Some Americans Regain Wealth from Recession

Posted on August 7, 2013 by Camron Hoorfar

America as a whole has regained all the household wealth it lost to the recession and then some, thanks to higher stock and home prices.
The average household still has a long way to go.
U.S. household wealth jumped $3 trillion to $70 trillion in the January-March quarter this year, the Federal Reserve said. That topped the previous peak of $68 trillion in the third quarter of 2007, just before the recession began. Yet because of inflation and a rising population, the average household has recovered only about 63 percent of the wealth it lost, according to separate calculations by the Federal Reserve Bank of St. Louis. Affluent households have benefited most because most of the recovered wealth has come from higher stock prices. The wealthiest 10 percent of Americans own about 80 percent of stocks.
The recession cost Americans $15.6 trillion in wealth.
Average household wealth, adjusted for inflation, was $539,500 at the end of last year, according to the St. Louis Fed. Yet most households own far less than the average, which is skewed by how much wealth belongs to the most affluent.
“Most families have recovered much less than the average amount,” the St. Louis Fed said in a report.
Household wealth, or net worth, reflects the value of assets like homes, stocks and bank accounts minus debts like mortgages and credit cards.
For America as a whole, higher home values and stock prices have helped create a “wealth effect.” This occurs when rising wealth gives Americans the confidence to spend more. The economy benefits because consumers drive about 70 percent of U.S. economic growth.
National home prices have been rising steadily since last summer, though they remain about 30 percent below their 2006 peak. Stocks have more than doubled since they bottomed in 2009, and stock averages hit record highs last month.
The Fed’s low-interest rate policies have been intended to support both the housing and stock markets.
The Fed’s policies have helped keep mortgage rates near record lows to encourage home purchases. They’ve also pushed Americans out of lower-yielding investments and into stocks. The resulting higher stock prices have helped boost household wealth.
But the distribution of the wealth has been uneven. Such wealth disparities mean “a smaller fraction of the population is near the average,” says Dana Saporta, an economist at Credit Suisse.
Over the past five years, inflation has eroded about 10 percent of America’s regained wealth. And the number of households has increased 3.8 million to 115 million from the third quarter of 2007 through the end of last year. The increase in the number of households means the wealth is now divided more broadly.
Rising stock prices accounted for nearly two-thirds of the rebound in wealth through the end of 2012, the St. Louis Fed report estimates.
The increase in stock prices has extended well into 2013, despite sharp declines the past two weeks. In the January-March quarter, gains in stocks and mutual funds accounted for about half of the nation’s $3 trillion increase in wealth. Rising home prices made up about one-fourth. The rest came from higher pension fund reserves, greater ownership of cars and other goods and lower debts.
Homes accounted for two-thirds of middle-class assets before the recession, estimates economist Edward Wolff of New York University. Stocks made up just 7 percent. Roughly half of Americans own stocks, directly or through mutual funds. But most of their holdings are small. As wealth has risen this year, many people have chosen to save less of what they earn and keep spending. Americans saved just 2.5 percent of their income in the first quarter. That compared with about 4 percent last year.
“People feel wealthier, so they’re happier to spend more,” says John Calverly, head of the macroeconomic research at Standard Chartered Bank.
“There is also a broad confidence effect. It’s not just in terms of consumers. Businesses see a higher stock market and feel more confident about investing.”
Economists worry that with more wealth accruing to richer households, the wealth effect may be muted. That’s because affluent Americans are less likely to spend additional wealth than middle- and lower-income Americans are.
On the other hand, richer households drive a disproportionate amount of consumer spending. So their recovered wealth will still likely boost overall spending.
Fed policymakers “are relying on the wealthy to spend and send their resources trickling down through the economy,” Saporta says.

