May 15 deadline for nonprofit organizations

Tax-exempt organizations are required to file annual reports with the IRS by the 15th day of the fifth month after their year-end. Those with gross receipts below $50,000 can file an E-postcard rather than a longer version of Form 990. For calendar-year organizations, the filing deadline for 2012 reports is May 15, 2013.

Don’t overlook tax planning in a divorce

Tax rules are daunting at the best of times – and they’re more so at the worst of times, such as during a divorce, when you may feel too stressed to face decisions involving your taxes. Yet the choices you make will affect your future, both financially and personally. Here’s where to start.

  • Filing status. For tax purposes, the timing of your divorce matters. The date of your final decree determines your filing status, which in turn has an impact on what you’ll owe.
  • Will your divorce be final by the last day of your tax year (generally December 31)? If so, you’ll file your income tax return as single or head of household. You can also use one of those filing statuses if you were legally separated according to the laws of your state by the end of your tax year. [Read more…]

Foreign asset reporting: You may need to file two forms

Do you know where your money is? If some of it is offshore, you might have tax reporting responsibilities – and those responsibilities generally go further than checking the familiar box on the Schedule B you submit with your federal income tax return. Here are two.

  1. FBAR. Foreign bank account reporting has been required since 1970, so you may be familiar with “Form TD F 90-22.1,” commonly known as “FBAR.” Unless you qualify for an exception, that’s the form you fill out when you control assets in a foreign financial account and the total value of your account exceeds $10,000 at any time during the calendar year.

The FBAR is an annual information form, filed separately from your federal income tax return. You may need to file it even if you receive no taxable income from your foreign account. [Read more…]

Ship worker entitled to ‘maintenance and cure’ for lymphoma

A merchant seaman who was diagnosed with lymphoma two months after ending his service on a tugboat was entitled to receive compensation from the ship owner for food, lodging and medical services, a New York federal appeals court ruled.

Such benefits – which are known as “maintenance and cure” – are available under general maritime law to seamen who are injured while serving on a ship.

The tugboat owner in this case argued that the worker wasn’t entitled to maintenance and cure because his disease didn’t manifest itself until long after his service on the boat had ended. [Read more…]

‘Rotating shifts’ might be illegal under disability rules

Many employers have “rotating shifts” where employees switch between day, evening and night shifts as a way of managing their workforce while meeting production and customer needs.

But in doing so, they need to be careful of employees’ rights under the Americans with Disabilities Act.

Take the case of a truck driver who suffered from fibromyalgia and sleep apnea that caused acute pain and fatigue. He claimed his condition made it impossible for him to work rotating shifts, and requested that his employer assign him to straight day shifts without overtime.

When the employer refused, he sued. And a federal appeals court in Chicago allowed the suit, saying that a jury should decide whether the worker’s long-term sleep problems and pain constituted a “disability,” and whether rotating shifts and overtime were truly essential to the worker’s job. [Read more…]

Congress is promoting ‘work-sharing’ as an alternative to layoffs

Layoffs are among the most unhappy consequences of the recession and the slow recovery. No employer enjoys having to tell productive and loyal workers that their services are no longer affordable. And obviously no employee welcomes the financial and personal upheaval that a job loss can create in a tough time.

The federal government has begun encouraging employers to look to “work-sharing” as an alternative to job cuts. Under a new law, the Middle Class Tax Relief and Job Creation Act of 2012, employers can reduce certain workers’ hours instead of terminating them, and these workers can be partially compensated for the lost hours through weekly unemployment payments while still receiving health insurance and retirement benefits. [Read more…]

Confidential investigations may violate federal labor law

When confronted with complaints of sexual harassment, safety violations or other workplace problems, a good employer will investigate immediately.

Often, employers will ask everyone involved for confidentiality when conducting an internal investigation. The reason is to protect employees, make it easier to get at the truth, and avoid spreading allegations that may prove to be unfounded.

However, a blanket confidentiality policy could land an employer in hot water with the National Labor Relations Board.

In a recent case, a hospital technician in Arizona claimed that she was retaliated against after she complained of unsafe working conditions. Before human resources officials questioned her, they made her agree not to discuss the matter with co-workers while the investigation was pending. The hospital apparently followed this same practice whenever it investigated an internal complaint. [Read more…]

Federal government cracks down on ‘at-will’ employment agreements

Most jobs in America are “at will,” which means that the employee can be fired at any time for any reason (and can also quit at any time for any reason).

Very often, an “at-will” employment agreement is included in an employee handbook, or the employee is otherwise asked to sign off on an agreement acknowledging that the employment can be terminated at any time.

But recently, the National Labor Relations Board has been cracking down on these agreements, and finding that they sometimes violate federal law.

The reason? By law, employees have the right to talk about or form a union, and a union can bargain for other types of arrangements – such as ones in which an employee can’t be fired for any reason, but only for “good cause.” [Read more…]

Wage-and-hour complaints are at an all-time high

Wage-and-hour claims against employers under the Fair Labor Standards Act are at an all-time high, according to data released by the Federal Judicial Center.

