February tax filing reminders

  • February 28 – Payers must file information returns, such as Form 1099s, with the IRS. This deadline is extended to April 1 for electronic filing.
  • February 28 – Employers must send Form W-2 copies to the Social Security Administration. This deadline is extended to April 1 for electronic filing.
  • March 1 – Farmers and fishermen who did not make 2012 estimated tax payments must file 2012 tax returns and pay taxes in full.

Dependents can be a complicated tax issue

Most taxpayers believe that a “dependent” is a minor child that lives with them. While that is essentially correct, dependents can include children and parents, other relatives and nonrelatives, and even children who don’t live with you. There is really much more to the dependent deduction than you might at first imagine.

  • Exemptions and your taxable income. For 2012, each dependent deduction is worth $3,800, reducing your taxable income by this amount. In 2013, the deduction increases to $3,900 and is phased out for high income taxpayers.
  • Dependents defined. It’s impossible to present all of the rules relative to dependents here, since they are so complicated. Generally speaking, if somebody lives with you and you provide more than half of that individual’s support for the entire year, there is a good chance that person is a dependent. There are many exceptions. [Read more…]

Straight talk on carrybacks and carryforwards

The timing of taxable income and deductions for federal income tax purposes is relatively straightforward. Generally, income is taxable in the year it is earned and received. Likewise, deductible expenses incurred and paid this year can offset taxable income on this year’s return. The Internal Revenue Code is riddled with exceptions, but these basic rules usually apply, especially for calendar-year taxpayers.

The tax law also includes several provisions commonly referred to as “carrybacks” and “carryforwards” (or “carryovers”). As their names imply, the tax item can be carried back to a prior year or carried forward to a succeeding year.

Two items that are often carried forward by individuals are capital losses and excess charitable deductions. [Read more…]

IRS plans a late start to the 1040 filing season

The delayed passage of the American Taxpayers Relief Act of 2012 has put the IRS behind schedule. Due to several provisions of the law affecting 2012 tax returns, the IRS could not open the Form 1040 filing season for the majority of taxpayers until late January.

Those taxpayers filing Form 5695 (Energy Credit), Form 4562 (Depreciation), and Form 3800 (General Business Credit) will not be able to file until late February or possibly not until March. Apparently a large percentage of taxpayers in this group typically file later in the season because they have more complex returns. [Read more…]

Harassment at work needn’t be sexual to be illegal

When a female employee brings a lawsuit for a “hostile work environment,” it typically means that the employee was sexually harassed. But harassment can be illegal even if it isn’t sexual, the Minnesota Supreme Court recently decided.

For example, in that case a female school custodian claimed that her supervisor regularly criticized the work of female employees, prohibited female workers from talking to each other when not on break, and required female workers (but not male workers) to report by radio when they were taking their break. [Read more…]

Non-compete agreement might not be valid after a merger

Six insurance agents in Ohio signed non-compete agreements with their agency, saying that they wouldn’t compete with the agency or solicit business from its clients for two years after they left work.

The agency then underwent a series of business transactions in which it merged with other agencies and ended up being owned by another company.

After the six agents left work and began soliciting clients, the new company went to court to stop them, claiming that they had violated the non-compete agreements. [Read more…]

Weight discrimination can be cause for lawsuit

Discrimination against an employee because of obesity may violate the Americans with Disabilities Act, according to the federal Equal Employment Opportunity Commission. And this is true regardless of whether the obesity is caused by an underlying physical disorder.

In a recent case, a Louisiana woman who worked at a drug treatment facility claimed her employer fired her after eight years because of her severe obesity. She maintained that while her condition constituted a disability, it did not prevent her from doing her job.

According to the employee, she was really fired based on stereotypes and prejudices against overweight people. [Read more…]

Disabled employee didn’t have a right to unplanned absences

A disabled employee doesn’t necessarily have a right to take unplanned days off from work, a federal appeals court in San Francisco has decided.

The case involved a part-time nurse working in a hospital’s neo-natal intensive care unit. The nurse suffered from fibromyalgia, a condition that limited her sleep while causing chronic pain.

Under the hospital’s attendance policy, she was allowed to take up to five unplanned absences each year. When she started to exceed that number, the hospital tried to accommodate her situation through flexible shift scheduling. But her attendance problems continued, and she was fired. [Read more…]

New laws limit employers’ monitoring of social networking

The rise of social networking platforms such as Facebook, Twitter, and LinkedIn, along with the rapid growth of other types of online discussion forums, have made it easier for disgruntled workers to destroy a company’s reputation quickly.

It’s natural for business owners to want to limit the negative impact of such technology. However, an overly restrictive social-networking policy that infringes on workers’ rights to privacy and to communicate among themselves can land an employer in legal trouble.

