Face the alternative minimum tax (AMT) head-on

The alternative minimum tax (AMT) – often called a “stealth tax” – snares unsuspecting or uninformed taxpayers each year. With a better understanding of the rules, you may be able to avoid or reduce adverse tax consequences.

Overview: The AMT is a separate tax system that runs parallel to the regular income tax system. This complex calculation includes additions for “tax preference items” and reductions for personal exemptions and certain tax deductions. There are five basic steps to computing the AMT.

  1. Determine your taxable income for regular income tax purposes.
  2. Make the technical AMT adjustments required by law. [Read more...]

Tax tips for year-end charitable giving

As the year draws to a close, you may decide to donate cash or property to one or more worthy causes. Besides the satisfaction of helping others, there’s another reward for your benevolence: a tax deduction on your 2011 return. But keep the following points in mind:

  • For starters, you may only deduct contributions made to a legitimate tax-exempt charitable organization. Note that a qualified charity cannot be established to benefit a specific individual or family.
  • Generally, your deduction is limited to 50% of adjusted gross income (AGI) for the year (30% of AGI for contributions to certain charities and private foundations). Any excess may be carried over for up to five years. The deduction for gifts of property have other AGI limits. [Read more...]

New worker classification program offered by the IRS

Companies that have had worker classification issues are being offered a settlement program by the IRS. The program, labeled the “Voluntary Worker Classification Settlement Program,” will let employers who previously misclassified employees as independent contractors make a minimal payment to settle the tax dispute. The program will give eligible employers substantial relief from federal payroll taxes they may have owed for past periods. Employers must agree to pay just over 1% of wages paid to reclassified workers for the past year and to treat these workers as employees going forward.

New law signed by President Obama on November 21, 2011

On November 21, 2011, President Obama signed the Three Percent Withholding Repeal and Job Creation Act into law. This new law repeals three percent withholding on certain payments to government contractors. The law, H.R. 674, was amended to include the Vow to Hire Heroes Act which provides tax credits to employers who hire unemployed veterans.

The law creates the “Returning Heroes Tax Credit” and the “Wounded Warriors Tax Credit.” Employers may qualify for a credit of up to $5,600 for hiring a veteran who has been looking for employment for more than six months. A credit of up to $2,400 applies for veterans who have been unemployed for more than four weeks but less than six months. [Read more...]

Facebook may be involved in 20% of all divorces

Facebook is playing a role in as many as a fifth of all divorces in the U.S., according to a study by the American Academy of Matrimonial Lawyers.

Facebook can come up in a divorce case in several ways. One is that marriages sometimes end because people have affairs with people they met – or re-connected with – over the social networking site.

One of the most common uses of Facebook is getting in touch with old friends. But if a marriage is in some trouble already, and a spouse gets back in touch with an old friend (or an old flame) who is emotionally available, a simple “hello” could turn into something much more complicated. [Read more...]

Husband’s credit card debt was his problem, not his ex-wife’s

Generally, whatever assets and debts a couple accumulate during a marriage can be split between them at divorce.

But what if a husband racks up an enormous amount of credit card debt without his wife knowing about it? Should she still be responsible for half the bill?

In one recent case, the Kentucky Supreme Court said “no.”

The couple in that case divorced after being married for 42 years. Late in their marriage, the husband ran up $65,000 in credit card debt trying to help their adult son recover from financial setbacks. [Read more...]

Wife shares in husband’s future partnership profits

A husband’s interest in a business partnership that produced a consistent stream of profits “counted” as marital property, and his wife can receive a share of his interest at divorce, the highest court in Massachusetts recently ruled.

The husband was a partner in an investment advisory firm. Under the terms of the partnership, he received annual cash payments in the form of salary, incentives, return on capital and merit pay.

The wife claimed a share of the value of his partnership interest. The husband objected, arguing that his partnership interest wasn’t “property” since he had no right to the annual payments, which were merely an “expectancy” of future income. (State law says that a divorcing spouse has no right to share in a mere “expectancy” of a benefit.) [Read more...]