More than 7,000 cases were filed under the law in the latest 12-month reporting period. That’s a new record, and almost four times as many claims as were filed during a similar 12-month period a decade earlier.

The bulk of the new claims are for “misclassification” – where an employer wrongly calls an employee an “independent contractor” in order to avoid overtime rules, payroll taxes, employee benefits and medical leave requirements.

The remainder of the claims are for failure to pay overtime, wage miscalculation, and similar issues. [Read more…]

After divorce, follow through and change your beneficiaries

After all the stress of divorce, many spouses don’t follow through and change the beneficiaries they’ve designated on all their retirement accounts, insurance policies, and other documents.

But this is a critical step. If you have any questions about what needs to be changed, we’d be happy to help you.

Here’s a good example of what can go wrong: When a Florida couple got divorced, the husband was awarded a deferred compensation plan that he had opened during the marriage. At the time he opened it, he had named his wife as the beneficiary who would be entitled to death benefits.

The husband never got around to changing the beneficiary, and he died unexpectedly a year later. [Read more…]

Mother is required to sign child’s passport papers

A mother can be ordered to sign documents so the father can obtain a passport for the couple’s daughter, the Alaska Supreme Court recently decided

The parents, who share custody, had difficulty cooperating in their daughter’s upbringing. When the father wanted to visit relatives outside the country, he applied for a passport for the daughter so he could bring her along. Under federal law, both parents must consent in order to obtain a passport for a child under the age of 16.

When the mother refused to sign a consent form, the father sued, claiming it was in the daughter’s best interests to obtain a passport. [Read more…]

Military retirement pay continues to raise issues

Military retirement pay and disability benefits continue to be a big problem, as courts across the country give different answers as to how they should be treated after a divorce.

The military’s rules for dividing retirement pay at divorce are very complex. While it’s possible for an ex-spouse to be entitled to a share of retirement pay, the military also allows veterans who become eligible for disability benefits to substitute disability for retirement pay in certain cases – sometimes with a tax advantage for doing so.

The question then becomes whether an ex-spouse who was eligible for a share of retirement pay is also eligible for a share of the disability benefits – and if not, whether a military retiree must make up the difference. [Read more…]

Support orders shouldn’t be used to equalize income, court says

The purpose of a child support order is to support then children fairly, not to equalize the income of the two parents, according to the highest court in Massachusetts.

In this case, the parents never married, but they were living together when their daughter was born. Both parents’ incomes exceeded the levels to which the state’s child-support guidelines automatically applied.

After the couple separated, the mother filed a paternity action and asked for child support.

Even though the couple shared custody and had comparable standards of living, a judge applied an “income-equalization” formula and ordered that the father pay almost $500 a week in support. [Read more…]

Child support could be reduced when child goes off to college

A divorced father could be entitled to reduce the amount of his child support to reflect his ex-wife’s lower expenses when the children spend most of the year away at college, a New Jersey appeals court recently decided.

The couple had two children. The parents agreed to joint custody, but the children lived mainly with the mother. The parents also agreed that the father would pay child support while sharing the cost of college.

After both children went off to college, the father asked the court reduce his support obligation. And the court agreed that a child going to college counts as a change in circumstances that could justify a reduction of child support payments. [Read more…]

‘Do-it-yourself’ divorce is a bad idea

Recently, a number of companies have been trying to persuade people that they can save money by handling their divorce on their own. These companies sell packets of generic forms in books or on the Internet, claiming that they were developed by “expert” attorneys and that they’re all you need.

Buyer beware!

These forms might be accepted by a divorce court, but they’re not tailored to your specific situation and the companies do not provide legal advice to protect you. Countless people who have used these forms have made mistakes that have cost them far more than they would ever have spent on a lawyer.

The sad irony is that the people who use these forms tend to be couples who are splitting up on reasonably good terms. They think they’re saving money – but the truth is that these types of uncontested divorces are the ones where attorney fees are low and where an attorney can provide the greatest “bang for the buck,” because all of the attorney’s time is spent protecting you rather than fighting with the other side. [Read more…]

Apartment, office and retail rents continue to rise…slowly

Average rents for apartments, offices and retail space are continuing their upswing, but the rate of increase is flat or slowing down.

The average apartment rent in the U.S. in the third quarter was $1,090, according to research firm Reis, Inc. That’s an increase of 0.8%, down from 1.1% in the previous quarter.

The apartment vacancy rate was 4.6%, down from 4.7% in the second quarter. That’s a big drop from the roughly 8% rate in late 2009.

The average rent for office space in the third quarter was $28.23 per square foot, an increase of 0.2%. The vacancy rate dropped from 17.2% to 17.1%.

The biggest jump in office rents was in San Francisco, which saw a 4.1% increase over three months. Increases of 2% or more were reported in New York, San Jose, Houston and Austin. The biggest drop (1%) was in Las Vegas. [Read more…]

New federal rules make ‘short sales’ easier

New federal rules will make it easier and quicker for homeowners to qualify for a “short sale” of their property.

