Saturday, December 12, 2009

10 Important Facts about the Extended First-Time Homebuyer Credit

If you are in the market for a new home, you may still be able to claim the First-Time Homebuyer Credit. Congress recently passed The Worker, Homeownership and Business Assistance Act Of 2009, extending the First-Time Homebuyer Credit and expanding who qualifies.
Here are the top 10 things the IRS wants you to know about the expanded credit and the qualifications you must meet in order to qualify for it.

1)You must buy – or enter into a binding contract to buy a principal residence – on or before April 30, 2010.

2)If you enter into a binding contract by April 30, 2010 you must close on the home on or before June 30, 2010.

3)For qualifying purchases in 2010, you will have the option of claiming the credit on either your 2009 or 2010 return.

4)A long-time resident of the same home can now qualify for a reduced credit. You can qualify for the credit if you’ve lived in the same principal residence for any five-consecutive year period during the eight-year period that ended on the date the new home is purchased and the settlement date is after November 6, 2009.

5)The maximum credit for long-time residents is $6,500. However, married individuals filing separately are limited to $3,250.

6)People with higher incomes can now qualify for the credit. The new law raises the income limits for homes purchased after November 6, 2009. The full credit is available to taxpayers with modified adjusted gross incomes up to $125,000, or $225,000 for joint filers.

7)The IRS will issue a December 2009 revision of Form 5405 to claim this credit. The December 2009 form must be used for homes purchased after November 6, 2009 – whether the credit is claimed for 2008 or for 2009 – and for all home purchases that are claimed on 2009 returns.

8)No credit is available if the purchase price of the home exceeds $800,000.

9)The purchaser must be at least 18 years old on the date of purchase. For a married couple, only one spouse must meet this age requirement.

10)A dependent is not eligible to claim the credit.

Monday, November 23, 2009

Small Business Workshops for the Holiday Season

SMALL BUSINESS WORKSHOPS - Learn While You Play This Holiday

It is time for our end of year workshops and we have several coming up. The Small Business Workshop is designed to help business owners get more organized and become more profitable, and the topics include: Expenses, Documentation, Business Entities and Maximizing Profitability. We have great presenters, strong information, and would love for you to take advantage of this opportunity for free financial and Small Business advice. Our workshops are one hour long and have a maximum of 20 people so that you can have your individual questions answered. Feel free to invite others you feel could benefit from this workshop as well. Please RSVP to office@mbtaxpro.com to reserve your seat or call (503) 595-5890.

Move Up / Repeat Home Buyer Credit until June 30th, 2010

Move up / Repeat Home Buyer Tax Credit
Another exciting new tax law for home owners! The Worker, Homeownership, and Business Assistance Act of 2009 has established a tax credit of up to $6,500 for qualified move-up/repeat home buyers (existing home owners) purchasing a principal residence after November 6, 2009 and on or before April 30, 2010 (or purchased by June 30, 2010 with a binding sales contract signed by April 30, 2010). THIS MEANS that even if you don't qualify for the First Time Home Buyer Credit because you have been a homeowner for the past three years, you still have a chance to take advantage of a large tax credit if you want to buy a new home in the next six months. Please see below for questions and answers regarding this new tax credit available:

Q:Who is eligible to claim the $6,500 tax credit?
A:Qualified move-up or repeat home buyers purchasing any kind of home are eligible to claim this credit.

Q:What is the definition of a move-up or repeat home buyer?
A:The law defines a tax credit qualified move-up home buyer (“long-time resident”) as a person who has owned and resided in the same home for at least five consecutive years of the eight years prior to the purchase date. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. Repeat home buyers do not have to purchase a home that is more expensive than their previous home to qualify for the tax credit.

Q:How is the amount of the tax credit determined?
A:The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $6,500. Purchases of homes priced above $800,000 are not eligible for the tax credit.

Q:Are there any income limits for claiming the tax credit?
A:Yes. The income limit for single taxpayers is $125,000; the limit is $225,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) above those limits. The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $145,000 (single) or $245,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.