Divorced mother couldn’t demand home schooling

When a divorced couple have different religious beliefs, and when children are involved, it can sometimes lead to court.

That’s what happened recently in New Hampshire, where a mother wanted to home-school her daughter according to her religious beliefs, but her ex-husband wanted the child to go to public school.

A judge ruled that it was in the daughter’s best interest to attend public school. The mother appealed to the New Hampshire Supreme Court, arguing that requiring the daughter to go to public school violated her parenting and religious rights under the Constitution. [Read more...]

Father’s child support is reduced by SSDI benefits

A father’s child support obligations could be reduced by the amount of his Social Security Disability Insurance payments that went directly to his children, the Vermont Supreme Court recently decided.

The father had been ordered to pay $326 a month in child support when he and his wife divorced. Soon afterward, he went to prison for five years.

When he got out of prison, he applied for SSDI benefits. He received a retroactive payment that included more than $14,000 that went directly to his ex-wife on his children’s behalf.

The father argued that his child support obligations should be reduced by the amount of this payment to his children. [Read more...]

Military promotion might not increase ex-wife’s pension share

The ex-wife of an Air Force officer might not be able to share in an increase in the officer’s pension benefits that resulted from a promotion he received after the couple divorced, according to a New Jersey appeals court.

The couple divorced when the husband was a captain. The divorce settlement gave the wife 50 percent of his military pension, which was based on his 11 years of service to that point.

By the time the husband retired, he’d reached the rank of major. His promotion entitled him to a larger pension benefit.

But the court said the wife couldn’t automatically share in the increase. Rather, it ordered a hearing to determine how much of the husband’s promotion was due to the couple’s joint efforts while married, and how much was due to the husband’s individual efforts after the divorce.

Thinking about divorce? Redo your estate plan, too

Divorce is stressful, and if you’re considering a marital split, the last thing you’re probably focusing on is your estate planning documents.  But if you’re thinking of getting divorced, it’s usually wise to revise your estate plans now rather than later.

For example:

  • You might have signed a power of attorney document that allows your current spouse to make gifts, sign contracts, and make financial decisions for you.
  • You might have a life insurance policy that names your spouse as the beneficiary.
  • You might have a lot of your money in joint accounts to which your spouse has unlimited access.
  • You might have a health care proxy that allows your spouse to make medical decisions for you if you become incapacitated. [Read more...]

Employers may need to tell workers they can form a union

The National Labor Relations Board recently proposed a rule that would require employers to post a notice in the workplace informing employees of their right to form a union.

The rule hasn’t been adopted yet, but if it is, employers who fail to comply could be fined or sued for unfair labor practices.

Such a notice could conceivably have an effect in smaller workplaces – such as those with 10 or 15 workers – where a union could form quickly if a majority of employees agree to organize.

Company’s ‘one strike’ drug-testing policy is okay

An employer can have a “one-strike” drug-testing policy that permanently disqualifies applicants who have previously flunked a drug test, according to a federal appeals court in California.

In this case, an employer rejected an applicant for a longshoreman job when he failed a pre-employment drug screening.

Some time afterward, the man allegedly stopped using drugs, but when he reapplied, the employer rejected him again under its one-strike rule.

He sued, claiming that the one-strike policy violated the Americans with Disabilities Act. That law prohibits employers from discriminating against rehabilitated drug users. [Read more...]

New mothers might be exempt from physical ability tests

A woman who had recently had a baby and who was denied a job as a security guard after failing a physical-fitness test could sue the company for pregnancy discrimination, a federal judge in Alabama recently ruled.

The test required job applicants to perform 29 sit-ups in two minutes.

The woman claimed she was unable to complete enough sit-ups because her stomach muscles were weak from childbirth several months earlier. She sued the employer under the federal Pregnancy Discrimination Act. [Read more...]