A “short sale” occurs when a home is worth less than the amount owed on the mortgage. The lender agrees to accept less than the full amount of the loan, and the owner is able to escape the mortgage debt and avoid foreclosure.

In the past, short sales have often bogged down in delays and cumbersome regulations.

The new rules apply to mortgages held by Fannie Mae and Freddie Mac. Together, the two companies own mortgages on about 4.6 million homes that are “underwater” (worth less than the outstanding mortgage debt). Of those homes, about 80% of the owners are current on their payments. [Read more…]

New 3.8% tax on investment income will affect real estate in 2013

A new 3.8% tax on investment income will take effect in 2013, and will affect many people who have rental income or who sell real estate.

The tax was included as part of President Obama’s health care law. It applies to single filers with adjusted gross income over $200,000 and married filers with adjusted gross income over $250,000. (It also applies to trusts and estates with undistributed investment income of more than about $12,000.)

The IRS hasn’t issued detailed guidance on the law, so it’s not entirely clear how it will work. However, it appears that it will apply to:

Vacation homes. If you sell a vacation home and have a capital gain, the tax will apply. If you rent a vacation home to others for more than 14 days a year, the rent (minus expenses) will be subject to the tax. [Read more…]

Here’s the real reason many people have trouble getting a mortgage

Mortgage rates have been at historic lows, but a lot of people still have trouble getting a mortgage because the lender makes them jump through hoop after hoop after hoop.

What most people don’t know is that a big reason this is happening is something called “put-backs.”

About 90% of the home mortgage loans in the U.S. are sold by the lender to federal agencies or to government-sponsored companies, chiefly Fannie Mae and Freddie Mac. These purchasers buy loans that meet certain specific standards.

Increasingly, when a loan goes bad, Fannie and Freddie are combing through the original documentation looking for flaws and mistakes. When they find one, they demand that the sale be undone and that the bank take back the loan – which is known as a “put-back.” This results in a big loss for the lender. [Read more…]

Should you own or rent? Some advantages most people don’t consider

Before the financial crash, the conventional wisdom was that it was almost always better to own a home rather than rent. It seemed like home prices always went up, so there was no reason to pay a landlord if you could pay a mortgage lender instead and build up equity every month.

Since the crash, however, home price gains are more uncertain, and many people are crunching the numbers and concluding that they’re better off renting.

But are they really?

Everyone’s situation is different, of course, but when many people do the math, they don’t consider the many legal and tax advantages of home ownership. In some cases, these advantages could be enough to tip the scale.

One obvious example is the home mortgage interest deduction. In general, home mortgage interest is deductible on your federal income tax return on loan amounts up to $1 million. This alone could save you thousands of dollars a year in taxes, and make home ownership much more attractive. [Read more…]

Filing reminder for tax-exempts

Tax-exempt organizations are required to file annual reports with the IRS. Those with gross receipts below $50,000 can file an E-postcard rather than a longer version of Form 990.

The deadline for nonprofit filings is the 15th day of the fifth month after their year-end. For calendar-year organizations, the filing deadline for 2012 reports is May 15, 2013.

Watch for hazards when buying a franchise

With a franchise, you don’t have to start a company from scratch. Whether the business sells fast food, automotive services, gourmet coffee, or dry cleaning, successful franchises are usually based on a proven business idea and a recognized brand name. The best franchisors can jump start a business by providing staff training, location advice, and detailed operations manuals. And some have ongoing relationships with financial institutions, which can help when you’re searching for start-up capital.

But buying into a franchise requires careful analysis and a healthy dose of skepticism. Before taking the plunge, watch for these hazards:

  • Unrealistic forecasts. Sometimes predicted revenues do not materialize. That’s because early entrants may have cornered the most profitable territories already. So be aware that rosy forecasts based on historical data do not always pan out. Get market research for the area you’ve staked out (preferably from several sources), and determine the least amount of revenue you’ll need to cover costs and remain profitable. [Read more…]

You can’t change your mind after you convert

Under the new tax law, it is now easier to convert your employer-sponsored retirement plan such as a 401(k), 403(b), or 457 into a Roth IRA account. This is similar to converting your traditional IRA into a Roth IRA, but with one very significant difference.

When you convert a traditional IRA into a Roth IRA, you can change your mind and undo this conversion (also known as a recharacterization) by October 15 of the following year. This may make sense when the value of the account has dropped since you did the conversion, because you do not want to pay tax on a higher value than the account currently has. [Read more…]

It’s tax filing deadline time

Monday, April 15, is the deadline for filing certain returns and taking certain tax-related actions. Here are the major deadlines.

  • Filing 2012 income tax returns for individuals. If you cannot file your return by this deadline, be sure to file an extension request by April 15. The automatic extension (you don’t need to explain to the IRS why you need more time) gives you until October 15, 2013, to file your return. An extension does not, generally, give you more time to pay taxes you still owe. To avoid penalty and interest charges, taxes must be paid by April 15.
  • Filing 2012 partnership returns for calendar-year partnerships. [Read more…]