First Time Home Buyer Credit Extended to June 30th, 2010

First-Time Homebuyer Credit
Did you think you missed the boat on the first time home buyer credit of $8,000 that was being offered by the IRS until December 1st, 2009? Great news! Homebuyers who purchased a home in 2008, 2009 or 2010 now have until June 30th, 2010 to be eligible for the first-time homebuyer credit. This credit applies to taxpayers who have not owned a home in the past 3 years and who are buying their new home to be used as a taxpayer's principal residence. This credit reduces a taxpayer's tax bill or increases his or her refund, dollar for dollar. It is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed. Check out the article below for full details.

First-Time Homebuyer Credit
IR-2009-103, Nov. 17, 2009: New Legislation


WASHINGTON — New legislation, the Worker, Homeownership and Business Assistance Act of 2009, which was signed into law on Nov. 6, 2009, extends and expands the first-time homebuyer credit allowed by previous Acts. The new law: Extends deadlines for purchasing and closing on a home. Authorizes the credit for long-time homeowners buying a replacement principal residence. Raises the income limitations for homeowners claiming the credit. Under the new law, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2010 and close on the home by June 30, 2010. For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 return. For the first time, long-time homeowners who buy a replacement principal residence may also claim a homebuyer credit of up to $6,500 (up to $3,250 for a married individual filing separately). They must have lived in the same principal residence for any five-consecutive year period during the eight-year period that ended on the date the replacement home is purchased. People with higher incomes can now qualify for the credit. The new law raises the income limits for homes purchased after Nov. 6, 2009. The credit phases out for individual taxpayers with modified adjusted gross income (MAGI) between $125,000 and $145,000 or between $225,000 and $245,000 for joint filers. The existing MAGI phase-outs of $75,000 to $95,000 or $150,000 to $170,000 for joint filers still apply to purchases on or before Nov. 6, 2009. Several new restrictions apply to homes purchased after Nov. 6, 2009. Purchasers must attach a properly executed settlement statement to their return. No credit is available if the purchase price of the home exceeds $800,000. The purchaser must be at least 18 years old on the date of purchase. For a married couple, only one spouse must meet this age requirement. A dependent is not eligible for the credit. http://www.irs.gov/newsroom/article/0,,id=204671,00.html

Expanded Loss Carryback Option for All Businesses - NEW Legislation

Most Businesses May Take Advantage Of Expanded Loss Carryback Option Under New IRS Procedure
Small Businesses and Big Businesses alike can take part in the cheer this season with a new tax law passed this week. In light of the financial hit taken by businesses in general in the recent economic downturn, the IRS is allowing losses incurred during the economic downturn to reduce income from prior tax years to any taxpayer with business losses. See the article below for more information.
Most Businesses May Take Advantage Of Expanded Loss
Carryback Option Under New IRS Procedure
IR-2009-105, Nov. 20, 2009
WASHINGTON — Most businesses may use losses incurred during the economic downturn to reduce income from prior tax years, under a revenue procedure issued today by the Internal Revenue Service. The relief provided under the Worker, Homeownership, and Business Assistance Act of 2009 differs from similar relief issued earlier this year in that the previous relief was limited to small businesses. The current relief is applicable to any taxpayer with business losses, except those that received payments under the Troubled Asset Relief Program. The relief also applies to a loss from operations of a life insurance company. Taxpayers under the procedure may elect to carry back a net operating loss (NOL) for a period of three, four or five years, or a loss from operations for four or five years, to offset taxable income in those preceding taxable years. An NOL or loss from operations carried back five years may offset no more than 50 percent of a taxpayer's taxable income in that fifth preceding year. This limitation does not apply to the fourth or third preceding year. The procedure applies to taxpayers that incurred an NOL or a loss from operations for a taxable year ending after Dec. 31, 2007, and beginning before Jan. 1, 2010. http://www.irs.gov/newsroom/article/0,,id=215657,00.html

Thursday, August 13, 2009

September 15th - Business Returns DUE

Corporate/LLC/Partnership/Estate&Trust Returns DUE SEPTEMBER 15th!