Employer could require a doctor’s note after sick leave

A city didn’t violate its employees’ right to medical confidentiality by making them provide a doctor’s note when coming back from sick leave, a federal appeals court ruled recently.

The city of Columbus, Ohio had adopted a policy demanding that police department employees who took sick leave give supervisors a physician’s note stating the “nature of the illness” and whether the worker could return to regular duty.

Several employees sued, arguing that the policy violated patient confidentiality rules under the Americans with Disabilities Act. [Read more...]

Company sued for ‘pressuring’ employee on medical leave

A company can be sued if it “pressures” an employee who is on medical leave by repeatedly calling to find out when the employee plans to return to work.

That’s the message of a new case from a federal court in Arkansas.

In that case, a woman took leave from her housekeeping job at a hospital to recover from back surgery. She claimed that while she was out, her immediate supervisor called her every week to ask when she was coming back. In one conversation, she asked if her job was in jeopardy, and the supervisor responded by telling her that she should return as soon as she could. [Read more...]

Medical marijuana law doesn’t preempt workplace drug policy

Many states have passed laws in recent years allowing people to use marijuana for medical reasons.

But while these laws may protect users against the police, they won’t necessarily protect them against their employers.

For example, a Wal-Mart employee in Michigan recently sued the company for firing him under its drug-use policy when he tested positive for marijuana. The employee claimed he was wrongfully fired because he used marijuana after work for medical reasons. [Read more...]

Workers can sue for ‘cat’s paw’ discrimination

In an old French fable, a sneaky monkey talks an unwary cat into grabbing roasting chestnuts from a fire. The cat burns its paw and drops the chestnuts, and the monkey walks off with them.

From this fable comes the phrase “cat’s paw,” meaning an innocent person who’s used as a tool for someone else’s dirty work.

In the employment world, a “cat’s paw” situation is one where a supervisor is prejudiced against a worker, but rather than firing the worker for an illegal reason, he or she persuades a higher-up manager to fire the worker for some trumped-up but legitimate-sounding reason. [Read more...]

Supreme Court helps workers who are fired for complaining

Once again, the U.S. Supreme Court has made it easier for workers to go to court and claim that they were fired in retaliation for asserting their rights.

In recent years, the Court has decided a number of cases that made it easier for workers to sue if they were fired for complaining about discrimination.

But what if a worker was fired for complaining about something else? What if a worker was fired (or otherwise punished) after making a comment about the way the employer allocates tips? Or about unsafe equipment? Or overtime practices? [Read more...]

‘Secrets’ of maintaining your credit score revealed

The Fair Isaac Corporation, creator of the FICO credit score, usually doesn’t reveal many details about how missing a mortgage payment will affect people’s scores. But the company recently issued a commentary to lenders that contained some unusually specific information.

FICO scores range from 300 to 850. Scores of 750 or higher generally qualify for the best credit terms.

Here are some of the newly released details:

  • Being 30 days late on a mortgage payment – even if it was an accident – can lower a 780 score by 100 points. That’s a huge drop. [Read more...]

What to do if the government wants your land by ‘eminent domain’

If a government entity wants to take all or part of your property by eminent domain, it’s required to pay you the land’s fair market value. Typically the government will send you a notice telling you what it thinks the land is worth, and offering to pay that amount. Its valuation will usually be based on an appraisal that it has commissioned.

Some property owners who get an eminent domain notice rush out and get their own appraisal, but this is often a mistake. It’s almost always better to talk with an attorney first before hiring an appraiser. [Read more...]

Can landlords limit the number of people in an apartment?

Do landlords have a right to limit the number of people who can occupy an apartment?

The answer, as often happens in the law, is, “It depends.”

In general, landlords own the property and they can decide how many people can live there. However, a landlord is not allowed to discriminate against tenants based on their “familial status.” (This rule was added to the federal Fair Housing Act back in 1988.)

