting alternative,” he said.

Some preparers, however, have also found this a blind marketing alley. “I was a member of Thumbtack,” said John Stancil, CPA, of My Bald CPA in Lakeland, Fla., and also a member of the NATP. “I found that, in most cases, the information provided was insufficient to make an informed bid. To avoid getting trapped doing a complex return for minimal dollars, I’d couch my bid in qualifiers, specifying that there would be additional charges for additional forms. In addition, it was my perception that people were trying to get a return done on the cheap. While I’m not the most expensive preparer around, I do expect a reasonable return for my time.”

“Third,” he added, “I found Thumbtack difficult to deal with at times. If the person requesting the quote responded to me, I could not get a refund even if they didn’t accept my bid. In short, Thumbtack was too much hassle for too little return.”

Other views

Other preparers, writing on LinkedIn preparers’ groups, have had different experiences (though wondering if Thumbtack clients were a “cheap crowd”).

One preparer, for example, reported that he “spent about $18 or so on bids and did over $800 worth of business and have an ongoing bookkeeping client as a result … It doesn't generate a ton of leads, so don't depend on it as a total source, but definitely add it to your package of advertising.”

Frank Hagan, CEO of Acumen Consulting, said on a preparers’ discussion group that he used Thumbtack several times last season, and secured two clients. “I found Thumbtack during a search for a local electrician,” he wrote, adding that the bidding process for such professionals as preparers isn’t always clear on sites like Thumbtack. “You can see the first name, city, and a brief description of the person’s needs,” he wrote. “I paid $6 to quote on [one ad] and did land the client. Overall, I spent about $35 on quotes through Thumbtack; $17.50 per client is not a bad customer acquisition cost.” 

Thumbtack has “a nice profile section where you can add a lot of content,” Hagan added, “but that content is hard to find because they want consumers to submit requests for quotes. The second client actually found my Thumbtack profile linked from another site, and so I got that client without paying to quote.”

“This is less valuable than a listing on Yelp or Angie's List (both of which are also free),” Hagan wrote. “I do have to say that the clients I picked up were good quality, and not just bargain-hunters. “

“My two customers weren't cheap, but then I quoted them less than they were paying at H&R Block. One was tired of having a different tax guy or gal every season. The other was quoted $300 for pretty simple return that I do for $200,” he wrote.

Tips and tricks

Clients acquired through these avenues do tend to be unusually price-sensitive and not especially loyal year to year, some preparers said. Other preparers have secured clients on these marketing sites with precise marketing wording.

One example: “I would appreciate doing your income taxes. I work with people on the price I charge. I have never had price as an issue. My prices generally run between $75 to $150 … I have done taxes for eight years. I am an IRS Registered Tax Preparer …”

“I tend to try and put too much information into the quote, and the two that I landed were ones where I just averaged my rates and kept it short and simple,” Hagan wrote, adding that he uses such marketing avenues primarily “to build a client list.”

C CORPS V. S CORPS

Joe Wallin for StartUp Law Blog writes: Suppose you’ve decided that you want to form your new business as a corporation (not an LLC), and you are trying to figure out if it should be an S Corp or a C Corp.  How do you decide?  Flip a coin?  Arm wrestle your co-founder?  Rely upon your lawyers or CPAs advice?  The following is a high level summary of some of the more important federal income tax and non-tax considerations involved in choosing between doing business as an entity taxed for federal income tax purposes as:

• a C corporation (C Corp) vs.
• an S corporation (S Corp); and

I generally don’t recommend a coin toss as the method of deciding.  Hopefully, the pros and cons listed below will help you.