September 15th is an important date for the IRS, and we want to make sure that you are aware and prepared. Corporate, LLC, Partnership, and Estate/Trust Returns are DUE on September 15th. In previous years the extension date was October 15th, but this year the IRS shortened the filing date by one month effective for 2008. This gives us even less time to prepare, and we want to make sure that we have everything in place to be able to lower your tax liability to the fulllest extent of the law. Also, remember that filing late will incur a penalty charge, so please call or email Fern to set up an appointment at your earliest convenience at office@mbtaxpro.com or (503) 595-5890.

First Time Homebuyer Credit

There is still time to take advantage of the First Time Homebuyer Credit. Qualifying taxpayers who purchase a home before December 1st, 2009 receive a credit of ten percent of the cost of the home purchase up to $8,000 or $4,000 for married individuals filing separately. You can qualify if you have not owned a home in the past three years. You have the option of either amending your 2008 tax return, or claiming the credit on your 2009 tax return. The amended return will allow you to claim the homebuyer credit on the 2008 tax return without waiting until next year to to claim it on your 2009 tax return. Where's My Refund?If you have not received your refund yet, and would like to know the exact date that you might expect it, please go to http://www.irs.gov/ and look at the right side of the home page. There is an icon called "Where's My Refund?" Click on that icon and it will take you to an data input page where you will provide your Social Security Number, your filing status (Filing Single, Head of Household, Married Filing Jointly etc.), and your exact amount of the refund that you expect. After you provide that information you will be taken to a page that tells you exactly the status of your refund, and when you should expect it to be direct deposited or mailed to your home. If you are unsure of the exact amount you are expecting, feel free to call us and we'll let you know.

A Frequently Asked Question

Question:
I am starting a small business and would like to get a better understanding of my personal bank account vs. my business account. Which one do I deposit my income into? How much can I transfer to my personal account per month? What kind of expenses are deductible when they are spent from my business account?
Answer: Great question! When you have income to deposit, go ahead and deposit all of it into your business account. That way you have a fast and easy way of seeing exactly how much is coming in every month. Then take out any and all money that you will need for personal expenses (rent/mortgages, food, clothing, personal items, recreation etc.). What is left in your business account will be spent strictly on the business. Some business expenses might be office rent, supplies, networking, advertising, professional fees, business travel costs, insurance, and of course, your business tax preparation! If you would like a copy of our Self-Employed or Small Business Deduction Worksheet, just email or call Fern at the office and she will be happy to email or mail one to you right away.

Thank you for helping to make 2009 one of our best years at MB Tax Professionals. Enjoy your last few weeks of summer, and we'll be looking forward to appointments with many of you soon.

All the best,
MB Tax Professionals


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Friday, July 10, 2009

Summer Tax Tips


It's that time of the year where the hustle and bustle slows down and we can finally take a moment to enjoy what we have worked so hard for all year long. It's also the time of the year that some of your tax planning may slide, so here are some fun Summer Tax Tips to keep in mind while you work and play.

Summer Camp
Is your child enrolled in a Summer Day Camp? You may be eligible for a tax credit. Many working parents must arrange for summer care for children 13 years and younger. Unlike overnight camps, the cost of day camp may count as an expense toward the Child and Dependent Care Credit.

Summer Cleaning
Summer Cleaning could earn you a tax deduction, as long as you donate items in good condition to a qualified charity. Remember to itemize your deductions and keep proof of all of your donations.

Summer Home
Buying a home this summer? First time home buyers get a credit of up to $8,000 (first time home buyers are those that haven't owned a house in the past 3 years). This credit is good for houses purchased prior to December 1st, 2009.