What does “familial status” mean? It means that a landlord can’t refuse to rent to a family with children. So if a family with seven children wants to rent an apartment, the landlord can’t say “no” based on that fact alone. [Read more...]

Cash is now king in real estate sales

Cash is playing a more significant role in residential real estate sales right now than at any time in recent memory.

Consider the following:

  • The median down payment on houses was 22% last year.

That’s according to a study by Zillow.com of sales involving conventional mortgages in nine major U.S. cities. It’s the highest figure ever since the data started being kept back in 1997.

By comparison, just three years ago the figure was 11%. And back in late 2006, it was only 4%.

The main reason for the change: Banks are tightening their standards and demanding larger down payments to qualify for mortgages. Banks are figuring that borrowers who can afford a larger down payment are less likely to default, and less likely to end up in a situation where they are “underwater” – meaning the value of their house falls to the point where they owe more than the house is worth. [Read more...]

Trust property could be tied up by a long-term lease

A Texas man put some ranch property into a trust. The trust was designed to pay regular income from the property to the man’s son. When the son died, the ranch was to go to his grandson.

The trustee (a bank) entered into a long-term lease for the property. The result was that when the son died, the grandson didn’t get the ranch all to himself; instead, he inherited it subject to the lease, which meant he couldn’t immediately sell it.

The grandson sued the bank trustee. But a Texas appeals court sided with the bank. [Read more...]

Creating ‘conservation easements’ to save taxes becomes easier

If you own land that you want to pass on to your heirs, but you also want to make sure that some historic, scenic, or agricultural value will be maintained and not destroyed by future development, you might be able to accomplish this with a “conservation easement”…and also save taxes at the same time.

A conservation easement is a restriction on your land that says it can never be developed in certain ways. When you create such an easement, you give it to a charity – usually one that has been created to preserve some historic, scenic or agricultural heritage. In some cases you can also give the easement to a government agency.

After that, the charity or agency has the right to enforce the easement and prevent such future development. [Read more...]

Now’s a good time to review your beneficiary designations

Did you know that your will does not determine who gets your IRA or your 401(k) account when you die?

That’s right – these accounts are “non-probate” assets, which means they’re not covered by your will. Instead, they will generally go to whatever person you named as the beneficiary when you set up the account.

Similarly, your will doesn’t determine who gets your life insurance – that will go to the named beneficiary on the policy. And your brokerage account might have a beneficiary as well.

So as part of your estate plan, it’s essential from time to time to review your beneficiary designations.

For example:

  • You’ve remarried, but you want to leave your 401(k) to your children from your prior marriage. Under federal law, even if you name the children as beneficiaries, your account will go to your new spouse – and not your children – unless your new spouse signs a waiver. [Read more...]

Have you picked the right person as your executor or trustee?

Before you name someone as an executor or a trustee in your will – or before you agree to be an executor or a trustee – it’s a good idea to review exactly what responsibilities are involved.

These are serious jobs, and sometimes people don’t give enough thought to which person should be chosen.

Often, people simply name a spouse, a child, or a family friend. This might seem like a logical choice, and the person might expect to be given such a role, but that doesn’t mean they’re necessarily the best person for the job – particularly if they’re not detail-oriented, good with figures, and adept at handling money. Many people who quickly agree to act in these roles later come to regret it.

An executor’s job typically lasts about a year, and involves a lot of responsibility. Most executors hire an attorney and sometimes other professionals to help them through the steps and make sure they don’t make any mistakes. However, you’ll still want to pick someone who is willing and responsible enough to handle the often difficult and time-consuming tasks.

These tasks typically include:

  • Locating the deceased person’s will (the original, not a copy) and filing it for probate.
  • Obtaining a death certificate, obtaining an estate tax ID number from the IRS, and setting up an estate bank account.
  • Notifying beneficiaries and other potential heirs. [Read more...]

