Plan for the fate of your digital assets

An important step in estate planning is creating an inventory of your assets. Your executor – the person you designate in your will to carry out your last wishes – uses the inventory to make sure all of your property passes to your heirs. That includes your digital assets. Documenting these along with more traditional effects can help ensure your final wishes are honored and your estate is administered correctly. Here’s what to keep in mind as you compile a list of your digital assets.

Passwords. In order to review financial accounts with banks, brokerages, or other businesses, your executor will need your current password. If you protect passwords with an encrypted program, include the master access key. Most importantly, keep your list updated when you change passwords. [Read more…]

Avoid penalties by keeping accurate information return records

Did you file all required information returns for 2015 and earlier years? Information returns include Forms 1099, the forms you complete when you pay for certain business expenses such as rent or services performed by an independent contractor. August is a good time to review your filing compliance because this is the time of year the IRS typically begins sending notices for prior year information returns with missing and incorrect taxpayer identification numbers, and the penalties for errors continue to rise. [Read more…]

Get organized and improve your business

The art of placing information in a logical order, more prosaically called organization, is key to the efficiency of your business, which can in turn increase productivity. Fortunately, you can master the art of organization by making habits out of simple techniques. Here are suggestions. [Read more…]

The part-year withholding method can increase your paycheck

If you’re starting your first job this fall, you probably want to avoid overpaying your federal income tax. Consider asking your employer to use a special formula known as the part-year withholding method to calculate the amount of federal income tax withheld from your wages. To be eligible, you have to use the calendar year as your tax year, and you must not expect to be employed for more than 245 days during the year.

IRS grants more time to benefit from this tax credit

When you hire workers from specified groups that typically experience high unemployment, you may qualify for a tax break known as the Work Opportunity Tax Credit. You typically have 28 days after the worker’s first day to complete paperwork for this federal income tax credit. However, for certain workers hired between January 1, 2015, and August 31, 2016, the 28-day rule has been extended until September 28, 2016. The extended date gives you an opportunity to review personnel files for credit-eligible employees. Contact us to learn how the credit can help save tax dollars.

Child support increased by inheritance, wealthy stepparent

The amount of child support a parent has to pay is usually determined by his or her income, but two new cases from Pennsylvania show that other sources of wealth – such as receiving an inheritance or marrying someone rich – can have an effect.

In one case, a police officer who was originally ordered to pay $1,458 a month to support his three small children was later ordered to pay $2,267 a month, after a judge took into account the fact that he had received a $600,000 inheritance.

The man argued that the inheritance wasn’t “income.” The court said this was true, but the money could be invested so as to produce income, and this could be counted in determining how much child support he had to pay. [Read more…]

Same-sex couples should consider prenups

Now that the U.S. Supreme Court has legalized same-sex marriage throughout the country, a lot of gay couples who have lived together for many years are getting married. And while every engaged couple should at least give some thought to a prenuptial agreement, it’s even more important for same-sex couples in this situation.

Here’s why: When a couple gets divorced, and a judge divides their property, the judge will usually take into account the length of the marriage. A judge is more likely to divvy up assets that were acquired during the marriage than assets that a spouse owned before the wedding. [Read more…]

Wife doesn’t refinance home; husband forces her to sell

It’s common for one spouse in a divorce to keep the couple’s home and assume the mortgage. Typically, the spouse keeping the home will refinance the mortgage in order to remove the other spouse’s name, so the other spouse isn’t jointly responsible for the debt.

But what happens if the spouse fails to refinance?

This happened in a recent case in New Jersey. An ex-wife was awarded the couple’s home with the understanding that she would refinance it within nine months. She failed to do so – and then made several late mortgage payments. [Read more…]

Husband could renege on promise to pay grown kids’ rent

A divorcing couple in New York signed an agreement saying that the husband would pay their two adult children $1,900 apiece each month to help cover their rent, until they turned 30 or began living with a significant other. The parents made this agreement because they thought it would help keep them on good terms with each other and make their divorce less contentious.

Later, the husband broke his promise – he gave each child a $10,000 lump sum and told them they had nothing else coming. The wife then went to court to enforce the deal. [Read more…]

Mother can’t stop child from calling stepmother ‘Mom’

It’s natural for parents to be concerned about a child’s relationship with a stepparent. Of course, parents most often worry that a stepparent will have a negative influence on a child’s life. But some parents worry that a stepparent will have too positive a relationship with a child, and as a result, will undermine their own relationship and authority.

This happened recently in New Jersey, where a child named Daniel developed a positive relationship with a woman named Lori after his father moved in with Lori and her three children. Lori, who had experience as a tutor, helped Daniel with his homework and generally looked after him while his father was away. Eventually, Daniel started calling her “Mom,” which is what Lori’s own children called her. The father began consulting with Lori on any important child-rearing issues. [Read more…]

More spouses are living together while they’re divorcing – is this wise?

The first step in a divorce is usually for one member of the couple to “walk out.” But increasingly, divorcing spouses aren’t walking out at all – they’re staying put. In fact, it’s been estimated that as many as one-half of all separating couples today live together in the midst of their divorce proceedings. And some couples even live together temporarily after they’re officially divorced.

Here’s a look at some of the reasons for this trend, as well as the potential drawbacks.