C CORPORATION ADVANTAGES/S CORPORATION DISADVANTAGES

• Traditional Venture Capital Investments Can Be Made – C corporations can issue convertible preferred stock, the typical vehicle for a venture capital and angel investment. S corporations may have a single class of stock only and therefore cannot issue preferred stock.
• Retention of Earnings/Reinvestment of Capital – Because a C corporation’s income does not flow or pass-through to its shareholders, C corporations are not subject to pressure from their shareholders to distribute cash to cover their shareholders’ share of the taxes payable on account of taxable income that passes through to them. An S corporation’s pass-through taxation may make conservation and reinvestment of operating capital difficult because S corporations typically must distribute cash to enable shareholders to pay the taxes on their pro rata portion of the S corporation’s income (S corporation shareholders are taxed on the income of the corporation regardless of whether any cash is distributed to them).
• No Single Class of Stock Restriction – S corporations can only have one economic class of stock; thus, S corporations cannot issue preferred stock. This restriction can arise unexpectedly, and must be considered whenever issuing equity, including stock options or warrants.  (S corporations can, by the way, issue voting and non-voting stock, as long as the stock is economically the same class.)
• Flexibility of Ownership – C corporations are not limited with respect to ownership participation. There is no limit on the type or number of shareholders a C corporation may have. S corporations, in contrast, can only have 100 shareholders, generally cannot have non-individual shareholders, and cannot have foreign shareholders (all shareholders must be U.S. residents or citizens).
• Eligibility for Qualified Small Business Stock Benefits – C corporations can issue “qualified small business stock.” S corporations cannot issue qualified small business stock, thus S corporation owners are ineligible for qualified small business stock benefits, such as the 50% gain exclusion for gain on the sale of qualified stock held for more than five (5) years (for an effective capital gains rate of 14%) and the ability to roll over gain on the sale of qualified stock into other qualified stock.  Currently, for C corporations acquired before the end of 2013, this exclusion is 100% (subject to a generous cap).
• More Certainty in Tax Status – A C corporation’s tax status is more certain than an S corporation’s; e.g., a C corporation does not have to file an election to obtain its tax status. S corporations must meet certain criteria to elect S corporation status; must elect S corporation status; and then not “bust” that status by violating one of the eligibility criteria.
• Avoidance of Shareholder State Income Tax Problems – Shareholders of an S corporation may be subject to income taxes in states in which the S corporation does business.

S CORPORATION ADVANTAGES/C CORPORATION DISADVANTAGES

• Single Level of Tax – S corporations are pass-through entities: their income is subject to only one level of tax at the shareholder level.  A C corporation’s income is  taxable at the corporate level and  distributions of earnings and profits to shareholders (i.e., dividends) that have already been taxed at the C corporation level are also taxable to the shareholders (i.e., the dividends are effectively taxed twice).  This rule is also generally applicable on liquidation of the entity.
• Pass-Through of Losses – Generally losses, deductions, credits and other tax benefit items pass-through to a S corporation’s shareholders and may offset other income on their individual tax returns. These returns are subject to passive activity loss limitation rules, at risk limitation rules, basis limitation rules, and other applicable limitations.  A C corporation’s losses do not pass through to its shareholders.

Paying Off Student Loans with Home Equity is a Risky Move

eCreditDaily writes: For many borrowers, these two trends are coinciding: growing student loan debt and the rebuilding of home equity through rising home values.

But is tapping into one (home equity) to pay off the other (college loans) a good idea? Generally speaking, there are more risks than rewards.

Rohit Chopra, of the U.S. Consumer Financial Protection Bureau, addressed this issue in a post on Friday.

“This can be risky. Student loan borrowers who have built equity in their homes may find that paying back outstanding student debt with a new home equity loan looks appealing, given today’s historically low interest rates, but putting more debt on your home can lead to problems down the road,” Chopra writes.

Congress is grappling with the July 1 deadline for preventing the doubling of the 3.4 percent rate on subsidized Stafford loans. Meanwhile, the bureau has received a significant number of questions from consumers who are looking for programs to refinance student debt or reduce payments owed.

Refinancing your student loan could possibly help you take advantage of improvements in your credit profile since your college days. But you may be able to lower your interest rate without some of the risks that come by tapping the equity in your home.

Income-Based Repayment (IBR) is a federal student loan repayment program that allows you to limit the amount you must repay each month based on your income. Many borrowers with federal Direct Loans can now enroll in IBR online.

The Bureau suggests that if you are considering an home equity loan to pay off a student loan, you should try to look for a student loan refinance product first and see what rate you can get.

Here are a few things to remember, according to the CFPB:

• Your rate may be lower, but your home is at risk. Interest rates for home equity loans are generally lower than interest rates for student loans. (Lenders are willing to offer a lower interest rate because they know that if you don’t pay, they have a legal claim on your home.) If you can’t pay, you could end up in foreclosure.
• On your federal loans, you are giving up repayment options and forgiveness benefits. Federal student loans feature a number of protections for borrowers that run into trouble, including Income-Based Repayment (IBR). These benefits no longer exist when you pay off a federal student loan with a home equity loan.
• This may impact your taxes. The interest you pay on a home equity loan could equate to a greater tax benefit for some borrowers, when compared to the student loan interest tax deduction, especially if you have high income and itemize deductions. You may wish to consult with a tax advisor when considering your options.