For instance, a security services company recently created a social networking policy that required employees to get permission from the company’s legal department before commenting on work-related legal matters online. But an administrative judge with the National Labor Relations Board found this to be an unfair labor practice. [Read more…]

What are gay people’s rights in the workplace?

Many people are surprised to discover that the main federal law against job discrimination – known as Title VII – doesn’t apply to gay people. It covers job discrimination based on race, color, ethnicity, sex, and religion, but it doesn’t apply to sexual orientation.

But that doesn’t mean that gay people have no rights in the workplace against discrimination and harassment. It’s just that the law is more complicated.

Here are some examples:

  • While the federal Title VII law doesn’t apply to sexual orientation, more than half the states have passed their own laws that prohibit discrimination in the workplace. [Read more…]

What can a landlord collect if a tenant damages a property?

Most of the time, when an apartment is rented, the tenant pays a security deposit that can be applied if he or she damages the property. Usually, unless the lease says otherwise, the tenant is liable only for damage to the property…not for ordinary wear and tear. The landlord is typically supposed to maintain the property and perform routine upkeep.

Security deposits are normally a small matter, but in some cases, tenant damage can be a big issue. Two recent cases at opposite extremes show that it’s important to speak with an attorney if you have any questions or concerns.

In one case, a Tennessee landlord leased a house and 25 acres to a married couple. The couple had two dogs, and the wife apparently also kept some horses on the property. [Read more…]

‘Mortgage contingency’ required actually applying for a mortgage

A Nebraska couple put down a $45,000 deposit on an $885,000 home, and signed an agreement saying the purchase was contingent on the couple’s being able to get a mortgage for the remaining $840,000. Sometime later, the couple told the builder that they weren’t going to apply for a mortgage and weren’t going to go through with the deal.

The builder refused to return the $45,000 deposit, and the case went to court.

The result? The builder got to keep the $45,000 deposit.

If a “mortgage contingency” in a contract says that the purchase is contingent on the buyer’s being able to obtain a mortgage, this creates an obligation on the buyer’s part to actually apply for a mortgage, the Nebraska Appeals Court decided. A buyer can’t just change his or her mind and renege on the deal without applying. [Read more…]

More people rent space in their home…but overlook the legal issues

The number of people who rent out space in their home…an extra room or an apartment…is skyrocketing. But many people don’t realize that doing so can create legal problems.

Craigslist reports that the number of people offering to rent a room in a home has nearly doubled over the last year or so. Some of this is due to the economic doldrums. But another phenomenon is that many baby boomers whose children have grown up and moved away have houses that are larger than they need, yet they don’t want to move – or they can’t sell because they owe more on their mortgage than their home is worth. Often, these people rent out extra space to generate income. [Read more…]

Apartment rents increase, along with apartment building values

The cost of renting an apartment hit record levels in the second quarter of 2012, according to a study by Reis, Inc., which tracks real estate data.

Rents increased in all 82 markets in the U.S. that the company tracks, and set new records in 74 of them, the company said.

And while national data on the value of apartment buildings can be hard to come by, it appears the value of these buildings (including multifamily homes) is spiking as well, at least in many markets. This is in contrast to the market for single-family homes in the last few years.

The highest average rent in the study was in New York City, at $2,935 a month. Average rents topped $1,000 a month in 27 markets, including Baltimore, Miami, San Diego and Seattle. [Read more…]

‘No closing costs’ mortgages can be smart…but be careful

closing costsA lot of lenders these days are offering a “no closing costs” option if you take out a mortgage. With this option, the lender pays the closing costs for you, but you pay a slightly higher interest rate on the loan.

This can be a good idea in some circumstances. But you have to run the numbers to find out if it’s right for you.

The appeal of a “no closing costs” loan is obvious: Closing costs can be expensive! The national average of closing costs for a $200,000 purchase-money mortgage is more than $4,000, according to a survey by Bankrate.com. And that figure can vary considerably by state: In New York, the most expensive state, the average total of closing costs for the same mortgage is $6,183. [Read more…]

Can someone with dementia sign a will?

Millions of people are affected by some form of dementia. Unfortunately, many of them don’t have all their estate planning affairs in order before the symptoms begin to appear. This is another good reason to speak with an elder law attorney now, rather than putting off such a discussion.

However, if someone you know has symptoms of dementia, it might not be too late to sign a will or other estate planning documents.

In order for a will to be valid, the person signing it must have “testamentary capacity,” which means that he or she must understand the implications of what’s being signed. It’s not the case that people automatically can’t sign a will if they’re affected by a disease or a mental illness. This doesn’t matter as long as the person is lucid enough at the time to know what they’re doing. [Read more…]

A frequent Medicare sign-up mistake can lead to big penalties

Most people should sign up for Medicare when they reach 65; if they wait until later, they have to pay a significant penalty when they do sign up. There’s an exception, though, for people who are still employed at age 65 and are covered by a group health plan. These people can delay signing up for Medicare without a penalty.