Summer Job
Any working students at home for the summer? Some things to keep in mind are what status they are employed as and if they will be exempt from withholding. Summer workers are sometimes misclassified as independent contractors (self-employed) rather than as employees. Employers who do this usually fail to withhold taxes from the worker's wages, often leaving the worker responsible at tax time for paying income taxes plus Social Security and Medicare taxes. Pay close attention to this so there are no surprises come tax time. Your working students also may be exempt from withholding if they are claimed as a dependent, their total 2009 income is not over $5,700, or they had no income tax owed for 2008. Feel free to call us at MB Tax Professionals with any tax questions for your working student.

Summer Road Trips
Buying a more fuel efficient car just in time for those long summer road trips? You may be eligible for a tax credit up to $1,800 depending on the make and model just for changing what you drive.

Enjoy your summer and let us know how we can help make 2009 your smoothest tax year yet. Looking forward to working with you soon!


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Thursday, June 25, 2009

Luke Cox - Short Sale Professional

Is a Short-Sale the right option for you?

Are you facing foreclosure? Are you unable to sell your home at a price that would cover what you currently owe on your mortgage(s)? I work to negotiate a Short Sale Agreement with your lender, lifting much of the financial burden off your shoulders.

A Short Sale is when your lender agrees to let you sell your home for less than what is owed on your mortgage(s). It is an option to them as an alternative to foreclosure, which is an extremely expensive process for them. I can assist you in supplying the appropriate information to your lender to maximize your results.

I prepare a list of documentation that needs to be completed and turned into the lender that lets them better understand your hardship and shows the current market activity so the lender is up to date with your market conditions.

If any of the following are true to your situation, a Short Sale may be right for you.
1. You lost your job.
2. Your medical expenses are too high.
3. You just went through/are going through a divorce.
4. You are behind on your payments.
5. You have no equity.
6. You can't afford the cost of selling your home.

Call Luke Cox with EXIT Realty, Your Next Move for a free no obligation consultation and find out if a Short Sale is the right option for you.

Luke Cox
Real Estate Broker
ABR, Earth Advantage STAR
CSP - Certified Short Sale Professional
Exit Realty, Your Next Move
503-239-7401 fax
503-516-5282 mobile
luke@lukecox.com
www.lukecox.com


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Thursday, April 2, 2009

10 Things the IRS Won't Tell You

1. "Like it or not, you may need help with your taxes."

When Cindy Hockenberry and her husband sent in a tax-penalty payment in 2007, they knew there was a chance their math might not jibe with the IRS's. When that turned out to be true and the amount was much higher than expected, they decided to dispute it. Fortunately for them, Hockenberry's a pro. As tax research coordinator at the National Association of Tax Professionals, she spotted a glitch in the IRS's calculation; after visiting the local IRS office, the agency admitted its mistake and lowered the penalty. "There's no way the average taxpayer would have noticed," she says.

As recently as 2000, less than half of all taxpayers were using a preparer. Today 80 percent use software or a tax pro, "because they're scared of making a mistake," says Nina Olson, the National Taxpayer Advocate. "That's a sign the system's too complex." A pro may not be necessary for basic returns that include just a W-2 and, say, mortgage interest; in those cases, TurboTax will do. However, if you've made a lot of market moves or run a side business, consider a preparer. (You can find one at www.natptax.com; expect to pay $150 to $200 per return.)

2. "You don't have to be rich to get audited."

The IRS's job is to enforce the tax laws enacted by Congress and to collect what's due. Its primary weapon? The audit, whose use has more than doubled since 2000, to surpass 1 percent of all returns, according to the Transactional Records Access Clearinghouse, a Syracuse University data-research organization. The increase can be attributed to the rising number of so-called correspondence audits -- those done through the mail asking for specific information rather than, say, investigating your whole return, says Susan Long, codirector of the organization. "It's more efficient."

One way to get the IRS's audit sensors tingling is to claim deductions much higher than are typical for your income level. We'd share them with you, but the IRS keeps that information under wraps. What's more clear: Big charitable donations have been getting a much closer look, says Bob Meighan, VP of TurboTax. "It's been an area of abuse for a while," he says. To protect yourself, get a receipt for any donation you plan on deducting. And keep those receipts for seven years -- unless it suspects you of outright fraud, that's how far back the IRS will go with an audit.

