Reuters Money

Friday is D-Day to voluntarily tell the IRS about your offshore assets

If your financial life spans multiple countries and you’ve not been paying close attention to your tax issues, be forewarned: This Friday is the deadline for the Internal Revenue Service’s latest offshore tax reporting voluntary disclosure program.

It’s one of those deadlines that most people pay little attention to, despite how much it’s been publicized. It’s the second in a series of IRS efforts — some 15,000 came forward for the previous initiative in 2009 — to bring offshore assets and income into the tax system through a voluntary disclosure program that let taxpayers avoid an array of civil and even criminal penalties (including potential jail time) for foreign income and account violations. Taxpayers who choose the program still face penalties, which may be hefty, but they are far less severe than those the IRS can impose if it uncovers your tax transgressions.

While you may think that this effort affects mainly uber-wealthy taxpayers with numbered accounts in Switzerland, the rules apply to a far broader, and more eclectic, group of people. Among those who could be affected are dual residents who haven’t filed returns, U.S. citizens (including retirees) who have been living abroad for decades, and immigrants in this country (whether citizens or not) who have maintained financial lives back home. “Some folks might not even realize they have a filing requirement,” says Jim Medeiros, a tax partner in PricewaterhouseCoopers private company services practice. “There are a lot of unintentional violators.”

Some taxpayers will find that complying with the program and paying the penalties aren’t too onerous given the risk it removes. But others may end up with huge unintended tax bills simply because they didn’t know the rules. The voluntary program’s penalty for failing to report foreign accounts on the FBAR, or foreign bank account reporting form is generally 25 percent of the highest aggregate balance in the account between 2003 and 2010. That’s a number that could be well over one-quarter of the current account’s value if its holdings were stocks valued at the peak, and it’s possible that the penalties due could exceed the amount of money now in the account. The FBAR filing is required for any U.S. person with at least $10,000 in a foreign financial account.

As immigrant communities learned of the rules, some were up in arms. A coalition of Indian American groups, for example, sent a letter of protest over the summer to Administration officials, arguing that the 25 percent penalty on law-abiding citizens was “immoral and unfair.”

The risks of not taking advantage of the program, however, are quite high. Should the IRS catch your non-disclosure, the penalties are severe, and could include criminal prosecution — and you don’t want to be the one the IRS makes an example of for not reporting. “You cannot claim ignorance,” Medeiros says.

The deadline for the program, officially called the 2011 Offshore Voluntary Disclosure Initiative, and begun in February, was extended because of Hurricane Irene, until today, Friday, September 9th. For those who are out of time, but still want to take advantage of voluntary disclosure, it is possible to apply for a 90-day extension.

Eight ways older workers can enhance job security

Last week’s dismal unemployment report contained what looks like a glimmer of hope for older workers. The August jobless rate for workers over 55 was 6.6 percent – far below the 9.1 percent national average. The seasonally-adjusted jobless rate for older workers was down from 7 percent as recently as June, and it stands considerably below the 7.3 percent rate in August 2010.

But the August jobless numbers masks broader weakness in the job market for older Americans, because it measures only workers actively seeking employment. Many older workers have given up looking; only 1 percent of unemployed older workers are optimistic about finding jobs in the near future, while 30 percent say they are very pessimistic, according to recent research by Boston College’s Sloan Center on Aging & Work.

Older workers who do lose their jobs tend to remain jobless much longer than their younger counterparts – if they are able to find new work at all. And those who do find new work most often accept jobs with lower pay and less valuable benefits. So, to state the obvious: the best strategy for staying employed after age 50 is to keep the job you have, if at all possible.

Easier said than done, you say — and I agree. But that doesn’t mean there’s nothing you can do to boost your odds of staying employed, argues Alan Sklover, an attorney who has represented or coached hundreds of older workers in employment cases over his 30-year career. He also coaches older workers facing firings, downsizings or layoff.

Sklover acknowledges that age discrimination is “rampant” in the workplace — but he also says it is “natural and normal,” even though it’s illegal, adding that “We all make judgments based on age, no matter what anyone says.”

That means it’s that much more important for older workers to “find ways to enhance job security by making yourself indispensable. We’re all wired to be sensitive to our own self-interest, and an employer’s self-interest is to ask, ‘Is this person helpful to me? Can they help me be successful?’ That is always where it starts.”

Sklover offers the following eight strategies for enhancing job security have worked well over the years for his older clients.