The biggest reason for living together during divorce is economic – these are tough times for many people, and it can be difficult to suddenly have to afford two separate households, with separate payments for rent, mortgage, utilities, groceries, and other household expenses. Many couples decide to keep living together for a while so they’ll have time to save up for when they have to start financially separate lives. [Read more…]

Average apartment rent was up 4.6% last year

The average rent in the U.S. was $1,180 a month at the beginning of 2016, up 4.6% from a year earlier, according to a company called Reis, Inc. that tracks such trends.

Rents dipped in 2009, following the recession, but they have been growing steadily ever since.

Demand for apartments is high, since the rate of homeownership in the U.S. is about as low as it’s been at any time in the last 30 years. [Read more…]

Be careful if you buy the furniture along with the house

A surprising number of home buyers make an offer for a house that includes some items of the seller’s personal property – they want to keep certain furniture, pieces of artwork, a pool table, a boat at the dock, etc.

There’s nothing wrong with this, but it does create some complexities that you should be aware of.

For instance, lenders typically won’t include the value of the “extras” in a mortgage loan – it’s simply too much trouble to foreclose on a sofa. So if you’re paying $300,000 for a house, and the price includes furniture that the lender thinks is worth $15,000, you’ll only get a mortgage for $285,000 – you’ll have to pay the rest out-of-pocket. [Read more…]

FHA mortgage loans may be easier to get

A new Federal Housing Administration initiative will make it easier to qualify for a mortgage loan through the FHA. This is good news for borrowers with lower incomes or an imperfect credit history, since FHA loans are often available to people with credit scores as low as 580 and down payments as low as 3.5 percent.

Here’s the background: As part of its crackdown after the housing bust, the federal government adopted rules saying that if Fannie Mae or Freddie Mac bought a loan that went into foreclosure, and it turned out that the lender had made some error in the initial paperwork years ago – even a fairly minor or technical one – Fannie or Freddie could force the lender to take the bad loan back. [Read more…]

Avoid capital gains tax when selling investment property

Did you know that it may be possible to avoid paying immediate capital gains taxes when you sell an investment property? That’s true if you’re planning to sell the property and invest the proceeds in another property shortly afterward.

For instance, suppose you own a condo as an investment, and you plan to sell it and use the proceeds to buy another investment property. You might be able to treat the sale and the subsequent purchase as a “wash,” and defer paying any capital gains tax on the first property until you sell the second property.

This is known as a “like-kind exchange,” or sometimes as a “1031 exchange” (after the section of the tax code that allows this). [Read more…]

New, easier forms help mortgage shoppers

One reason many potential homebuyers have always found mortgages to be intimidating is that lenders send them lengthy, complex “disclosure” forms that are confusing and hard to understand. This can make it more difficult to figure out exactly what you’re getting into, and whether one mortgage product is really better than another.

Starting a few months ago, though, the federal government has been requiring new, simplified forms to make shopping for a mortgage easier. The new forms make it much less complicated to understand your costs and obligations, and to engage in comparison shopping.

In the past, mortgage applicants received two separate forms after applying for a loan – an early Truth in Lending Statement and a Good Faith Estimate. At closing, they got two more forms – a final Truth in Lending Statement and a HUD-1 Settlement Statement. [Read more…]

Sometimes, it makes sense for only one spouse’s name to be on the mortgage

Most married couples who buy a home take out a mortgage together. Frequently, they need both spouses’ income in order to qualify. But in a surprising number of cases, it can make sense for the couple to own the home jointly, but for only one spouse to obtain the mortgage.

Here are some advantages to this arrangement: [Read more…]

Form 5500 filing reminder – and changes to note

August 1, 2016, is the deadline for filing retirement or employee benefit returns (5500 series) for plans on a calendar year. (The usual due date of July 31, 2016, is a Sunday.)

You’ll also want to note two IRS updates regarding Form 5500. First, the compliance questions are optional. Form 5500 includes new compliance questions for 2015 tax years (returns with a due date of August 1, 2016, for calendar year filers). Because the questions were not approved by the Office of Management and Budget, the instructions for Form 5500 say plan sponsors should skip them when completing the form. [Read more…]

Are you at risk of an audit?

According to recent statistics, budget cuts, staff attrition, and a heavy workload for IRS employees mean your chances of undergoing a tax audit are less than 1%. Does that sound like a non-event to you? Don’t be lured into a false sense of security. The statistic is a blended rate covering many types of incomes and taxpayers. Here are some of the reasons returns were audited. [Read more…]

Follow these steps to a comfortable retirement

Planning can help you achieve a comfortable retirement. Here are five suggestions to consider. [Read more…]

Will you be ready for the new overtime pay rules?

In May, the Department of Labor updated the rules for paying overtime. Under the new rules, salaried employees who earn less than $913 per week ($47,476 per year) will be eligible for overtime pay. That’s double the annual exempt amount of $23,660 from previous rules. In addition, the total annual pay for an exempt highly compensated employee is $134,004 (up from $100,000 previously). These amounts will be updated automatically every three years beginning in 2020.

The changes take effect December 1, 2016, which means you need to begin reviewing your payroll now, as penalties and fines can be assessed for noncompliance. One important step is to begin tracking hours for your salaried employees. You’ll also want to review your payroll practices so you can determine the best options for your business as you get ready to implement the new rules.