AFRs for February 2011

The Applicable Federal Rates (AFRs) for the month of February are as follows:

	Annual	Semiannual	Quarterly	Monthly
Short-term (≤ 3 years)	0.51%	0.51%	0.51%	0.51%
Mid-term (> 3 years but ≤ 9 years)	2.33%	2.32%	2.31%	2.31%
Long-term (> 9 years)	4.15%	4.11%	4.09%	4.08%

TYS Starts Off 2011 with Fun & Friends

Recently, our NY office came to CA to visit for a few days. During this time we laughed, ate good food, did some site seeing in SF and now we're ready to tackle busy season as one great team.  We all look forward to a great 2011 both within our firm and with our clients.

To see more photos of our time together, check out our Facebook page:  http://www.facebook.com/pages/TYS-LLP/59288227795

Debate on Reverse-Mortgage Risks Heat Up

A report by Consumers Union and other advocacy groups has ignited a debate about whether reverse mortgages are too risky for house-rich seniors in need of extra cash. The groups are urging the new Consumer Financial Protection Bureau to boost oversight of the complex loans and to move to fight scams and deceptive marketing. The call for increased oversight comes as the market for reverse mortgages is poised for expansion as the baby-boom generation retires. Meanwhile, lenders are aggressively marketing reverse mortgages, tapping celebrities such as actor and former U.S. Sen. Fred Thompson as spokesmen and holding seminars at senior centers to sell the loans. Most reverse mortgages are made under the Home Equity Conversion Mortgage program, begun in 1988 and administered by the Department of Housing and Urban Development. A borrower must be at least 62 years old and have paid off all or most of the mortgage. Instead of a monthly mortgage payment, the borrower receives payments as a lump sum, monthly cash advances or line of credit. When the homeowner dies moves or sells the house, the loan must be repaid. The consumer advocates say seniors should use reverse mortgages—which allow older Americans to tap into the equity in their home—only as a last resort because fees can be high and the loans could affect eligibility for government-assistance programs such as Medicaid. Also, if borrowers deplete home equity, they won't have much to pass on to heirs and could have a harder time funding long-term care, the groups warn. Defending reverse mortgages, groups such as RetireSafe and the National Reverse Mortgage Lenders Association say the report fails to acknowledge recent pro-consumer changes. "I think they're rattling the cages here without having much concrete to offer or any evidence to back up their allegations that there are widespread problems," said Peter Bell, president of the NRMLA. Congress directed the new Consumer Financial Protection Bureau to study reverse mortgages. According to a bureau official who works closely on mortgage-related issues, the bureau is beginning to examine reverse mortgages and plans to build on the Federal Reserve's and GAO's efforts to improve disclosures and prevent misleading advertising. The advocacy groups say reverse mortgages are reasonable for some seniors in foreclosure who don't plan to move into assisted living and for low-income seniors who lack other retirement assets, don't qualify for lower-cost alternatives and can't meet their current mortgage obligation. But most seniors should consider alternatives, the groups say. Still, Barbara Stucki, a vice president at the National Council on Aging, expects homes to become more popular sources of income for retirees, given that fewer Americans have defined-benefit pensions and more Americans are living longer after retirement. "Today's retirement realities are daunting, and when you combine that with the economic challenges, people are going to be tapping the equity in their homes," she said. "We want to make sure that options like reverse mortgages are viable and properly regulated." "We understand that the demographics are in our favor. The market will grow, and the need will grow because people need to fund longevity, but it will only grow if consumers feel the products are fair and the people who offer them are trustworthy," said Mr. Bell of the National Reverse Mortgage Lenders Association. "If the regulatory regime helps get us there, that's great."

EFT Rules Now In Place

Beginning January 1, 2011, all employers must use electronic funds transfer (EFT) to make all federal tax deposits. These deposits include employment taxes, excise tax and corporate income tax. Forms 8109-B, Federal tax Deposit Coupon, cannot be used after December 31, 2010.

IRS Releases 2011 Standard Mileage Rates

The IRS released in early December the standard mileage rates for use in 2011. The optional standard mileage rates can be used by taxpayers to calculate the deductible costs of operating an automobile. For business use of an automobile after Dec. 31, 2010 is 51 cents a mile; for medical or moving expenses, 19 cents a mile; and for services to charitable organizations, 14 cents a mile. For tax year 2010, the rates were 50 cents, 16.5 cents and 14 cents, respectively. Rather than using the standard mileage rates, taxpayers may instead use their actual costs, if they maintain adequate records and can substantiate their expenses. IRS Revenue Procedure 2010-51 prohibits a taxpayer from using the business standard mileage rate to compute the deductible expenses of five or more automobiles a taxpayer owns or leases and uses simultaneously.