How to Keep Your Info Private (Even From the NSA) / Thwarting the efforts of a billion-dollar super-secret government spy agency -- or anyone else who wants access to your personal information -- is not that difficult.

Dan Schointuch for MoneyTalksNews writes:  With the recent revelations that the NSA and other agencies have been tapping into corporate streams of data that can provide them with massive amounts of private information about U.S. citizens, now is a good time to start thinking about how best to keep your private information private.

Not a big deal, you say? Well, whether you’re concerned about the government digging through your personal data or not, you should be concerned about protecting your privacy. According to the Department of Justice’s most recent National Crime Victimization Survey, “In 2010, 7 percent of households in the United States, or about 8.6 million households, had at least one member age 12 or older who experienced one or more types of identity theft victimization.” That’s almost one in 10, with 76 percent of them experiencing direct financial loss as a result.

Imagine that statistic was for bank robberies or home break-ins. If 1 in 10 Americans had their bank accounts emptied or their home broken into, we’d all be living in fear. And yet, that’s happening every year to our personal information. Making that information harder for someone else to obtain is Step One in preventing identity theft.

And not all identity theft is of the “crime” variety. There’s a famous quote that I’m paraphrasing: “If you’re using a website and you can’t figure out what they’re selling, you’re what they’re selling.”

Many corporations make a living off of selling or processing your personal habits and preferences for marketers, retailers and government agencies, practically without your knowledge. Since you’re not being paid for this information, and (unless you speak legalese and love spending your afternoons reading “Terms and Conditions”) you’re not aware that it’s being taken and used in this fashion, I’d consider it “theft.” But since the government has yet to agree with me, the best way to prevent yourself being used in this fashion is to get a little more serious about your privacy.

In this article, we’ll focus on the things the NSA has reportedly been looking at. It’s reasonable to assume that if you can stop them from taking a peek at your private information, you’ll have stopped hackers and others, too. Fortunately, thwarting the efforts of a billion-dollar super-secret government spy agency is not that difficult. You just need to know which services to turn to.

It’s important to note that everything in this article is public knowledge. If you’re worried about terrorists reading it and figuring out how to thwart our government’s best efforts at finding them, don’t be. The terrorists already know this stuff. You, however, might not.

1. Your phone

If you’re looking to keep SMS messages secure and you have an iPhone, there’s a free app called Wickr that can help. The app uses end-to-end encryption without storing the keys for decryption on its servers. What that means is that when you send a message to someone else using Wickr, nothing you say can be read by anyone at Wickr. Because of that, there’s no stream of plain text messages going back and forth that the NSA or anyone else can siphon.

To make voice calls, the easiest option is Silent Circle, but you’re going to have to pay for the privilege — $20 to $29 per month to call other Silent Circle users, with an optional add-on to safeguard calls to everyone else. Joining Silent Circle also gets you secure chat, email and video calling.

If you’re an Android user, you have a few more options than iPhone users do. For text messages, there’s Gibberbot. Like Wickr, Gibberbot is free and promises more secure messaging.

And for calls, check out RedPhone. When calling someone who also has RedPhone, everything you say is encrypted, making it much more difficult for someone to listen in. Plus, it’s free and uses your data connection, not your cellular voice. So not only will your calls be secure, you won’t have to pay for the minutes either.

More Android apps to check out:

• TextSecure (chat).
• Ostel (voice — in beta, but looks promising).
• Kryptos (chat).

2. Your Dropbox

According to documents released by The Guardian and The Washington Post, Dropbox is “coming soon” to the NSA’s spy program. If that were to happen, documents, tax records or other private information in your Dropbox folder could be subject to government monitoring. Add to that Dropbox suffering security breaches in the past, and they’re just not safe enough for me. The solution? SpiderOak.

SpiderOak is just like Dropbox — there’s a folder, you put stuff in it, that folder syncs between computers and devices — but with one important difference: good encryption. Everything you put in your SpiderOak Hive (that’s what they call their syncing folder) is first encrypted on your computer using your password, then sent to the SpiderOak servers.

This means that even SpiderOak can’t read your data without your password; it looks like gibberish. So if someone (the NSA, a foreign government, or a hacker in Latvia) manages to get into SpiderOak’s servers, they won’t be able to see what you’ve stored there without breaking one of the world’s most advanced encryption algorithms (one the NSA trusts to secure its own data).

