Buzz Around Refi Possibilities in Early 2015

Processed by: Helicon Filter;Last month’s New York Times headline couldn’t have been clearer: “It’s Time to Think About Refinancing Your Mortgage,” said Neil Irwin. We may not, Irwin explained, see rates as low as 3.8% on a 30-year fixed-rate mortgage and 2.9% on a 15-year fixed-rate mortgage for long.

Just one week ago, Polyana da Costa, writing for Bankrate.com, reported in the same vein that, “Fidgety mortgage rates end up unchanged,” the result of which is a “refi mini-boom.”

As of today, mortgage interest rates have inched a hair since Irwin’s report – in particular for 15-year mortgages, with an average of over 3% reported around the Web. Nevertheless, the window of opportunity appears still to be open.

In fact, the only reason this “mini boom” hasn’t turned into a serious boom may be, as Marjo Shaffer, Vice President of RPM Mortgage in Alamo, California points out, that “Many of my clients have already refinanced, taking advantage of the low rates that have been available for a few years now.”

If you’re only just getting around to considering refinancing, however, you’ve got some attractive options before you.

The temptation may be to focus on how much you can lower your monthly payments. This amount can indeed be dramatic, especially if you’ve already lived in your home for some years. By choosing another 30-year mortgage, you’d stretch your remaining loan amount over that entire time period, which can’t help but lower your monthly payment.

Beware of this temptation, however, and run some numbers (with the help of a mortgage broker or online calculators). Otherwise, you could end up paying far more in interest over the long haul than you’d originally signed up for.

If you’re not struggling to make your current house payments, you might consider a 15-year mortgage. These often get overlooked during the initial home purchase, since most buyers have just drained their bank accounts to come up with a down payment and are in a state of budget shock. But by the time you’re thinking about a refi, you may have settled into a more predictable financial pattern. Perhaps your income has improved, too. Nabbing the extra-low interest rates that come with a 15-year mortgage might be a great way to come out ahead.

Still, the 15-year mortgage hasn’t turned into a customer favorite. Marjo says, “Most of my clients seem to want an option, not an obligation, to pay off their mortgage in a short time. They’ve got other expenses, like kids’ schooling, to think about. You can always make early payments on a 30-year mortgage, which will reduce your overall interest owed at the same time.”

There’s also the matter of how soon you plan to move. If you’ll need to pay closing costs on the refi (origination and appraisal fees), you’ll need to spend enough time in the house to see the benefits of your lower interest rate. (Online calculators can help you figure out your “break-even” point.) “For many of our clients,” says Marjo, “it makes sense to accept a slightly higher interest rate in return for no closing costs at all.”

No matter what, look at the big picture. According to Shaffer, “considerations such as retirement savings, risk tolerance, savings for an emergency, and discipline, are all part of choosing the mortgage that will work for you.” See Nolo’s article on “Refinancing Your Mortgage: When It Makes Sense” for more information.

10th Circuit Rules: No Tax Discharge in Bankruptcy If You File a Late Return

The 10th Circuit Court of Appeals recently ruled that if a bankruptcy debtor files a “late” income tax return, the underlying income tax debt cannot be discharged in Chapter 7 bankruptcy even if the debtor meets the other criteria for discharging tax debt in bankruptcy.

The Criteria for Discharging Income Taxes in Bankruptcy

Although many income tax debts are not dischargeable in bankruptcy, you can discharge a tax debt if it meets the following criteria:

  • The tax debt is for federal or state income taxes.
  • The tax return was due at least three years ago (this includes all valid extensions).
  • You filed the return at least two years ago.(This is where the “late filed” return issue arises, see below.)
  • The taxes were assessed at least 240 days ago.
  • You did not file a fraudulent frivolous return and you are not evading tax laws.

(To learn more, see Tax Debts in Chapter 7 Bankruptcy.)

The Split in Authority

According to most bankruptcy courts, a late-filed return does not constitute a “return” for purposes of the third prong in the above criteria for discharging tax debt.