Written by Christopher S. Rugaber and Bernard Condon.
Courtesy of The Legal Record.
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Costly Debt Settlement Schemes Prey on the Most Debt-Burdened Consumers Struggling to Recover from Economic Downturn

Posted on August 6, 2013 by Camron Hoorfar

NACBA
WASHINGTON, D.C. – October 17, 2012 – As few as one in 10 unwary consumers who are lured into so-called “debt settlement” schemes actually end up debt free in the promised period of time, making the risky schemes the No. 1 threat facing America’s most deeply indebted Americans, according to a major new consumer alert issued today by the nonprofit National Association of Consumer Bankruptcy Attorneys (NACBA).

Available online at http://www.nacba.org, the NACBA consumer alert notes:  “Already struggling with home foreclosures, harsh bank and credit card fees, and other major financial challenges, America’s most deeply indebted consumers are now falling victim to a major new threat:   so-called ‘debt settlement’ schemes that promise to make clients ‘debt free’ in a relatively short period of time.  Unfortunately, most consumers who pursue debt settlement services find themselves facing not relief but even steeper financial losses. Even the industry acknowledges – though not in its ever-present radio and online advertising – that debt settlement schemes fail to work for about two thirds of clients. Federal and state officials put the debt-settlement success rate even lower – at about one in 10 cases – meaning that the vast majority of unwary and uninformed consumers end up with more red ink, not the promised debt-free outcome.”

The private debt-settlement industry remains robust.  More than 500,000 Americans with approximately $15 billion of debt are currently enrolled in debt settlement programs, according to industry estimates.  And there is room for further growth:   One in 8 U.S. households has more than $10,000 in credit card debt.

Durham, NC bankruptcy attorney Ed Boltz, NACBA Board member and incoming NACBA president, said:   “Based on what bankruptcy attorneys are seeing across the nation, we believe that debt settlement schemes are the number one problem facing America’s most deeply indebted consumers today. Bombarded with slick radio and Web advertising falsely promising a smooth road to being debt free in a short period of time, these companies prey on the most desperate victims of the economic downturn.   These particularly vulnerable consumers usually end up getting sued, stuck with outrageous fees, more deeply in debt, and far worse off in terms of their credit score.”

Earlier this year, NACBA focused national attention on the “student debt bomb,” which then was identified as the fastest growing consumer debt problem being handled by consumer bankruptcy attorneys.

Richard Thompson, a Rialto, California, retiree and victim of a debt settlement scheme, said:    “I was told they could settle my $89,000 in debts for a total of $39,000 if I made payments of $1,800 for 22 months.  I was contacted about a chance to settle $15,000 debt for $6,000 but my debt-settlement company ignored the offer.   In fact, I paid them a total of $25,200 as they kept on ignoring settlement offers from creditors.  I thought they were taking care of me by bringing my debt down, but all they were doing was taking my money.   I ended up with $25,000 more in debt than I started out with.   Before I retired I worked 25 years as a manager, now I have had to go back to work as a part-time security guard to help make ends meet.”

Bankruptcy attorney Trisha Connors, a NACBA member from Glen Rock, New Jersey who has testified before the New Jersey Law Revision Commission on debt settlement abuses, said:   “Over the last three years, I have worked with 12 different for-profit debt settlement companies and over 25 clients who came to me after their debt settlement program failed to serve them.  The results with each client were the same:  exorbitant fees being paid, settlement (at best) of one small credit card debt, and mounting late fees and penalty interest charges on the unsettled debts.  When clients informed the debt settlement companies of their desire to exit the program, the firms kept all or most of the accumulated savings for debt reduction as ‘fees.’  Every person I dealt with who had been current on their debts prior to contacting a debt settlement program told me that the sales representative told him the only way to be successful in the program is to stop paying credit card bills.”

Ellen Harnick, senior policy counsel, Center for Responsible Lending, said:   “Debt settlement companies require clients to default on their debts before they will negotiate.  This adds late fees and penalty interest to their debt and frequently results in the client being sued by creditors.  Since only a tiny proportion of debts are actually settled by these companies, clients are typically left worse off than they were when they started.”