Scams against the elderly: Know the danger signs

News of yet another investment scam is alarming enough, but when the victim is elderly, the crime seems especially offensive. Senior citizens are a favorite target of con artists for a variety of reasons. Here are some popular schemes to look out for.

Scams take many forms, but those involving gold and precious metals are especially problematic right now. Buying gold is trendy, and it can appeal to a senior’s desire for tangible security. Naturally, scammers will take advantage of this appeal. If someone you know is elderly and considering a gold-related investment, make sure they do their homework and work with a reputable company. Anyone pitching gold as a safety net against doomsday scenarios or hyperinflation should be carefully vetted. [Read more...]

Are you prepared for these common business problems?

When the economy is uncertain, you must be extra-careful to avoid the types of disasters that could ultimately lead to your company’s demise. Fortunately, some advance planning may prevent or alleviate severe problems. Here are seven common scenarios facing owners and managers of small to mid-sized businesses.

  1. A natural disaster damages the premises. Of course, you can’t control the weather or other unforeseen circumstances. But damage to a business building caused by a natural disaster could temporarily shut down the operation. It can even ultimately put you out of business. Make sure that you have adequate insurance and that valuable business data is stored at a secure site. [Read more...]

Make time for a year-end tax review

Time is running out for moves you can make to reduce your 2011 tax bill. Some actions to consider right now:

  •  Be sure to max out your 401(k) plan at work. This year you can sock away $16,500 ($22,000 if you’re 50 or older).
  •  Establish a pension plan for your small business. You may qualify for a tax credit of up to $500 in each of the plan’s first three years.
  •  Plan year-end purchases of new or used business equipment to take full advantage of the expensing limit of $500,000 for 2011. Purchases of new equipment (not used) can qualify for first-year 100% bonus depreciation.
  •  Get your investment records in order so you can make wise year-end sell decisions, either to rebalance your portfolio at the lowest tax cost or to offset gains and losses.
  •  Track down reinvested dividends for any stock sold in 2011. They’ll add to your cost basis and reduce taxable gain or increase deductible loss on the sale.

If you’d like to discuss tax-cutting options that fit your particular situation, please contact us soon for a year-end planning review.

Contact us soon for a year-end tax review

An important part of our service to you is to help identify actions you can take before year-end to minimize your 2011 income tax bill. Accelerating or delaying income and deductions, contributing to retirement plans, and taking investment losses are just a few of the strategies you might want to consider. There are also tax credits that require careful planning or they may be lost. If you’d like to discuss tax-cutting options that fit your particular situation, please contact us soon for a year-end planning review.

Charitable contributions: More than just cash might be deductible

Many taxpayers give much more than just cash to their favorite charity. Many also provide their time, travel, meals, and other “out of pocket” expenses in order to assist the charity in doing good work. And while you can’t take a charitable deduction for your time, you are allowed to deduct other expenses incurred in support of a charity, such as vet bills for your local humane society, or wood and nails for a “habitat” charity.

Let’s examine your house of worship. It’s possible for members to deduct evangelism travel expenses, even if the charity (a church in this example) never initiated, controlled, supervised, or assisted with the trips. The church fostered missionary work in general. Before the trip, the church provided the taxpayers with letters of commendation serving as introductions to other interfaith groups during the trip. And after the trip, the charity publicized the member’s efforts to the other congregations. This allowed the taxpayers to deduct mileage at the prescribed IRS rate, air fare, lodging, and meals while on their missionary trip. [Read more...]

Consider four tax-smart ways to save for college

The cost of sending a child to college is daunting. According to the latest figures from the independent College Board, the total average cost for the 2010/2011 academic year – including tuition and fees, room and board, books and supplies, transportation and other sundries – for in-state students at four-year public colleges was $20,339. For out-of-state students, the average cost jumped to $32,329. The cost at four-year private colleges averaged $40,476. And costs are expected to keep rising.