How parents of multiples tackle financial challenges

Kevin O’Reilly spends his life dispensing financial planning advice. But he wasn’t exactly fiscally prepared when his wife Rebecca had triplets more than six years ago after spending close to $20,000 on fertility treatments. At the time she was earning a substantial salary as a project manager.

The plan was for his wife to return to work not too long after the delivery. That pretty much went out the window once they found out she was carrying triplets because of the extra care they required.

Although the loss of one income was the biggest financial challenge the couple faced, there were others.

“We had to buy a minivan because we needed a vehicle that could fit three car seats,” says Kevin, a Scottsdale, Arizona-based financial adviser. “That set us back about $30,000. Then there’s the cost of diapers, formula and everything else you need.” While they have set up college savings plans for each of the children, the family has had to cut back substantially on retirement plan contributions.

As the media continues to follow Kate Gosselin and Nadya Suleman, thousands of families with twins and triplets quietly struggle with unique financial issues that most singleton parents don’t face, or encounter more gradually. With the use of fertility drugs more than doubling the rate of multiple births since 1980s, many families now grapple with these issues.

In the scheme of things having to buy two or more of everything at once or the absence of hand-me-downs may seem like fairly minor inconveniences. But adding multiples children to the mix can have more serious financial consequences when premature deliveries and related health complications, which are more common with multiple births, lead to exorbitant hospital bills.

Research shows that the financial stress of multiples takes a real toll on families, according to a study released last year from the University of Birmingham in the UK. It found that 62 percent of multiple birth families reported being financially worse off after their babies were born, compared to 40 percent of other parents. Families with a multiples birth were more than twice as likely as others to categorize their financial problems as “quite difficult.”

What new jumbo mortgage rules mean for expensive zip codes

On Oct. 1, the size of mortgages eligible for purchase by Fannie Mae and Freddie Mac will shrink. That isn’t necessarily a big deal in most parts of the country; the new lower limit of $625,500 — down from today’s $729,750 — still is big enough to cover most homes in almost all markets in the United States.

Furthermore, mortgage bankers are stepping up with new money to cover those bigger loans, reports Mortgage Daily. “Programs here and there are popping up,” says publisher Sam Garcia. He reports that some new lenders, including TMS Funding and New Penn Financial LLC, are launching programs that will make mortgages as big as $2 million available to lenders with good credit scores and enough cash to keep up with the payments. And many existing mortgage lenders currently will make those so-called “jumbo” loans and just keep them in their portfolios instead of selling them.

But those loans will cost more. Currently the difference between rates on so-called conforming loans and private-made loans is about 0.64 percent. Over the last two years that spread has been as low as 0.48 percent and higher than one percent, says Garcia.

So in some pricey places, the new limits will really pinch borrowers. Those limits vary from market to market and are determined in part by local housing prices. In expensive housing markets where prices have fallen, the limits will drop the most. Hardest to be hit, according to a new analysis by Move.com, will be San Diego, where loans up until $697,500 qualify for Fannie and Freddie until Sept. 30. On Oct. 1, that limit drops to $546,250, a $151,250 difference.

Folks there who want to borrow a bunch for a home will see their costs rise significantly. A San Diego homebuyer who needs $600,000 would pay $2,937 a month for a 30-year loan at today’s rate of 4.18 percent, according to Bankrate.com. Starting next month, if rates stay stable and that borrower goes to a private lender, he would pay $3,155 a month. That’s $228 more a month, or $82,080 more over 30 years.

Some buyers (and lenders) may try to get around that by piggy-backing loans; piling a smaller non-conforming loan onto a conforming loan.

Here are some other areas, most often searched on Realtor.com, that could see significant changes in their loan limits, according to the Move analysis.

New agency seeks help protecting military family finances

The Consumer Financial Protection Bureau, the new federal watchdog agency, is trying to extend some extra protection to the often vulnerable members of the armed services and their families.

The CFPB is collecting information from the public about developing education programs and other initiatives aimed at those connected to the military.

“Military families face unique challenges especially when it comes to their finances,” Holly Petraeus, the CFPB’s assistant director for the Office of Servicemember Affairs, said in a statement. “We believe that open dialogue is key to addressing these challenges. By identifying the products and services that aim to assist their particular needs, our office will be able to better serve servicemembers and their families”.