In addition to highlighting the stories of three victims of debt settlement schemes, the NACBA consumer alert notes the following:

•    There is now across-the-board agreement on the danger that debt settlement schemes pose to consumers.  The Better Business Bureau has designated debt settlement as an “inherently problematic business.”  Similarly, the New York City Department of Consumer Affairs called debt settlement “the single greatest consumer fraud of the year.” Across the country, the U.S. Government Accountability Office (GAO),  the Federal Trade Commission, 41 state attorneys general,  consumer and legal services entities, and consumer bankruptcy attorneys have all uncovered substantial evidence of abuses by a wide range of debt settlement companies.

•    Debt settlement schemes encourage consumers to default on their debts.  Because creditors frequently will not negotiate reduced balances with consumers who are still current on their bills, debt settlement companies often instruct their clients to stop making monthly payments, explaining that they will negotiate a settlement with funds the client has paid in lieu of their monthly debt repayments.  Once the client defaults, he or she faces fines, penalties, higher interest rates, and are subjected to increasingly aggressive debt-collection efforts including litigation and wage garnishment. Consequently, consumers often find themselves worse off than when the process of debt settlement began:  They are deeper in debt, with their credit scores severely harmed.

•    “Self help” may be the best answer for smaller debt burdens.   If you have just a single debt that you are having trouble paying (such as a single credit card debt) and you have cash on hand that can be used to settle the debt, you may be able to negotiate favorable settlement terms with the creditor yourself.  Creditors typically require anywhere from 25 to 70 percent on the dollar to settle a debt so you will need that much cash for a successful offer.  Be sure to get an explicit written document from the creditor spelling out the terms of the debt settlement and relieving you of any future liability.  Also be prepared to pay income taxes on any of the forgiven debt.

•    Nonprofit credit counseling agencies can help, but must be vetted carefully.  If, like most people, you owe multiple creditors and do not have the cash on hand to settle those debts, you may want to consult a non-profit credit counseling agency to see if there is a way for you to get out of debt.  But make sure to check it out first: Just because an organization says it’s a “nonprofit” there is no guarantee that its services are free, affordable or even legitimate.  Some credit counseling organizations charge high fees (which may not be obvious initially) or urge consumers to make “voluntary” contributions that may lead to more debt. The federal government maintains a list of government-approved credit counseling organizations, by state, at www.usdoj.gov/ust.  If a credit counseling organization says it is “government approved,” check them out first.

•    Bankruptcy will be an option for some consumers.  Bankruptcy is a legal proceeding that offers a fresh start for people who face financial difficulty and can’t repay their debts.  If you are facing foreclosure, repossession of your car, wage garnishment, utility shut-off or other debt collection activity, bankruptcy may be the only option available for stopping those actions.  There are two primary types of personal bankruptcy:  Chapter 7 and Chapter 13.  Chapter 13 allows people with a stable income to keep property, such as a house or car, which they may otherwise lose through foreclosure or repossession.  In a Chapter 13 proceeding, the bankruptcy court approves a repayment plan that allows you to pay your debts during a three to five year period.  After you have made all the payments under the plan, you receive a discharge of all or most remaining debts.  For tax purposes, a person filing for bankruptcy is considered insolvent and the forgiven debt is not considered income.  Chapter 7 also eliminates most debts without tax consequences, and without any loss of property in over 90 percent of cases.  To learn more about bankruptcy and whether it makes sense for you, go to http://www.nacba.org/Home/AttorneyFinderV2.aspx.

NACBA urges consumers to steer clear of any companies that:

•    Make promises that unsecured debts can be paid off for pennies on the dollar. There is no guarantee that any creditor will accept partial payment of a legitimate debt. Your best bet is to contact the creditor directly as soon as you have problems making payments.

•    Require substantial monthly service fees and demand payment of a percentage of what they’ve supposedly saved you. Most debt settlement companies charge hefty fees for their services, including a fee to establish the account with the debt negotiator, a monthly service fee, and a final fee– a percentage of the money you’ve allegedly saved.