3. "Fear is often our best weapon."

The threat of an audit is enough to send many folks scurrying to their tax preparer, and no wonder. "With audits, you're assumed guilty until proven otherwise," says Long. It's this fear, coupled with the complexity of the system, that causes some to overpay their taxes by not taking deductions they're entitled to, according to experts. A study by the Government Accountability Office found that 2.2 million people a year overpay, by an average of $438. "Americans are leaving a lot of money on the table," says Roni Deutch, a Sacramento-based tax attorney.

The GAO report listed mortgage interest, personal property tax, and state and local income tax as the main deductions not being taken. But there are more. Net market losses can be deducted up to $3,000, and if you lost more, you can roll it over into the next year. (Note: To claim a loss now, you need to have sold the stock last year.) You can also deduct things like tax-prep software, a résumé service and IRA fees if they total more than 2 percent of your adjusted gross income. Bottom line: "Take every legitimate tax break out there," says Kay Bell, a tax expert at Bankrate.com. "Just make sure you can justify it."

4. "The AMT is our ATM."

When the alternative minimum tax was introduced in 1969, it affected only a handful of taxpayers with high income and big deductions. But by 2010, it will hit 87 percent of married couples with income between $75,000 and $100,000. That's not what it was designed to do; the AMT was meant to force big earners with lots of deductions to pay their fair share. Now it "brings in a group of taxpayers the IRS has no problem with," says Olson. "The AMT has run its course." The problem is, the AMT hasn't been updated to account for inflation. Instead, Congress has been adjusting exemption criteria on a yearly basis. "It's just a Band-Aid," says Hockenberry.

The Band-Aid in this year's stimulus plan reduces the number of taxpayers subject to the AMT to 4.4 million -- it would've been 30 million, according to the Tax Policy Center. But if you're living in a high-tax state or married with two or more kids, you might find as you calculate both your regular return along with the AMT -- form 6251, which taxpayers are responsible for -- that you could be liable for the latter. Confused? The IRS offers AMT assistance at www.irs.gov; click on "Online Services."

5. "Just because we billed you doesn't mean you owe us money."

Receiving a CP2000, also known as a correspondence audit, sure sounds scary, but in most cases, you don't actually owe any more money. Not that the IRS will make that clear -- it's likely billing you because of a discrepancy on a certain deduction or reported income; then it's up to you to prove otherwise. But as the number of these audits have risen, up 176 percent since 2000, the chance for error goes up as well. The IRS says 98 percent of the audits it sends out require clarification, not payment, but Charlotte Ogorek, an Illinois-based enrolled agent, thinks it's more like 85 percent.

Even if the charge is unfounded, to appeal it could cost you anywhere from $500 to $4,000, depending on how long it takes, says Bill Wandel, a licensed taxpayer rep at JK Harris. If you plan to challenge a CP2000, contact your local taxpayer advocate from the IRS (go to www.irs.gov/advocate to find yours), who will provide advice and representation free. If it turns out you need even more expertise, contact a tax lawyer or an enrolled agent (a professional licensed by the IRS to represent taxpayers in front of the IRS). Find one at www.naea.org.

6. "If you don't pay, we'll sic a collection agency on you."

If you thought dealing with the IRS was bad, wait till you're past due on a payment and get turned over to one of the two private collection agencies the IRS taps to help collect its money. Since 2005, the IRS has been assigning delinquent taxpayer accounts to either Pioneer Credit Recovery or the CBE group of Iowa -- much like any other business or lender. "These are federal taxes," says Olson, the National Taxpayer Advocate. "The IRS should be collecting them." The retention of these private agencies costs $7.65 million annually, yet when the IRS works these cases instead, "it's three times more productive," Olson says. (A spokesperson for Pioneer Credit Recovery and CBE says the issue isn't who can do the work more efficiently; it's whether these taxes would be collected at all without the private collection agencies.)