But SpiderOak can also back up any file or folder on your computer, sync any file or folder on your computer, and share any file or folder on your computer. This makes it a great one-stop-shop for all your syncing, sharing and backup needs.

There’s a free plan that offers 2 GB of data, plenty for storing tax returns, scans of important documents, photos, small videos, and other data that you would prefer was stored securely. If you need more space, they offer it for a fee. Prices are almost identical to Dropbox, starting at $10 for 100 GB.

3. Your social network

Unfortunately, there’s no good option here. You join social networks because you want to share things with others, or connect with people you know and see what they’re sharing. Typically, this includes things that you might use as password reset reminders on other sites: a pet’s name, your mother’s name, high school you attended, favorite sports team, etc. That means that if a hacker or the NSA can gain access to your social media profile (either directly with your password, or indirectly by pretending to be someone you know and friending you), they can probably find enough information to gain access to your accounts on other sites, as well.

While there are a few start-up social networks that offer more advanced encryption of your data, they’re complicated to install, and even more difficult to get everyone you know using them, too. For now, the best option is to assume that anything you post on Facebook, Google+, Twitter, Pinterest, etc., will eventually be read by everyone in the world. That way, it won’t matter much if someone gets access to your data, be that a government agency, a jilted ex-girlfriend, or simply a prospective or current employer.

To share more securely, use something like SpiderOak or a secure messaging program to share directly with those you trust.

4. Your credit cards

Yes, the NSA is probably looking at credit card transactions, too. So how do you get around exposing your purchase history? “I already know this; the answer is to use cash,” you’re probably thinking. But how do you shop online without using a credit card?

The answer, sort of, is Bitcoin. It’s a virtual currency (you give or receive Bitcoins, which are worth something in dollars), but if used correctly, it can provide almost complete anonymity when shopping online. And since you’re not typing your credit card information into a site that may or may not keep that data secure, there’s no risk that your account will be stolen by someone hacking the site.

The only catch is that there aren’t a lot of places that accept Bitcoins. In fact, you’d be hard-pressed to find ones that do. But if the currency takes off, it could become the “cash” of the Internet.

A more doable option? Buy prepaid gift cards from Visa, MasterCard or American Express with cash. Then use those to shop online. You’ll probably have to pay a few dollars extra when buying the card, but afterward you’ll be able to shop anywhere those cards are accepted without having the purchase data and your identification forwarded to a government agency. If the site where you used the card is ever hacked, you’ve got nothing to worry; by that time you’ll probably have already used the balance on the card and moved on to one with a different number.

5. Your Web history

Everything you search for on Google, and a good deal of your browsing activity, can also be snooped on by the NSA, according to news reports. The problem is your IP address. It’s the sequence of numbers that identifies your computer on the Internet, and can be traced back to you through your ISP (Internet service provider).

The answer? A virtual private network, or VPN. A VPN will sit between you and the websites you visit, encrypting and relaying information back and forth. So when you do a search on Google, the IP address Google records as having performed the search is that of the VPN, not you. Find a good VPN, one that’s easy to use, with a good price, limited or no logging of your activity and fast speed, and you’ll be much harder to track online. Just make sure you sign out of your Google, Facebook, and Twitter accounts before connecting to the VPN, or use your web browser’s private mode.

Here’s a list of VPNs to consider. If you just want me to pick one for you, check outIPVanish.com. They have software that makes them especially easy to use, can be set up on your computer, tablet or smartphone, have servers all over the world that you can connect to, and cost $10 for unlimited use (and it’s even cheaper if you pay for a year in advance).

Bonus: Some VPNs accept Bitcoin as payment, making for the ultimate in anonymous Web browsing. Not even the VPN has to know who you are.

While using a VPN at home is something you might consider to protect your privacy from the NSA, using a VPN at a public Wi-Fi hot spot or hotel network should be mandatory. Often, those networks are unsecured and almost everything you do can be “sniffed” out of the air by someone else connected to the same network. A VPN would protect you.

6. Your everything else

While I’ve tried to hit all the major areas you might want to protect, this is by no means a comprehensive list of everything you can do to keep your private information safe and secure. Entire websites could be devoted to the topic.

Websites like Security In-A-Box. They’ll teach you everything from creating good passwords and protecting your computer from hackers to remaining anonymous online and bypassing censorship. And it’s free. If you’re interested in protecting your data in this brave new world, I encourage you to check it out.