•    Tell you to stop making payments or to stop communicating with your creditors. If you stop making payments on a credit card or other debts, expect late fees and interest to be added to the amount you owe each month. If you exceed your credit limit, expect additional fees and charges to be added. Your credit score will also suffer as a result of not making payments.

•    Suggest that there is only a small likelihood that you will be sued by creditors.  In fact, this is a likely outcome.  Signing up with a debt settlement company makes it more likely that creditors will accelerate collection efforts against you.  Creditors have the right to sue you to recover the money you owe. And sometimes when creditors win a lawsuit, they have the right to garnish your wages or put a lien on your home.

•    State that they can remove accurate negative information from your credit report. No company or person can remove negative information from your credit report that is accurate and timely.

Boltz emphasized:  “Many different kinds of services claim to help people with debt problems.  The truth is that no single solution works in all cases.  Bankruptcy is an option that makes sense for some consumers, but it’s not for everyone.  For example, the National Association of Consumer Bankruptcy Attorneys and its individual consumer bankruptcy attorney members do not encourage every person who looks at bankruptcy to enter into it.   What makes sense for each consumer will depend on their individual circumstances.  We encourage everyone to get the facts and do what makes the most sense in their situation.”

ABOUT NACBA

The National Association of Consumer Bankruptcy Attorneys (http://www.nacba.org) is the only national organization dedicated to serving the needs of consumer bankruptcy attorneys and protecting the rights of consumer debtors in bankruptcy. Formed in 1992, NACBA now has more than 4,000 members located in all 50 states and Puerto Rico.

MEDIA CONTACT:  Patrick Mitchell, for NACBA, (703) 276-3266, or pmitchell@hastingsgroup.com.

EDITOR’S NOTE:  A streaming audio recording of the news event will be available on October 17, 2012 by 6 p.m. EDT at http://www.nacba.org.

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Reduce Your Taxes with Miscellaneous Deductions

Posted on August 5, 2013 by Camron Hoorfar

deductions

If you itemize deductions on your tax return, you may be able to deduct certain miscellaneous expenses. You may benefit from this because a tax deduction normally reduces your federal income tax.

Here are some things you should know about miscellaneous deductions:

Deductions Subject to the Two Percent Limit.  You can deduct most miscellaneous expenses only if they exceed two percent of your adjusted gross income. These include expenses such as:

  • Unreimbursed employee expenses.
  • Expenses related to searching for a new job in the same profession.
  • Certain work clothes and uniforms.
  • Tools needed for your job.
  • Union dues.
  • Work-related travel and transportation.

Deductions Not Subject to the Two Percent Limit.  Some deductions are not subject to the two percent of AGI limit. Some expenses on this list include:

  • Certain casualty and theft losses. This deduction applies if you held the damaged or stolen property for investment. Property that you hold for investment may include assets such as stocks, bonds and works of art.
  • Gambling losses up to the amount of gambling winnings.
  • Losses from Ponzi-type investment schemes.

Many expenses are not deductible. For example, you can’t deduct personal living or family expenses. Report your miscellaneous deductions on Schedule A, Itemized Deductions. Be sure to keep records of your deductions as a reminder when you file your taxes in 2014.

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Courtesy of the Internal Revenue Service.

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Eight Tips for Taxpayers Who Owe Taxes

Posted on August 2, 2013 by Camron Hoorfar

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While most taxpayers get a refund from the IRS when they file their taxes, some do not. The IRS offers several payment options for those who owe taxes.

Here are eight tips for those who owe federal taxes.

1. Tax bill payments.  If you get a bill from the IRS this summer, you should pay it as soon as possible to save money. You can pay by check, money order, cashier’s check or cash. If you cannot pay it all, consider getting a loan to pay the bill in full. The interest rate for a loan may be less than the interest and penalties the IRS must charge by law.