Nevertheless, you can lighten the financial burden of putting your children through school by taking advantage of certain tax-favored vehicles. These techniques are generally available to grandparents as well as parents. Here are four prime examples. [Read more...]

What ‘counts’ in divorce? See if you can guess

It’s often unclear whether certain of a couple’s assets or certain types of income “count” in divorce proceedings. Take a look at the following questions, and see if you can guess what the courts decided. (Remember that the actual outcome could vary from state to state and in slightly different situations.)

  • A woman won $2.7 million in a medical malpractice lawsuit. Ten years later she got divorced. Can her husband share in the money?

No, said an Iowa court. The couple had placed the money in an investment account and had lived off the proceeds for a time. The court said that since the husband had lived off the proceeds for a while, it was only fair to allow the wife to keep whatever amount was left, “so that she is adequately compensated for her physical injuries, pain and suffering, and future medical expenses.” [Read more...]

Termination of parental rights includes grandparents’ rights

When someone’s parental rights are terminated, this also terminates the rights of the person’s relatives – including the child’s grandparents, an Illinois appeals court recently ruled. In this case both natural parents’ rights were terminated, and the child’s foster parents petitioned for adoption. The natural father’s parents objected. But the court said they had no legal right to contest the adoption, since once the father’s parental rights were terminated, all of their rights were terminated as well.

Value of husband’s business interest is reduced at divorce

After 27 years of marriage, a Colorado couple got divorced. The husband’s main asset was a share of an oil and gas company that was worth $2.5 million. However, for purposes of dividing the couple’s property, the divorce judge reduced the value of the husband’s share by one-third, to about $1.6 million.

The judge explained that this was a “marketability discount.” The idea of a marketability discount is that, while the husband’s interest might have been “worth” $2.5 million if you simply divided the value of the business by his percentage interest, it wouldn’t be “worth” $2.5 million if he tried to sell his interest to a third party. That’s because a third party probably wouldn’t want to pay full value for a minority stake in a business, given that he or she would be a minority owner and would have no control over the operations. [Read more...]

Social Security benefits used to calculate child support

Social Security benefits received by a father count when figuring out his child support obligation, the Mississippi Supreme Court recently ruled. The father’s only source of income was Supplemental Security Income benefits. After a paternity case, he was ordered to pay 14 percent of his income for child support.

The father objected, pointing to a federal law that says Social Security benefits can’t be withheld for child support payments. The court agreed that it couldn’t order the Social Security Administration to withhold his payments. But it could still order him to turn part of the money over to the mother after he received it, the court decided.

‘Skype visitation’ ordered when mother moves out-of-state

A mother can relocate with her children from New York to Florida if she pays for visitation via the “Skype” service that will provide a real-time broadcast between her children and their father over the Internet, a New York court recently decided.

The mother wanted to move from Long Island to Florida with the couple’s two children, ages nine and six. She planned to move in with her parents because the New York home was in the late stages of foreclosure and she was unemployed. The father was a recovering alcoholic who lived in employer-provided housing and couldn’t afford trips to Florida.

He objected to the move, especially because he had recently completed rehab and was trying to become a permanent presence in the children’s lives. [Read more...]

Ex-wife remarries; husband stops paying her health insurance

A divorced husband could stop paying for his ex-wife’s health insurance when she got engaged and moved in with her fiancé, the Iowa Supreme Court recently ruled. The couple’s divorce decree required the husband to pay up to $300 per month for the wife’s health insurance. He obliged, but wanted to stop paying when the wife no longer needed the coverage.

The question was whether the insurance coverage was part of the wife’s support – which could be modified by a court if her needs changed – or part of the couple’s property settlement, which couldn’t be changed. The court said that in this particular case, the insurance payments were part of the wife’s support, and so they could be cancelled later by a judge.

Prenups: No longer just for the rich and famous

Prenuptial agreements used to be only for celebrities, but in the last few years they have become dramatically more common in the U.S., and now it’s quite ordinary for middle-class couples to ask for them.