The CFPB declined to elaborate further than the written statement it issued, but Petraeus — wife to former Gen. David Petraeus (now head of the CIA) — has been a longtime advocate for military families.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act enacted last year, the bureau was directed to help military families with financial products and services.

Military families have long been a target of scams, often targeting the families stateside while a spouse is on deployment.

“The CFPB is doing exactly the right thing investigating ripoff financial products peddled to military families,” says National Consumers League President Sally Greenberg. “Far too many unscrupulous businesses prey on military families. It’s shameful, but it happens every day and it needs to stop. We applaud the CFPB’s efforts protect those families who serve our country from financial fraudsters.”

Six investment scams to avoid

Money is a powerful lure. Pretty much everyone wants more of it, and a whole lot of people want to get theirs by taking it from others. Investors are typically more savvy, but they’re targets nonetheless.

The North American Securities Administrators Association (NASAA) put together its annual list of “tricks and traps” for investors to avoid. For most, due diligence and skepticism is what stands between the investor and the scam.

Here are some of the scams to watch out for so you’re better prepared if one comes your way.

Real estate The beaten-down real estate market, with its abundant opportunities for real investors, has also spurred a growth in schemes tied to distressed properties. Earlier this year, Lawrence R. Hamel was convicted in federal court in Florida of a conspiracy that took $2.3 million from 39 investors around the country who thought their money was going to refurbish distressed properties that would then be sold for a profit. Authorities say Hamel didn’t buy properties and used the money from later investors to pay earlier investors in a Ponzi scheme.

Energy These scams are connected to the time-honored lure of buying into the big rewards that come with investing in oil and gas reserves. “Investors must realize the distinct possibility that they could lose their total investment in legitimate ventures. Energy investments tend to be poor alternatives for those planning for retirement and should be avoided by anyone who cannot afford to strike out when trying to strike it rich,” the NASAA warns.

Gold As the price of gold has risen, so has the temptation to get a piece of the action. That’s a powerful draw for a scam. There are a couple of variations in this arena, the NASAA says. One offers investors a chance to buy into a mine that had been closed with the promise of getting all their money back plus interest. Another involves marketing coins or nuggets that supposedly have a superior return. This summer, the operator of the Lake Worth, Florida-based Gold Bullion Exchange was accused of defrauding more than 1,400 investors of more than $25 million. Jamie Campany allegedly got investors to buy under a variation of margin financing, and collected commission and fees but never bought any bullion.

Promissory notes On the face of it, these seem like a good investment. After all, it’s on paper that you’re going to get a fat return on your investment. “Unregistered promissory notes are often covers for Ponzi schemes and other scams,” NASAA warns. Investors should check with their state regulator to determine whether a promissory note and the seller/borrower are properly registered. Former FBI agent Cary Alan Burdette pleaded guilty this summer to using promissory notes in a scheme that brought in more than $4 million.

Back-to-school spending tests your wallet and your patience

Remember when you could outfit a kid with roughly $20 in school supplies? Now there’s a lesson in ancient history, folks.

In present-day Chicago, the list of required items for two public school students can easily top $200. And the author of this article, a father of two, has a fresh receipt to prove it: The total at Office Depot last week to outfit a fourth-grade boy and a second-grade girl came to $196.13 before cashing in a $20 coupon.

All that spending on pencils, paper, wipes and markers, by the way, doesn’t include what many moms, dads and kids also consider fall necessities—items from new school clothes to smartphones for older kids. Parents are frustrated with school district supply lists that grow even as their income shrinks or stagnates. It’s no longer just a matter of pencils and notebooks, but tissues, hand sanitizer, wipes, paper towels, academic planners and much, much more. A student’s back-to-school arsenal can also include new footwear, clothing and computer equipment. And on the tech side, more kids demand smartphones (even if they’re not getting them) and e-readers.

What’s a parent to do, then? Experts say you can fight the back-to-school shopping blues in many ways, and offer powerful tips for doing so:

1. Comparison shopping apps. A smartphone app like RedLaser scans barcodes to find the lowest price on any item. “It uses product results from Google, eBay, Half.com and others and it’s free,” says Farnoosh Torabi, a personal finance expert and author of “Psych Yourself Rich.”

2. Rewards programs. We all dread junk email but getting on the mailing lists of retailers you frequent can yield sales alerts and money-saving coupons. Joining Office Depot’s Worklife Rewards allowed access to that $20 coupon mentioned earlier.