If the IRS puts a private collection agency on your case, Olson says the first thing to do is to request that your case be turned back over to the IRS. The reason: IRS collectors have the authority to offer you a compromise settlement, something the private agencies aren't authorized to do.

7. "Want to go green? We'll help pay."

Tucked into last year's unprecedented $700 billion bailout plan was some pork that even a vegan could love. Congress not only added an extension of the eco-friendly Energy Policy Act of 2005, which was set to expire at the end of 2007, but it also sweetened the pot for homeowners looking to green up their homes.

Want to grab some energy from the sun? Starting in 2009, a number of energy-saving steps will garner tax breaks for green consumers. Installing a photovoltaic system for solar energy, for example, will net you a tax credit worth 30 percent of the total cost; at www.solar-estimate.org you can find out the price and potential savings of installing a system in your neighborhood. Or if you're gung-ho for wind energy, you'll get up to $4,000 or 30 percent of the cost of installing a small home windmill system to generate energy. Check out the National Renewable Energy Laboratory's "In My Backyard" tool at its Web site to see how much energy you can expect to get from a windmill. For homeowners who aren't looking to go quite that green, there will be a $500 onetime credit for installing energy-efficient windows, insulation or a central air system.

8. "April 15 isn't necessarily a hard deadline."

If you're one of the 112 million taxpayers who receive a refund every year rather than owing more, you have a lot more flexibility around the standard Apr. 15 deadline than you might think. Feeling rushed this year? By filling out IRS form 4868, which you can find online, you can buy yourself a no-questions-asked six-month extension on filing your taxes. And you can file the form requesting your extension as late as Apr. 15 without incurring any penalties. The only catch -- and it's significant for some: If you do owe any taxes, then you must still pay those by the 15th.

How do you know if you're going to owe taxes this year? If your life is basically the same year to year, then your refund is pretty much on autopilot, says Bell. But any big changes -- such as a large increase in salary, unexpected commission or year-end bonus, or having a child go from dependent to independent -- could potentially swing you into the loss column. So when in doubt, do the math in advance, or check with a tax pro to see if there's anything you should be worried about.

9. "We may be a government agency, but that doesn't mean your data's safe."

One things you may not be thinking about as you file your taxes this year is that the documents you're sending off to the IRS contain virtually every piece of information an identity thief would ever need to drive your credit, and your sanity, into the ground. And considering that data breaches are on the rise -- up 47 percent in 2008 from 2007, according to nonprofit Identity Theft Resource Center -- protecting your information, which includes your Social Security number and home address, should be paramount. But a recent report by the Treasury Inspector General for Tax Administration (TIGTA), an independent IRS oversight organization, casts some doubt on the agency's ability to protect your information. For example, TIGTA says two new systems the IRS is implementing to manage taxpayer accounts and account data were "deployed with known security vulnerabilities in the controls over sensitive data protection, disaster recovery and system access."

Alarming as this information is, it's hardly a new problem at the IRS, says J. Russell George, inspector general for TIGTA. "We've seen this before when they implement a new system. The organization's unwillingness to change its behavior is potentially harmful to taxpayers," he says. (The IRS had no comment.)

10. "We may still have your refund."

Waiting on a refund? Typically, it takes three to six weeks to get your money back from Uncle Sam, depending on whether you e-filed or sent your paper return through snail mail. Either way, the IRS does a pretty good job, by and large, of getting refund checks out to taxpayers in a timely manner. But the agency's record is hardly perfect: Every year a fraction of refunds -- belonging to more than 100,000 taxpayers, and with an average due of $988 -- never get to their destination.

What's the problem? According to the IRS, these undelivered refunds are mainly due to issues regarding the accuracy of a taxpayer's mailing address or direct-deposit information. For example, people move and don't leave a forwarding address, handwritten returns may be illegible, or the direct-deposit routing number may be off by a digit or two. If you haven't received your tax return in a reasonable amount of time, check out the IRS's "Where's My Refund?" tool on its Web site.

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