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By RIVA RICHMOND

Barbara Heinrich says she isn’t computer-savvy, but last month the owner of Local Motion, a clothing boutique in Minneapolis, went online and built her own mobile-phone application.

It was worth a try, she figured, considering how cheap and easy it was to do and how addicted to iPhone apps young people like her daughter were. It also dovetailed with other online marketing efforts —her Web site and e-mail blasts—aimed at bringing regular customers, collected over 25 years, back to the shop. So she built a free app to display her hours, location and pictures of new arrivals using BuildAnApp, a Web site from Mobile On Services Inc., of Minneapolis, and submitted it to Apple for inclusion in its App Store.

Glockner Honda Toyota’s iPhone app

“I kind of jumped in and did it, and now I just need to figure everything out. But I think it will be great,” she said. “I think that everybody’s going to be doing it.”

A number of services including MobileAppLoader LLC, SwebApps, Mobile Roadie LLC and Kanchoo LLC have cropped up recently to help even the smallest and most local of businesses make apps, and they are pitching the programs as the next must-have marketing tool. With easy-to-use online templates, much like those used to make low-cost Web sites, a basic iPhone app can take 15 or 20 minutes to make and cost as little as $15 a month in hosting charges.

Yet while there’s not much to lose, creating an app that actually brings in business isn’t quite so simple. Entrepreneurs, already overwhelmed by a slew of trendy marketing initiatives, need to consider whether they have the hours or the staff needed to maintain apps and keep content fresh. Those who lack technical skills, or want to pay a consultant to develop a custom app, need to consider whether it’s worth investing hundreds or thousands of dollars into having one built.

In general, businesses that rely on repeat customers, like restaurants and retailers, or have intense interaction clients for some period of time, like real-estate brokers and car dealers, are the most likely to benefit from an app, said Greg Sterling, a senior analyst at Opus Research Inc.

“For ongoing, regular contact with customers that are on the go, it makes sense as a promotional or loyalty tool,” Mr. Sterling says, since apps enable businesses to send out coupons and event details, including by text message, and customers can easily place orders or contact you for information.

But businesses that are looking primarily to attract new customers, such as doctors, lawyers and contractors, may find an app is a bit of a waste.

Randy Walden, president of HeartWarming Care LLC, an elder-care firm in Tacoma, Wash., got his iPhone app in May. The simple program is meant to help adult children of potential clients call to make appointments to discuss care for their parents, get directions to its offices and click to visit to the company’s Web site.

“I’m not sure it’s useful,” he said of the app. Most new clients hear about HeartWarming Care through word of mouth or community partners, or find it doing a local Google search. He doubts many of his client’s children have iPhones, or that they would think to look for and use his app.

Others have been pleasantly surprised.

Founding Farmers, a Washington, D.C., restaurant owned by a collective of family farmers, got its app into the App Store in June. Dan Simons, a principal at restaurant management company Vucurevich Simons Advisory Group that oversees the restaurant, jumped at the chance to put Founding Farmers’ logo on iPhone screens, which he calls “a modern day fridge magnet.” He put a sign in the window and encouraged staff to mention the app to diners.

“It’s turned out to be way better than I thought,” he says. More than 1,000 people have downloaded the app, three-quarters of whom submitted their email address. In the last 30 days, 94 people used it to book reservations and 34 to book larger parties, a nice number albeit small compared to more than 2,800 reservations made via its Web site.

Mr. Simons paid SwebApps, a unit of Sweb Development, of San Antonio, about $3,000, to create a customized tool. The restaurant’s app features a VIP reservation line; a feature that lets diners spin the wine list by literally shaking their phones; and, to entertain kids of all sizes, another with farm animals that make sounds when you tap them – sometimes rude ones if you tap enough times.

In Portsmouth, Ohio, Tim Glocker of Glockner Honda Toyota says ten customers a day, on average, download his iPhone application, which is less than three months old. The app, built using the online service MobileAppLoader LLC, of Cupertino, Calif., lets car buyers view pictures and videos of every new and used car in stock, and calculate monthly payments. Customers can also find out about specials and schedule service appointments.

“This is one of the best ideas we’ve come up with this year,” he says.

By TOM HERMAN

It’s understandable that many people will look for almost any excuse to put off the mind-numbing task of figuring out their taxes and filing their returns on time.

But some ultra-procrastinators have fallen several years behind—and now are in danger of losing valuable refunds.

The Internal Revenue Service recently estimated that refunds totaling more than $1 billion may be waiting for nearly 1.1 million people who still haven’t filed their federal income-tax returns for 2008.

To collect, these individuals typically must file their return for 2008 no later than April 17 this year. That is only about one month from now. (The tax-filing deadline this year is April 17 because April 15 falls on a Sunday, and April 16 is a holiday in Washington, D.C.)

“In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund,” according to the Internal Revenue Service. “If no return is filed to claim a refund within three years, the money becomes property of the U.S. Treasury.”