There’s no one single reason for the change. Rather, a number of factors are working together to make prenups more acceptable – including:

  • The recession. Many people have seen the value of their homes, pensions and investments shrink dramatically, and they are concerned about protecting what they have left. In addition, a lot of people want to shield themselves from debts brought to a marriage by the other spouse. [Read more...]

Worker in company car covered by workers’ comp

Workers who are using a company-owned vehicle might be considered “at work” – and thus covered by workers’ comp if they have an accidenteven if the employer believes that they’re done for the day. The Texas Supreme Court recently ruled that a sales rep was entitled to workers’ comp for injuries she suffered in a car accident after her last meeting of the day with clients.

She was headed home, although she had planned to drop off some marketing materials at an employer-provided storage unit on the way. The employer argued that the sales rep was going home and was no longer “at work” at the time of the accident. But the court disagreed, and said the rep was covered because she was in a company car on a job-related errand when the accident occurred.

Federal job discrimination claims set new record

Nearly 100,000 job discrimination claims were filed with the U.S. Equal Employment Opportunity Commission in fiscal 2010, an all-time record. Claims were up 7% over the previous year during the period, which ended in September 2010. They were up 21% over fiscal 2007.

There were several reasons for the increase. One is that the struggling economy led to more employees being laid off. Another is that the agency had a bigger budget, and spent money to educate employees and make it easier for them to file claims. The total amount the agency collected from employers in lawsuits it filed itself during the period was $404 million, also an all-time record.

Worker with ‘occasional flare-ups’ had a protected disability

An employee who suffered sporadic muscle flare-ups can sue his employer for disability discrimination where the business failed to accommodate his occasional problem, a federal appeals court recently ruled. The worker, a parts manager at an AutoZone store, had a condition that caused intermittent tightening in his back muscles. When the condition flared up, he couldn’t perform simple tasks.

The company fired him after keeping him on involuntary medical leave for more than a year. The worker sued under the Americans with Disabilities Act. In response, AutoZone argued that he wasn’t “disabled” because his condition only occasionally limited him in his abilities. But the court disagreed, and said a “predictable yet intermittent pattern” of muscle problems could amount to a disability under the federal law.

Discrimination based on bankruptcy is illegal

With so many people having filed for bankruptcy in the current economy, it’s important to know that it’s illegal for an employer to discriminate against a worker because he or she went bankrupt. Most everyone is aware that it’s illegal to discriminate on the basis of race or sex, but few people realize that “bankruptcy discrimination” also violates federal law.

However, the law isn’t as extensive as the laws against race and sex discrimination. For instance, a federal appeals court in Philadelphia recently decided that while it’s illegal to fire someone for going bankrupt, it’s okay to refuse to hire someone because of a prior bankruptcy filing.

The court said this was true because the discrimination rules in the federal bankruptcy laws are different from the ones in the federal civil rights laws. This ruling only covers a small part of the country, though. It’s definitely wise to speak with an attorney about any concerns over bankruptcy issues.

Business liable for firing someone based on a ‘rumor’

You might remember the “telephone game” in school, where the teacher would tell a student a secret. The student would pass the secret on to a classmate and it would circulate through the class. At the end, the last student would relate the secret and the class would learn how much the story had changed as it was passed along.

Businesses can experience a real-life telephone game in the form of rumors about people who work there. But employers who take action against employees based on unverified rumors risk being held responsible in court.

For example, a jury in Minnesota recently ordered the Marriott Hotel to pay damages to Jeff Moen, a bellhop who had been fired based on a rumor that he had brought a gun to a meeting with management and union representatives.

The bellhop had worked at the hotel for 22 years. Though he had been the subject of a couple of minor complaints early in his career, he had a glowing record in the five years before he was fired. [Read more...]