3. Online sales. About 30 percent of families plan to comparison shop online, says Arianna Georgi, vice president of marketing at Flank Digital LLC, the parent company of CheapSally.com. “Online coupon sites are only adding to this push, since many offer large discounts on items such as clothes, books, backpacks and electronics.”

Financial advisers consistently ask the wrong questions

If you go to see a financial adviser and you are only asked two main questions — how much money will you need in retirement and what’s your risk tolerance? – you should run for the hills.

Financial advisers who are shackled by conventional wisdom or just looking for numbers to plug into off-the-shelf portfolio software may be asking you the wrong questions.

You deserve a more customized approach, and can get one if you demand it.

Because it’s difficult to pin down a number that represents a decent lifestyle. It’s a moving target for many of us, and most of us are lousy judges of risk. Estimates can be tragically wrong.

Dan Ariely, the bestselling author and behavioral economist at Duke University, thinks many advisers are barking up the wrong tree.

In a recent Harvard Business Review piece, Ariely blasts this whole charade and the common compensation scheme of charging clients 1 percent annually to manage money.

“Frankly I think trained monkeys could do the same basic job giving answers to those two questions,” Ariely writes. “Certainly algorithms can do it, probably with many fewer errors. This is not something for which we should pay 1 percent of assets under management.”

Utility stocks that can plug you into yields instead of losses

After trailing the market in 2009 and 2010, utilities have emerged as its leading sector, and a number of analysts believe they are on track to maintain that position for at least the rest of 2011.

The Standard & Poor’s 500 Index fell 3 percent in the first eight months of the year, while utility shares  rose 7.3 percent. In August, the index fell nearly 6 percent, while utilities went up 1.7 percent.

Investors have been drawn to stocks of electric, gas and water utilities for a number of reasons. Dividend yields north of 4 percent look tempting when 10-year Treasury securities yield less than 2.5 percent. The stocks are less volatile than the rest of the market, and their stable earnings and other defensive characteristics stand out in a weak economic environment. The extension of the favorable 15 percent tax rate on dividends through 2012 also adds to their appeal, at least for now.

Fans include Robert W. Baird & Co. utility analyst David Parker, who noted in a recent report that, “If boring is good, and it likely is with growing global economic uncertainties, then the utility sector should not disappoint,” in the second half of 2011. Citing their resilience in a weak economic environment, Standard & Poor’s changed its portfolio allocation recommendation on utilities from “market weight” to “over weight” in late August.

But the appeal could evaporate quickly if the stock market gets bullish again and plodding stability starts looking drab again. That happened in 2009 and 2010, when utility stocks rose 21 percent over the two years, compared to a 51 percent leap for the S&P 500 Index. Rising interest rates, which would prompt income-seeking investors to abandon stocks for higher-yielding bonds, could also end the party fairly quickly.

“In a strong bullish environment, utility stocks won’t do as well as cyclical or growth stocks,” warns Tim Winter, a utility analyst with Gabelli & Co.

Where is the real U.S. jobs plan?

Jobs, justice and peace. Have three themes ever been so intimately intertwined since Dr. Martin Luther King, Jr., championed this tri-partite campaign in his 1967 March on Washington?

Unemployment is ravaging the country, especially among urban minorities. Yet Congress has yet to put forward a comprehensive jobs plan to create employment. We’re still fighting two wars and garrisoning troops in Europe and Japan as the jobless rate soars at home. Debt reduction is still a priority over job creation.

The current economic downturn has put the brakes on economic progress for most of the American working class. They shared in widespread growth during the 1990s, but have been falling behind during the latest recession.

The pain has been uneven and most punishing in the inner city and among the young. For white men and women, the jobless rate for those 20 years and older was around 8 percent as of July. For white teenagers (age 16 to 19), the rate was 23 percent.

Unemployment for African-American adults is twice as high as white adults at 16 percent. For African-American teenagers, the rate soars to nearly 40 percent.

Much of the reason that decent-paying jobs have evaporated is that inner cities and suburbs have been de-populated and businesses have left — many of them to wealthy suburbs or overseas. Unionized industrial jobs have also fled.

There’s been great progress made since the end of World War II to create a broad base of high-paying jobs, although the bulk of those positions were in unionized manufacturing companies, nearly all of which have cut back, shut down or outsourced. High-wage jobs left urban manufacturing districts to be replaced by low-wage service jobs or occupational deserts.