If you need prior years’ tax forms and instructions, go to the IRS website (www.irs.gov). Look on the forms and publications page. Or you can call 800-829-3676.

The IRS says taxpayers seeking a 2008 refund may have their checks held if they haven’t yet filed returns for 2009 and 2010. “In addition, the refund will be applied to any amounts still owed to the IRS, and may be used to offset unpaid child support or past due federal debts such as student loans,” the IRS says.

Write to Tom Herman at tom.herman@wsj.com

Send your questions to us at askdowjones.sunday03@wsj.com and include your name, address and telephone number. Questions may be edited; we regret that we cannot answer every letter.

By M.P. MCQUEEN

(See Correction & Amplification below.)

While consumers have been fretting about the safety of their policies at large, publicly traded insurers, some smaller, less-watched companies have been running into trouble too.

Insurers of all sizes are being slammed by investment losses. Some also are being dragged down by higher-than-expected claims in areas like long-term-care insurance. Regulators have taken over companies with policies owned by more than half a million people in more than 30 states, including life insurance and annuities. At one insurer, a receiver has imposed a moratorium on policyholders taking cash out of their policies or turning them in for cash.

Shenandoah Life Insurance Co., a small insurer based in Roanoke, Va., recently fell below state requirements for capital and cash reserves because of its investments in mortgage-backed securities, which were hammered in the housing meltdown. Shenandoah has stopped selling new policies and has instituted a moratorium on policyholders cashing out, selling, surrendering or borrowing from their contracts. The company is continuing to pay death and annuity benefits as well as health-insurance claims. The state receiver who has been running Shenandoah since last month declined to comment.

The life-insurance industry’s troubles are causing angst for policyholders, even at institutions still regarded as solid, driving some consumers to delve deeper into the financial health of their insurers. Phyllis Myers of Washington, D.C., says she and her husband, who both work for nonprofit institutions, recently looked into the financial strength of Teachers Insurance & Annuity Association, part of retirement giant TIAA-CREF, which issues their annuities — an insurance contract that promises a stream of income over a period of time.

Ms. Myers, an environmental consultant, says she was somewhat reassured by TIAA’s triple-A ratings. But, she adds, “we are not sure right now how much confidence we have in the ratings based on what I am reading in the paper and hearing on the television.”

Such behemoths as MetLife Inc.,

Hartford Financial Services Group Inc.

and Prudential Financial Inc.

have all been hit with slumping share prices and downgrades in their financial-strength ratings — the main gauge used to assess an insurer’s ability to pay claims — though the ratings remain strong or very strong.

Worst Blowups

Some of the worst blowups so far have taken place at insurers that offer long-term-care policies to defray nursing-home expenses. The problem here was a higher-than-expected level of claims, partly because of owners’ longevity, and partly because few customers are letting their policies lapse. Senior Health Insurance Co. in Pennsylvania, a unit of Conseco Inc.

That prompted worries that policies won’t pay off when they’re needed, or that people will get a much-smaller benefit than they expected for their premiums.

“In good times the issues get swept under the rug, and in bad times rough spots show up,” says Martin Weiss, president of Weiss Research Inc. in Jupiter, Fla., an investment-research firm that also rates insurers.

More trouble could be on the horizon. More than a dozen major insurers have seen ratings downgrades in recent weeks, and several have dropped into categories reflecting relatively weaker financial health. Analysts say their ability to pay claims could be affected by continuing investment losses.

They include Phoenix Cos.,

of Hartford, Conn., and its subsidiaries, which sell life insurance and annuities to the affluent, and Security Benefit Life Insurance Co.

of Topeka, Kan. Phoenix has been weighed down by problematic investments in mortgage-backed securities. The company recently announced that its top two distributors had ceased to sell its policies. A Phoenix spokeswoman says the company’s key financial “metrics remain solid.”

Security Benefit, which sells 403(b) retirement plans and annuities, and which recently acquired mutual-fund company Rydex Investments, was recently downgraded for the fourth time since 2005. It is now at the top of the “vulnerable” range, according to the scale used by A.M. Best — the range at which ratings agencies have determined that an insurer’s financial condition could be subject to outside economic factors. Its problems stem from exposure to financial derivatives and subprime mortgages. Security Benefit executives and Kansas state regulators say they expect the company to be able to manage its way through.

In an unusual situation, Shenandoah was suddenly taken over by Virginia regulators last month after receiving a “good” financial-strength rating from a ratings firm just weeks earlier. The company has about 200,000 individual and group life-insurance policies and 21,000 annuity contracts in force in more than 30 states, mostly in the South. Regulators stepped in after a proposed merger with an Indianapolis financial-services company fell through. They said they hope to get the company back on its feet and avoid liquidation, but “it is too early to determine whether that can be achieved.”

Virginia’s state guaranty association, which compensates policy owners when an insurer is liquidated, protects life insurance and individual annuity cash values up to $100,000, and death benefits up to $300,000. Guaranty-fund limits vary by state; Virginia’s are typical. For those in your state check the Web site of the National Organization of Life and Health Insurance Guaranty Associations, www.nolhga.com.