U.S. cracks down on verification of new employees

The federal government is stepping up its enforcement efforts against employers who fail to verify new employees’ eligibility to work in the U.S. In some cases, it’s levying serious fines against employers who don’t do proper verifications – even if the employer never hired an illegal worker as a result.

For example, clothing company Abercrombie & Fitch was fined more than $1 million by the government for failing to verify employees’ eligibility to work at its stores in Michigan. And in that case, there was no evidence that Abercrombie actually employed any illegal workers.

U.S. Immigration and Customs Enforcement simply found deficiencies in Abercrombie’s electronic I-9 verification system when it conducted an inspection. This was enough for a serious fine. [Read more...]

Social media sites are creating issues in the workplace

The rise of social media – including blogs, Facebook and Twitter – has opened up a whole world of communication to people. But it’s also opened up a lot of potential confusion and headaches in the workplace. That’s because, with a few strokes on a keyboard, an employee can now do things – such as insult the boss or make an inappropriate sexual comment to a co-worker – that used to happen mainly at the office holiday bash or an after-work gathering at the corner pub.

And as bad as such behavior may have been in the traditional context, it’s even more damaging on the Internet, where it’s documented for the whole world to see, and where the evidence can never be completely deleted. Social media also allow employees to widely distribute sensitive information or trade secrets, and post incriminating data and photographs.

Misuse of social media can easily result in economic harm to a company or a lawsuit for sexual harassment or a hostile work environment. As a result, many employers are creating social media policies to go along with their general Internet and e-mail policies, to try to head off problems and make it easier to deal with them if they occur. [Read more...]

Are you keeping an eye on your company’s cash?

Do you regularly monitor your company’s cash accounts? You should. Even if you leave the job to your bookkeeper or accountant, you should stay aware of where the cash is going and how the spending is approved. Along with inventory “shrinkage,” theft or improper expenditures of cash are among the chief sources of loss for small companies.

Periodically, you hear about a huge loss caused by an employee who’s been quietly embezzling cash for years. But many smaller cases are never noticed. And it’s not always employees at fault. In fact, the vast majority of employees are scrupulously honest and loyal. Outsiders can be stealing your cash too, by submitting false or inflated invoices that are paid without proper review. [Read more...]

What to do with your 401(k) savings when you change jobs

If you change jobs you may have an important decision to make – what to do with your 401(k) plan. You’ll have several choices. Unfortunately, the easiest choice is the worst choice: that is, to take a distribution from the old plan and put it in the bank. It may be tempting, because who couldn’t use some extra cash. But if you do, you’ll owe taxes on the balance and usually a 10% penalty as well. You’ll lose the benefits of future tax-deferred growth on your savings. And if you spend the money, you’ll have to start from scratch in saving for retirement. Instead, consider three options.

  • Ask your new employer whether you can roll your balance into the new company’s plan. If you can, arrange a direct transfer between plans. You may have to complete a probationary period before you can join your new company’s plan.
  • Explore whether you can leave your balance in the old plan, at least for a while. That removes the pressure for an immediate decision.
  • Roll over your balance into an individual retirement account (IRA). This avoids immediate taxes and lets your savings continue to grow tax-deferred. It also gives you maximum flexibility for future investments. You even have the flexibility to later convert into a Roth IRA. Be sure to ask for a “trustee-to-trustee” transfer to avoid any short-term tax risk. [Read more...]

IRS increases mileage rates

The IRS has increased the standard mileage rates to be used for computing the deductible costs of operating a vehicle for business or for driving for medical or moving reasons. The new rates will apply to driving from July 1, 2011, through December 31, 2011.

The revised rates are 55.5¢ per mile for business driving and 23.5¢ for medical and moving driving. The rate for charitable driving is fixed by law and remains at 14¢ per mile.

The rates for the first half of 2011 (January 1 through June 30, 2011) are unchanged: 51¢ per mile for business driving and 19¢ per mile for driving for medical or moving reasons.