2. Electronic Funds Transfer.  It’s easy to pay your tax bill by electronic funds transfer. Just visit IRS.gov and use the Electronic Federal Tax Payment System. You may also use EFTPS to pay your taxes by phone at 800-555-4477.

3. Credit or debit card payments.  You can also pay your tax bill with a credit or debit card. Even though the card company may charge an extra fee for a tax payment, the costs of using a credit or debit card may be less than the cost of an IRS payment plan. To pay by credit or debit card, contact one of the processing companies listed at IRS.gov.

4. More time to pay.  You may qualify for a short-term agreement to pay your taxes. This may apply if you can fully pay your taxes in 120 days or less. You can request it through the Online Payment Agreement application at IRS.gov. You may also call the IRS at the number listed on the last notice you received. If you can’t find the notice, call 800-829-1040 for help. There is generally no set-up fee for a short-term agreement.

5. Installment Agreement.  If you can’t pay in full at one time and can’t get a loan, you may want to apply for a monthly payment plan. If you owe $50,000 or less, you can apply using the IRS Online Payment Agreement application. It’s quick and easy. If approved, IRS will notify you immediately. You can arrange to make your payments by direct debit. This type of payment plan helps avoid missed payments and may help avoid a tax lien that would damage your credit.

Taxpayers may also apply using IRS Form 9465, Installment Agreement Request. If you owe more than $50,000, you must also complete Form 433F, Collection Information Statement. For approved payment plans the one-time user fee is $105 for standard and payroll deduction agreements. The direct debit agreement fee is $52. The fee is $43 if your income is below a certain level.

6. Offer in Compromise.  The IRS Offer-in-Compromise program allows you to settle your tax debt for less than the full amount you owe. An OIC may be an option if you can’t fully pay your taxes through an installment agreement or other payment alternative. The IRS may accept an OIC if the amount offered represents the most IRS can expect to collect within a reasonable time. Use the OIC Pre-Qualifier tool to see if you may be eligible before you apply. The tool will also direct you to other options if an OIC is not right for you.

7. Fresh Start.  If you’re struggling to pay your taxes, the IRS Fresh Start initiative may help you. Fresh Start makes it easier for individual and small business taxpayers to pay back taxes and avoid tax liens.

8. Check withholding. You may be able to avoid owing taxes in future years by increasing the taxes your employer withholds from your pay. To do this, file a revised Form W-4, Employee’s Withholding Allowance Certificate, with your employer. The IRS Withholding Calculator tool at IRS.gov can help you fill out a new W-4.

Visit our website at www.Hoorfarlaw.com
Courtesy of the Internal Revenue Service.

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The Taxpayer Advocate Service: Helping You Resolve Tax Problems

Posted on July 31, 2013 by Camron Hoorfar

amt

The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that helps taxpayers who are experiencing unresolved federal tax problems. Here are 10 things every taxpayer should know about TAS:

1. The Taxpayer Advocate Service is your voice at the IRS.

2. You may be eligible for our help if you’ve tried to resolve your tax problem through normal IRS channels and have gotten nowhere, or you believe an IRS procedure just isn’t working as it should.

3. We help taxpayers whose problems are causing financial difficulty. This includes businesses, organizations and individuals.

4. We’ll do everything we can to resolve your problem. And our service is always free.

5. If you qualify for our help, you’ll be assigned to one advocate who will be with you at every turn.

6. We have at least one local taxpayer advocate office in every state, the District of Columbia and Puerto Rico. To find your advocate:

  • Visit www.irs.gov/advocate
  • Call us toll-free at 1-877-777-4778
  • Check your local directory
  • Look at Pub. 1546, Taxpayer Advocate Service – Your Voice at the IRS, which lists our offices nationwide

7. Our tax toolkit at www.TaxpayerAdvocate.irs.gov has basic tax information, details about tax credits, and more.

8. TAS also handles broader problems that affect many taxpayers. If you know of one of these systemic issues, please report it to us at www.irs.gov/sams.

9. You can get updates at:

10. TAS is here to help you because when you’re dealing with a tax problem, the worst thing you can do is to do nothing at all!