Financial Stability

“The industry continues to hold capital and surplus well in excess of the minimum requirements — even after the detrimental effects from 2008,” says Therese M. Vaughan, the CEO of the National Association of Insurance Commissioners.

Even if they’re not panicking, financial advisers and their clients are doing some soul-searching after hearing about some big insurers’ troubles. Henry Montag, a certified financial planner in Jericho, N.Y., said he hasn’t switched or sold any of his own or clients’ contracts lately, but he is discussing the solvency issue with clients.

“We are in uncharted waters,” he says. “So many of the major companies like the Prudentials and Hartfords have been downgraded, that I am bringing it up rather than waiting for clients to bring it up.” Mr. Montag is now pairing new clients with insurers “that are more financially stable and secure even if the premiums are higher.”

Corrections & Amplifications
Conseco Inc. transferred the long-term care policies in its Conseco Senior Health Insurance unit to an independent trust in Pennsylvania last year. This article incorrectly reported that the unit was taken over by regulators.

Printed in The Wall Street Journal, page D1

By SUZANNE KAPNER

Some customers lured into new bank accounts by awards such as department-store gift cards and frequent-flier miles are finding a most unwelcome bonus: a visit from the tax man.

Some customers lured into new bank accounts by awards such as department-store gift cards and frequent-flier miles are finding a most unwelcome bonus: a visit from the tax man, Suzanne Kapner reports on Markets Hub. (Photo: AP)

HSBC Holdings PLC, Citigroup Inc.,

and the Citizens Bank unit of Royal Bank of Scotland PLC each mailed IRS form 1099 to thousands of customers who accepted such deals last year. The forms list the income the banks reported to the government in the customers’ names, reminding recipients they may be obliged to pay taxes on those sums.

The monetary stakes aren’t that high, running in most cases to a few hundred dollars, and the banks say they fully disclosed the tax implications to customers. Even so, an unpleasant surprise could await those who didn’t read the fine print, potentially alienating the very customers the banks are courting.

Drew Jerina, a 68-year-old retiree in Frisco, Texas, said he called Citigroup to find out why he had received two 1099 forms—one for interest earned on his account and another for miscellaneous income. The latter was for 25,000 frequent-flier miles valued at $625, which the bank had given him for opening the account.

Mr. Jerina said that he didn’t expect to pay taxes on the miles and was so annoyed by the $175 he now owes that he planned to close his Citigroup account.

A Citigroup spokesman said the bank is obligated to report the gifts as income, and noted that “this is separate and distinct from miles or points earned by our credit-card customers for their purchases,” which are generally not subject to income tax.

Banks have long dangled free toasters or coffee makers as incentives to draw new savings and checking-account customers. As competition for customers has intensified and interest rates have remained low, the gifts have gotten pricier.

Last year, HSBC gave new-account holders who met certain requirements a $900 Saks Fifth Avenue gift card, and Citizens Bank offered $500 toward an auto-loan payment. The banks say they always send tax forms for such gifts.

“We have never seen the richness of offers we are seeing today,” said Anuj Shahani, director of key accounts at Mintel Comperemedia, a market research firm.

The cutoff for banks to notify the IRS is $20 for accounts with balances in excess of $5,000 and $10 for accounts with balances of less than $5,000. Gifts that fall below those thresholds are supposed to be self reported by the recipients. If the gift exceeds $600, it is classified as miscellaneous income—as opposed to interest income—and requires a different tax form.

Nessa Feddis, senior counsel with the American Bankers Association, said that banks tend to be sticklers about tax rules, because they operate in such a regulated industry. “They’ve got to be careful about dotting the i’s and crossing the t’s,” Ms. Feddis said.

In contrast, freebies offered by retailers or consumer-products companies often aren’t subject to IRS reporting, because they are classified as a reduction in the purchase price, rather than income, accounting experts said.

For decades, the federal government capped the interest rates financial institutions paid on checking and savings accounts, which forced banks to differentiate themselves in other ways, often with gifts. They courted young newlyweds, in hopes of building lifetime relationships, and toasters symbolized that effort.

The law changed in 1980 to allow banks to compete on rates. With today’s rates at historically low levels, banks are again forced to look for other ways to stand out.

Gifts can more than double the number of people who respond to bank offers, which, in turn, reduces the cost of acquiring these customers, according to Robert Tetenbaum, executive vice president of First Manhattan Consulting Group, which advises financial-services companies. The response rate for banks is less than 0.5% for every 100,000 offers mailed, or about half the direct-mail industry average, according to the Direct Marketing Association.

What isn’t clear: whether the newly acquired customers will stick around once they get hit with the tax bill.

Write to Suzanne Kapner at Suzanne.Kapner@wsj.com

A version of this article appeared February 23, 2012, on page C1 in some U.S. editions of The Wall Street Journal, with the headline: In Lieu of Toasters, Customers Burned.