But here’s a common problem: Suppose you’re no longer working when you turn 65, but you’re still covered by your old employer’s group health plan under COBRA?

COBRA is a federal law that allows many workers to continue on their employer’s health plan for up to 18 months after their employment is terminated or their hours are reduced.   [Read more…]

Rock star Jim Morrison’s will demonstrates an all-too-common error

Jim Morrison, the lead singer of the popular rock band The Doors, died in 1971 at age 27. Before his death he had signed a simple, one-page will that left everything to his girlfriend, Pamela Courson (or if she died before he did, to his brother and sister).

As a result of the will, Pamela inherited his entire estate. Pamela herself died shortly afterward of a heroin overdose. Because Pamela didn’t have a will, most of Morrison’s fortune then went by law to Pamela’s closest living relatives – her parents.

Now, Pamela’s father was a former Navy officer and a high school principal in conservative Orange County, California. He probably never imagined that he would spend decades collecting millions of dollars in rock-and-roll royalties, or that he would have artistic control over a counterculture legend’s poetry and a major say in how Morrison was portrayed in movies such as The Doors. [Read more…]

Assisted living residents on Medicaid could be evicted after a hospital stay

Some residents of assisted living facilities who are covered by Medicaid are at risk of being evicted if they leave the facility for a period of time – even if they leave merely for a temporary hospitalization.

This is a significant problem that seniors should be aware of when they are planning for long-term care.

In general, Medicaid will pay nursing homes to hold a room for a Medicaid recipient who is temporarily absent due to a hospitalization. This entitles the resident to return to the first-available room. [Read more…]

Some seniors are losing their homes due to unpaid property taxes

An 81-year-old woman in Rhode Island was evicted shortly before Christmas from the home she had lived in for more than 40 years – because she failed to pay a $474 sewer bill.

A corporation then bought her house at a tax sale for $836.39…and later resold it for $85,000.

While this is an extreme case, it’s a symptom of a growing trend. More and more seniors around the country are being forced to pay large, unnecessary fees – or even losing their homes – as a result of unpaid property tax bills. [Read more…]

Tax legislation gets us past the fiscal cliff – for now

The American Taxpayer Relief Act of 2012 approved by Congress just after we plunged over the “fiscal cliff” restores and modifies several expired tax breaks, but doesn’t address other issues. Here are the highlights of the new law’s provisions for individual taxpayers.

  • Individual income taxes. Only the wealthiest taxpayers face an income tax increase in 2013. A new individual tax rate of 39.6% will apply to single filers with income above $400,000 and joint filers with income above $450,000. Otherwise, the 2012 tax rate structure is permanently extended. However, beginning in 2013, a new 3.8% Medicare surtax authorized by the 2010 health care law also applies to certain high-income investors.
  • Capital gains and dividends. Under prior law, the maximum tax rate for net long-term capital gain would have been boosted to 20%, while qualified dividends were scheduled to be taxed at ordinary income rates, beginning in 2013. [Read more…]

Use adjusted tax numbers in your 2013 planning

The IRS and the Social Security Administration have published some inflation-adjusted numbers for 2013. Use these numbers as you begin your tax and financial planning for 2013.

Social security taxable wage limit for 2013 will be $113,700. Retirees under full retirement age can earn up to $15,120 without losing benefits.

The threshold for unearned income a child can earn in 2013 without having the kiddie tax apply is $2,000.

The amount that can be given each year without paying gift tax is $14,000 ($28,000 for joint gifts). [Read more…]

Understand “sunk costs” in making business decisions

Emotions add zest to life. They propel us to our feet when our favorite running back scores a touchdown. They warm us at an inspirational concert or movie. But in the realm of business, emotions sometimes hinder good choices. In fact, business owners and managers often let emotions dominate the decision-making process.

This is especially true when choices are based on “sunk costs.” Broadly defined, sunk costs are past expenses that are irrelevant to current decisions. For example, many firms hire consultants who sell and install software. In some cases, a company is still waiting – three or four years into the contract term – for a functional and error-free system. Meanwhile, costs continue to escalate. But are those costs relevant? [Read more…]

Mark these tax deadlines on your 2013 calendar

It’s time to file various tax returns once again. Among the tax deadlines you may be required to meet in the next few months are the following:

* January 15 – Due date for the fourth quarterly installment of 2012 estimated taxes for individuals unless you file your tax return and pay any taxes due by January 31.

* January 31 – Employers must furnish 2012 W-2 statements to employees. Payers must furnish payees with Form 1099s for various payments made. (The deadline for providing Form 1099-B and consolidated statements to customers is February 15.) [Read more…]