Archives for October 2013

Repaying Student Loan Debt

Around 11.2 trillion of workers in the US owe student loans. Many of those are struggling to pay them back, but have managed until now. The federal government established a way for public service workers to have their student loans forgiven.

The Consumer Financial Protection Bureau released a report stating that more than a quarter of the public service workforce is eligible for loan forgiveness, but many do not know about the program. They would like to find ways to get the information to the workers. If you would like more information visit http://studentaid.ed.gov/repay-loans/forgiveness-cancellation/charts/public-service to find out if you qualify for student loan forgiveness.

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The Rising Mobility Demand for Companies

Over the past decade, the increase demand for companies in the overseas markets has increased by 25%. With the demand, companies are finding an increased number of mobile employees. The mobile employees frequently make trips overseas to complete short-term assignments, project-based assignments, and assignment that require no relocation. The mobility of employees is set to increase over the next eight year to around 50% of large company’s workforce.

This can provide serious problems for companies. There is a need for a specialized workforce according to a survey by PwC of 900 company’s chief executives. The chief executives are looking to recent college graduates and mobility specialists to fill the needs within the company.

To respond to the shortages, changing business needs and employee preferences, many companies are making the effort to retain the best workers and develop a well-rounded employee that can meet the demands of the changing business environment. Since companies are targeting younger workers to develop, they are becoming more accommodating to family needs and responsibilities. They are also considering the preferences and needs of the different generations and cultures and shaping assignments to fit the different requirements.

As workers emerge in different markets, especially China, companies are starting to see a preference towards domestic multinationals instead of Western multinationals, so companies will recruit within the international market.

They are also improvement that are being implemented to help keep track of oversea employees and assignments. Many companies are adopting a standard global remuneration system for all oversea assignments. To deal with the increasingly diverse and mobile workforce, companies’ human resources and global mobility functions are becoming strategic tools instead of providing services for the workforce.

With the ever-changing demands in the business world, companies will have to adapt in response to demands including employee preference, long-distance commuting, and virtual mobility. The greater the flexibility from companies the better global mobility will work for both employee and employer.

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Changes to Innocent Spouse Relief

With today’s divorce rate of first marriages at 50%, the ‘happily ever after’ that most people seek can be elusive. If things go sour in a marriage then they could go sour in other areas also, including jointly filed tax returns. When a couple files jointly they can be many benefits, but they are also both fully responsible for any taxes owed, interest and penalties. This also applies to any couple that lives in a community property state even if they file separately. This can detrimental to anyone going through a divorce financially if the person filing the return underreports or over deducts.

There is relief for the innocent spouse. The IRS has three ways to help innocent spouses with joint return that have gone awry, and they include:

  • Innocent Spouse Relief: which provides you relief from additional taxes that you may owe that your spouse failed to report, improperly reported, or if they claimed credits or too many  deductions.
  • Separation of Liability Relief: allocates additional taxes owed between you and your former or current but separated spouse on items not reported correctly. It allows you to pay what you owe.
  • Equitable Relief: may be applied for when you do to qualify for either innocent spouse relief or separation of liability for something not reported properly on a joint return, or for the right amount, but the payment remains unpaid.

In the past, the IRS has allowed a two year window to file for relief, but this has recently changed. Now as long as the statute of limitations has not expired then you can still file for relief, the two year window no longer applies. With this change, if you have applied for relief and were denied solely on the two year window, then you may reapply using the Form 8857 as long as the statute of limitations has not expired.

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Making Changes to Reverse Mortgages

Traditional mortgages, borrowers, and lenders are still feeling the financial crunch that was the result of the financial crisis. Along with the traditional, the Federal Housing Administration (FHA) is also feeling the pinch with its reverse mortgage program, and as a result, the Department of Housing and Urban Development (HUD) has established guideline that make the program more restrictive by reducing the borrowing limits and increasing the insurance premiums.

The new changes will take effect on September 30, 2013. The changes include:

  • Consolidation of the HECM Saver and HECM Standard loans into one loan
  • An adjustment of the upfront Mortgage Insurance Premium (MIP) to 0.50%
  • The borrower is only allowed to access up to 60% of the principal limit at closing or within the first year.
    • The exception is if they have “mandatory obligations” which could include closing costs, existing liens being refinances, delinquent Federal debt or other debt amounts that exceed 60% of the principal. The cap is moved to meet the mandatory obligations plus 10%.
    • If the borrower will be assessed an additional 2% upfront MIP if more than 60% of the Principal limit is meet at closing or during the first year.

There are additional changes that take effect January 13, 2014. This will require borrowers to undergo an mandatory financial assessment to determine if they are capable of maintaining the property tax and insurance payments with their other income. If they are unable to meet the obligations then the payments will be drawn from the reverse mortgage and placed in an escrow account.

With the new regulations, the goal is to reduce the number of people using reverse mortgage who are already financially distressed, and prevent them from defaulting on the loan and foreclosing on the property anyways.

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Budget Talks May Alter the Retirement Landscape

Many people contribute to some form of retirement saving account. Whether it is an IRA or defined contribution plan like a 401(k), Americans have contributed $8.82 trillion to some form of retirement account. With so much money stashed away, and not taxed, it not surprising that the government wants to get their cut, but the proposals will reshape the fundamentals of retirement finances and taxes in the US in general.

President Obama along with congress will begin debating the proposals October 1, and only time will tell how this will effect retirement saving in the future. Below are just three of the six proposals that could have the most impact on the retirement landscape. They are:

  • Inherited IRAs: With the current system, people, other than spouses, that inherit IRAs can spread out the withdrawals over their lifetime to minimize the impact on taxes paid. The proposal is for other people who are not spouses that inherit to empty the account by end of the fifth year after the original owner’s death. This means that more money will be required to be withdrawn from the account each year and the taxes paid will be considerably higher. There will be certain exemptions for beneficiaries, including those with disabilities.
  • Savings Cap: If this proposal passes, there will be a limit to the amount that can be contribute to retirement accounts. To do this all account would be considered as a whole, and when the total survivors annuity produces a joint payout of $205,000 a year then the person will no longer be able to contribute to their retirement accounts. While this probably will not affect most people now, as interest rates rise, annuities paying $205,000 a year would cost less and the cap would be lower.
  • Mandatory IRAs: This edict would apply to any business that has ten or more employees and have been in business for two or more years. It would require employers to develop and establish automatic enrollment in IRA for their workers. The contributions would be made through payroll deductions and the employees would be allowed to choose how much is contributed with 3% being the default amount. Employers would be granted tax credits to help design and establish plans, but this is just another thing business owners will have to worry about.
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