Visit our website at www.Hoorfarlaw.com
Courtesy of the Internal Revenue Service.

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Simplified Option for Home Office Deduction

Posted on July 29, 2013 by Camron Hoorfar

 

home office

Do you work from home? If so, you may be familiar with the home office deduction, available for taxpayers who use their home for business. Beginning this year, there is a new, simpler option to figure the business use of your home.

This simplified option does not change the rules for who may claim a home office deduction. It merely simplifies the calculation and recordkeeping requirements. The new option can save you a lot of time and will require less paperwork and recordkeeping.

Here are six facts the IRS wants you to know about the new, simplified method to claim the home office deduction.

1. You may use the simplified method when you file your 2013 tax return next year. If you use this method to claim the home office deduction, you will not need to calculate your deduction based on actual expenses. You may instead multiply the square footage of your home office by a prescribed rate.

2. The rate is $5 per square foot of the part of your home used for business. The maximum footage allowed is 300 square feet. This means the most you can deduct using the new method is $1,500 per year.

3. You may choose either the simplified method or the actual expense method for any tax year. Once you use a method for a specific tax year, you cannot later change to the other method for that same year.

4. If you use the simplified method and you own your home, you cannot depreciate your home office. You can still deduct other qualified home expenses, such as mortgage interest and real estate taxes. You will not need to allocate these expenses between personal and business use. This allocation is required if you use the actual expense method. You’ll claim these deductions on Schedule A, Itemized Deductions.

5. You can still fully deduct business expenses that are unrelated to the home if you use the simplified method. These may include costs such as advertising, supplies and wages paid to employees.

6. If you use more than one home with a qualified home office in the same year, you can use the simplified method for only one in that year. However, you may use the simplified method for one and actual expenses for any others in that year.

Courtesy of the Internal Revenue Service.
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How to Get a Transcript or Copy of a Prior Year Tax Return

Posted on July 24, 2013 by Camron Hoorfar

Tax return check

There are many reasons why you should keep a copy of your federal tax return. For example, you may need it to answer an IRS inquiry. You may also need it to apply for a student loan or a home mortgage. If you can’t find your tax return, the IRS can provide a copy or give you a transcript of the tax information you need.

Here’s how to get your federal tax return information from the IRS:

1. Transcripts are free and you can get them for the current year and the past three years. In most cases, a transcript includes all the information you need.

2. A tax return transcript shows most line items from the tax return you originally filed. It also includes items from any accompanying forms and schedules you filed. It does not reflect any changes made after you filed your original return.

3. A tax account transcript shows any changes either you or the IRS made to your tax return after you filed it. This transcript includes your marital status, the type of return you filed, your adjusted gross income and taxable income.

4. You can get transcripts on the web, by phone or by mail. To request transcripts online, go to IRS.gov and use the Order a Transcript tool. To order by phone, call 800-908-9946 and follow the prompts.

5. To request a 1040, 1040A or 1040EZ tax return transcript by mail or fax, complete Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript. Businesses and individuals who need a tax account transcript should use Form 4506-T, Request for Transcript of Tax Return.

6. If you order online or by phone, you should receive your tax return transcript within five to 10 calendar days. You should allow 30 calendar days for delivery of a tax account transcript if you order by mail.

7. If you need an actual copy of a filed and processed tax return, it will cost $57 for each tax year. Complete Form 4506, Request for Copy of Tax Return, and mail it to the IRS address listed on the form for your area. Copies are generally available for the current year and past six years. Please allow 60 days for delivery.

8. If you live in a Presidentially declared disaster area, the IRS may waive the fee to obtain copies of your tax returns. Visit IRS.gov and select the ‘Disaster Relief’ link in the lower left corner of the page for more about IRS disaster assistance.

