What’s New In The World Of Taxes… And Postage Stamps

Telling Tips is a series of articles from local experts to help you save money, make better decisions and plan for a better future.

It’s autumn. It’s the end of the harvest season. Are you enjoying the lovely colors — orange, red, rust, gold, brown? Take the family and go apple or pumpkin picking. ‘Tis the season for carving pumpkins and making pumpkin bread and pie, and apple pie and cider.

Time for a reality check — here’s what’s new in taxes this week.

Waiters & Waitresses To Be Short-Changed?

The IRS says that servers need to report tips of at least $20 to their employer on a monthly basis. These tips are then noted on the W-2 at year’s end. The server pays Social Security and income tax on the tips, the employer matches the Social Security, and the government collects more revenue.

Sometimes, the server “forgets,” so the income is never reported. As of January 2014, the IRS is going to help servers “remember” to report tips by requiring employers to add any gratuity automatically added to the bill for service as a reported tip. As this requirement is only for automatic tips noted on the bills, you should see less automation.

New Rules For Reverse Mortgages

If you are 62 or older, a reverse mortgage gives you access to the equity in your home through a line of credit, monthly payments, or a lump sum. No repayment is required until you move, sell, or pass away, but you are still responsible for property taxes and insurance.

As of October 1, new restrictions will make it more difficult to obtain a reverse mortgage. It was found that borrowers were unable to live off of loan for very long, or pay it back. The new rules are an effort to make borrowers more responsible — to change their behavior as to how they access the funds.

Some of the new rules are:

• Lowering from 75 percent to 60 percent of the appraised home value what the borrowers can take during the first year.
• The lender must evaluate the ability of the borrower to pay their property taxes, insurance, homeowner’s association dues, etc.
• The lender may now require the borrower to set aside funds to pay known costs.
• If married, both must be on the loan. This will decrease the amount they can jointly borrow.

Need To Repay The First-Time Homebuyer Credit?

If you purchased a home before January 1, 2009, and have to repay the credit over 15 years, you can check your status.

U.S. Postal Service To Raise Prices – Again

Nothing to do with taxes, but FYI, the proposed changes that would become effective January 26, 2014 include:

• Letters (1 oz.): three-cent increase to 49 cents
• Letters additional ounces: one-cent increase to 21 cents
• Letters to all international destinations (one ounce): $1.15
• Postcards: one-cent increase to 34 cents.

Worst States For Business

Yes, for business, again New York is the worst, #50, followed by New Jersey. Will this ever change? One bright spot: New York is 49 (behind California) for individuals. (Thanks to the Tax Foundation for this cheerful news.)

Lap Dance Fee

The city of Philadelphia was looking to impose an “amusement” tax on fees paid for lap dances. The city’s Tax Review Board voted it down.

Need A Mortgage?

During the government shutdown, IRS employees are not available to help third parties with a tax transcript so the borrowing bank can verify your income with your tax return. A work around is that individuals can still request their own transcript using the IRS’s automated process

Looking For Your Tax Refund?

Forget it. No refunds until IRS operations resume — but — you still have to pay whatever taxes are due! Note, also, that paper tax returns will not be processed until “normal” operation resume, but tax payments will be accepted whether e-filed or paper filed. Not fair? It’s all in the name Internal REVENUE Service.

IRS Says Tax Audits Are Non-Essential

As there is technically no money to pay government employees, the IRS has put on hold all tax audits. So, is this a good thing? I don’t think so. If someone is not paying their proper taxes, then you and I have to make up their difference.

IRS Staff Update

About 86,000 IRS workers are non-essential furloughed due to the shutdown. But if you are looking for a speaker on “ethics,” Lois Lerner (former director of the IRS’ Exempt Organizations unit) is available. She has retired, just before she was to be fired. Another speaker to consider is Charles Rangle.

Quip: “You can lead a man to Congress, but you can’t make him think.” — Milton Berle

Joseph Reisman, of Joseph S. Reisman & Associates, has been serving tax prep and business accounting expertise from his Coney Island Avenue office for more than 25 years. Check out the firm’s website.