What is a late return? Your return is “late” if all of your filing extensions have expired and the IRS has filed a substitute return without your assistance. Your return is not late if the IRS files a substitute return with your assistance under Internal Revenue Code Section 6020(a) — something the IRS may, but is not obligated, to do.

However, some courts have found otherwise:  That a late return is still a “return” for the purposes of the third prong. This means that if you filed a late return at least two years before your bankruptcy and meet the other criteria, you can discharge the underlying tax debt.

The 10th Circuit Decision: In re Mallo

In a recent decision, the 10th Circuit Court of Appeals embraced the first line of authority:  That is, a late filed return does not constitute a “return” for purposes of the bankruptcy dischargeability test. In re Mallo, No. 13-1464, 2014 WL 7360130 (10th Cir. Dec. 29, 2014). The 10th Circuit did say that if the IRS files a return with your assistance under IRC Section 6020(a), then the return does count as a “return” for the third prong of the test.

This case may go to the U.S. Supreme Court; we’ll keep you posted.  In the meantime, if you have income taxes you’d like to discharge in bankruptcy, be sure to speak with a local bankruptcy attorney.

Are Employer-Mandated Vaccinations Legal?

Disney made hessadlines this week after asking unvaccinated employees to get the measles vaccination before returning to work. This comes after news of a recent measles outbreak that can be traced back to the happiest place on earth, when an infected visitor arrived at the park back in December of 2014. Since then, the disease has quickly spread, infecting over 100 people in 14 states. In an effort to contain the spread of the disease, Disney has strongly encouraged its 27,000 employees to show proof of vaccination or get vaccinated at its cost.

While the measles might not be an immediate threat to most other workplaces, the issue of employer-mandated vaccinations comes up in many other contexts. Most commonly, the issue comes up when the flu season rolls around. According to the Centers for Disease Control and Prevention, the flu causes $6.2 billion in lost productivity each year. To prevent such loss, employers may be tempted to require all employees to get the flu vaccine. The question is: Can employers legally do this?

In every state except Montana, the default rule is that employment is at will. This means that employers may fire employees at any time and for any reason, as long as the reason is not illegal. In general, employers are free to place conditions on employment, including requiring employees to get vaccinated.

The problem, however, arises when the mandatory vaccination rule is applied to certain individuals. In particular, mandatory vaccination policies may violate federal antidiscrimination laws. Title VII of the Civil Rights Act makes it illegal for an employer to discriminate against an employee on the basis of religion, while the Americans with Disabilities Act (ADA) prohibits discrimination on the basis of an employee’s disability. Employees who refuse to get vaccinated due to religious beliefs, or who are unable to get vaccinated due to disabling health conditions, are protected under these laws. Employers cannot fire these employees for refusing to get vaccinated, nor can they ask questions that delve too deeply into an employee’s religious beliefs or medical condition.

Because of the potential for illegal discrimination, many employers – like Disney – choose to encourage, but not require, vaccinations. Employers can create incentives for their employees to get vaccinated, such as footing the bill or having on-site vaccinations available at the workplace. Employers can also prevent the spread of disease by giving employees sick leave or allowing sick employees to work from home while they’re contagious.

 

We’ve moved!

Nolo’s Disability Blog has moved and now resides on our partner site, disabilitysecrets.com. I will still be answering readers’ disability questions, occasionally joined by guest blogging disability attorneys from around the country. Please visit us on the “Ask Your Disability Question” page on disability secrets.com, where you can find our entire archive of past questions and answers.

Don’t Forget Form 1095-A

Take the IRS’s advice and don’t file your 2014 return before you receive Form 1095-A.

For folks who enrolled in a health plan through the Health Insurance Marketplace (the “exchange”) in 2014 wait until the exchange sends you this form, which should be any time now.  It will contain information needed to compute your premium tax credit and reconcile advance payments of the credit made on your behalf to your insurance provider with the actual amount of premium tax credit claimed on your return.