9. Forms 4506, 4506-T and 4506T-EZ are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Courtesy of the Internal Revenue Service.
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Temporary Jobs Becoming a Permanent Fixture

Posted on July 23, 2013 by Camron Hoorfar

temp job

Hiring is exploding in the one corner of the U.S. economy where few want to be hired: Temporary work.
From Wal-Mart to General Motors to PepsiCo, companies are increasingly turning to temps and to a much larger universe of freelancers, contract workers and consultants. Combined, these workers number nearly 17 million people who have only tenuous ties to the companies that pay them – about 12 percent of everyone with a job.
Hiring is always healthy for an economy. Yet the rise in temp and contract work shows that many employers aren’t willing to hire for the long run.
The number of temps has jumped more than 50 percent since the recession ended four years ago to nearly 2.7 million – the most on government records dating to 1990. In no other sector has hiring come close.
Driving the trend are lingering uncertainty about the economy and employer’s desire for more flexibility in matching their payrolls to their revenue. Some employers have also sought to sidestep the new health care law’s rule that they provide medical coverage for permanent workers. But the Obama administration delayed that provision of the law for a year.
The use of temps has extended into sectors that seldom used them in the past – professional services, for example, which include lawyers, doctors and information technology specialists.
Temps typically receive low pay, few benefits and scant job security. That makes them less likely to spend freely, so temp jobs don’t tend to boost the economy the way permanent jobs do. More temps and contract workers also help explain why pay has barely outpaced inflation since the recession ended.
Beyond economic uncertainty, Ethan Harris, global economist at Bank of America Merrill Lynch, thinks more lasting changes are taking root.
“There’s been a generational shift toward a less committed relationship between the firm and the worker,” Harris says.
An Associated Press survey of 37 economists in May found that three-quarters thought the increased use of temps and contract workers represented a long-standing trend.
Typical of that trend is Latrese Carr, who was hired by a Wal-Mart in Glenwood, Ill., two months ago on a 90-day contract. She works 10 p.m. to 7 a.m., helping unload trucks and restocking shelves. Her pay is $9.45 an hour. There’s no health insurance or other benefits.
Carr, 20, didn’t particularly want the overnight shift.
“I needed a job,” she says.
The store managers have said some temps will be kept on permanently, Carr says, depending on their performance.
Carr isn’t counting on it.
The trend toward contract workers was intensified by the depth of the recession and the tepid pace of the recovery. A heavy investment in long-term employment isn’t a cost all companies want to bear anymore.
“There’s much more appreciation of the importance of having flexibility in the workforce,” says Barry Asin of Staffing Industry Analysts, a consulting firm.
Susan Houseman, an economist at the Upjohn Institute of Employment Research, says companies want to avoid having too many employees during a downturn, just as manufacturers want to avoid having too much inventory if demand slows.
“You have your just-in-time workforce,” Houseman says. “You only pay them when you need them.”
This marks a shift from what economists used to call “labor hoarding”: Companies typically retained most of their staff throughout recessions, hoping to ride out the downturn.
“We clearly don’t have that anymore,” says Sylvia Allegretto, an economist at the University of California, Berkeley.
The result is that temps and contract workers have become fixtures at large companies. Business executives say they help their companies stay competitive. They also argue that temp work can provide valuable experience.
“It opens more doors for people to enter the labor market,” says Jeff Joerres, CEO of ManpowerGroup, a workplace staffing firm.
But Houseman’s research has found that even when jobs are classified as “temp to permanent,” only 27 percent of such assignments lead to permanent positions.

By Christopher S. Rugaber published in The Legal Record.
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Six Tips on Gambling Income and Losses

Posted on July 22, 2013 by Camron Hoorfar

gambling2

Whether you roll the dice, play cards or bet on the ponies, all your winnings are taxable. The IRS offers these six tax tips for the casual gambler.

1. Gambling income includes winnings from lotteries, raffles, horse races and casinos. It also includes cash and the fair market value of prizes you receive, such as cars and trips.

2. If you win, you may receive a Form W-2G, Certain Gambling Winnings, from the payer. The form reports the amount of your winnings to you and the IRS. The payer issues the form depending on the type of gambling, the amount of winnings, and other factors. You’ll also receive a Form W-2G if the payer withholds federal income tax from your winnings.

3. You must report all your gambling winnings as income on your federal income tax return. This is true even if you do not receive a Form W-2G.

4. If you’re a casual gambler, report your winnings on the “Other Income” line of your Form 1040, U. S. Individual Income Tax Return.

5. You may deduct your gambling losses on Schedule A, Itemized Deductions. The deduction is limited to the amount of your winnings. You must report your winnings as income and claim your allowable losses separately. You cannot reduce your winnings by your losses and report the difference.

6. You must keep accurate records of your gambling activity. This includes items such as receipts, tickets or other documentation. You should also keep a diary or similar record of your activity. Your records should show your winnings separately from your losses.

Courtesy of the Internal Revenue Service.
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Tips for Employers Who Outsource Payroll Duties

Posted on July 19, 2013 by Camron Hoorfar

payroll

Many employers outsource their payroll and related tax duties to third-party payers such as payroll service providers and reporting agents. Reputable third-party payers can help employers streamline their business operations by collecting and timely depositing payroll taxes on the employer’s behalf and filing required payroll tax returns with state and federal authorities.

Though most of these businesses provide very good service, there are, unfortunately, some who do not have their clients’ best interests at heart. Over the past few months, a number of these individuals and companies around the country have been prosecuted for stealing funds intended for the payment of payroll taxes. Examples of these successful prosecutions can be found on IRS.gov.

Like employers who handle their own payroll duties, employers who outsource this function are still legally responsible for any and all payroll taxes due. This includes any federal income taxes withheld as well as both the employer and employee’s share of social security and Medicare taxes. This is true even if the employer forwards tax amounts to a PSP or RA to make the required deposits or payments. For an overview of how the duties and obligations of agents, reporting agents and payroll service providers differ from one another, see the Third Party Arrangement Chart on IRS.gov.

Here are some steps employers can take to protect themselves from unscrupulous third-party payers.

  • Enroll in the Electronic Federal Tax Payment System  and make sure the PSP or RA uses EFTPS to make tax deposits. Available free from the Treasury Department, EFTPS gives employers safe and easy online access to their payment history when deposits are made under their Employer Identification Number,      enabling them to monitor whether their third-party payer is properly carrying out their tax deposit responsibilities. It also gives them the option of making any missed deposits themselves, as well as paying other individual and business taxes electronically, either online or by phone. To enroll or for more information, call toll-free 800-555-4477or visit www.eftps.gov.
  • Refrain from substituting the third-party’s address for the employer’s address. Though employers are allowed to and have the option of making or agreeing to such a change, the IRS recommends that employer’s continue to use their own address as the address on record with the tax agency. Doing so ensures that the employer will continue to receive bills, notices and other account-related correspondence from the IRS. It also gives employers a way to monitor the third-party payer and easily spot any improper diversion of funds.
  • Contact the IRS about any bills or notices and do so as soon as possible. This is especially important if it involves a payment that the employer believes was made or should have been made by a third-party payer. Call the number on the bill, write to the IRS office that sent the bill, contact the IRS business tax hotline at 800-829-4933 or visit a local IRS office. See Receiving a Bill from the IRS on IRS.gov for more information.
  • For employers who choose to use a reporting agent, be aware of the special rules that apply to RAs. Among other things, reporting agents are generally required to use EFTPS and file payroll tax returns electronically. They are also required to provide employers with a written statement detailing the employer’s responsibilities including a reminder that the employer, not the reporting agent, is still legally required to timely file returns and pay any tax due. This statement must be provided upon entering into a contract with the employer and at least quarterly after that. See Reporting Agents File on IRS.gov for more information.
  • Become familiar with the tax due dates that apply to employers, and use the Small Business Tax Calendar to keep track of these key dates.

Courtesy of the Internal Revenue Service.

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