Chance Gates' Blog

RISMEDIA, March 3, 2010—With the U.S. federal income tax filing deadline of April 15 now just weeks away, taking time to review your tax situation and plan for any needed action will save you time, stress and, quite possibly, money.

With the economic recession impacting so many Americans in 2009, many people will have complicated filing situations this year, says Jeff Staley, president of Freedom Tax Relief, LLC. “This is the time to prepare, review your tax obligations and evaluate your alternatives for payment if you find you may have difficulty in paying your tax bill this year.” Staley recommends taxpayers follow these steps now in order to be ready for April 15:

1. Make a plan for filing. Make plans now to ensure that you will be able to file your income tax return on time. If that is impossible, file an extension. The Internal Revenue Service (IRS) is more forgiving of those who follow the rules than those who skip filing. Even if you cannot pay your tax debt in full on April 15, filing the required forms will result in smaller penalties.

2. Understand tax on unemployment benefits. Unemployment income is taxable. If you received unemployment benefits during 2009, you should have received a Form 1099-G providing the total amount received. If your employer paid separate unemployment compensation, that income should be reported on your W-2 form as income. Note that the first $2,400 of government benefits received in 2009 is exempt from tax, thanks to the American Recovery and Reinvestment Act.

3. Prepare documentation for tax credits. Review your 2009 expenses to know whether you qualify for credits. The American Recovery and Reinvestment Act of 2009 (e.g., stimulus package) included many tax credits, ranging from an expanded health coverage tax credit to new education benefits.

4. Maximize deductions. If you made donations to nonprofit organizations in 2009, make sure you obtain needed appraisals or valuations to list these contributions accurately in your tax forms, per IRS guidelines.

5. Contribute to your retirement plan. If you plan to contribute to a retirement plan, you can still make tax-deferred contributions for 2009 until April 2010.

6. Estimate your payment. You can estimate your tax obligation by reviewing a copy of last year’s tax form, completed with your 2010 data. If you purchase tax return software, you can use that. Or go to www.irs.gov and download a PDF version of your form to fill out.

7. Plan for payment. If it looks like you will have a larger tax bill than you can afford to pay in full by April 15, the IRS suggests taxpayers find any means possible to pay that bill, including bank loans, cash advances on credit cards, using savings, borrowing against retirement or life insurance, or using equity in assets (such as a home) to pay. However, if you are in dire financial circumstances, exchanging one debt for another will not make things easier, and putting a home at risk is almost always a bad idea. Consult a tax and/or financial adviser before making a decision.

8. Evaluate your alternatives. If you will absolutely be unable to pay your tax bill, contact the IRS. The agency sometimes gives some leeway to taxpayers who contact them directly or pay a late bill voluntarily. The IRS might waive penalties for those who cannot pay because of a death in the family, serious illness, financial records lost in a natural disaster or another “reasonable cause.”

Another alternative is tax debt resolution. Tax resolution specialists can often negotiate directly with the IRS on behalf of consumers who owe $10,000 or more. These specialists usually are attorneys, enrolled agents or certified public accountants with special training and experience. They can navigate the maze of IRS forms and calculations, help consumers understand what the IRS wants, and help them resolve their tax debt.

“As the April tax filing deadline looms, it is time to face up to the demands of the IRS and determine a payment strategy for your tax bill,” says Staley. “In these economic times, it is good to know that help is available for those who need it.”

For more information, visit www.freedomtaxrelief.com.

Chance Gates does welcome any questions or comments on the Reno/Sparks real estate market or on any articles that may be posted.  Send your  emails  to  chance at ballard-company.com

IR-2009-27, March 18, 2009

WASHINGTON — As part of the Treasury Department’s consumer outreach effort and with the April 15 individual tax filing deadline approaching, the Internal Revenue Service today began a concerted effort to educate taxpayers about additional options at their disposal to claim the new $8,000 first-time homebuyer credit for 2009 home purchases. For people who recently purchased a home or are considering buying in the next few months, there are several different ways that they can get this tax credit even if they’ve already filed their tax return.

The Treasury Department encourages taxpayers to explore these options to maximize their credit and get their money back as fast as possible.

“The new credit can get money in the pockets of first-time homebuyers quickly,” said IRS Commissioner Doug Shulman. “For people who recently purchased a home or are considering buying in the next few months, there are several different ways that they can get this tax credit even if they’ve already filed their tax return.”

First-time homebuyers represent a significant portion of existing single-family home sales. The expansion in the first-time homebuyer credit will make it easier for first-time homebuyers to enter the housing market this year.

Under the American Recovery and Reinvestment Act of 2009, qualifying taxpayers who purchase a home before Dec. 1 receive up to $8,000, or $4,000 for married individuals filing separately. People can claim the credit either on their 2008 tax returns due April 15 or on their 2009 tax returns next year.

The filing options to consider are:

File an extension. Taxpayers who haven’t yet filed their 2008 returns but are buying a home soon can request a six-month extension to October 15. This step would be faster than waiting until next year to claim it on the 2009 tax return. Even with an extension, taxpayers could still file electronically, receiving their refund in as few as 10 days with direct deposit.

File now, amend later. Taxpayers due a sizable refund for their 2008 tax return but who also are considering buying a house in the next few months can file their return now and claim the credit later. Taxpayers would file their 2008 tax forms as usual, then follow up with an amended return later this year to claim the homebuyer credit.

Amend the 2008 tax return. Taxpayers buying a home in the near future who have already filed their 2008 tax return can consider filing an amended tax return. The amended tax return will allow them to claim the homebuyer credit on the 2008 return without waiting until next year to claim it on the 2009 return.

Claim the credit in 2009 rather than 2008. For some taxpayers, it may make more financial sense to wait and claim the homebuyer credit next year when they file the 2009 tax return rather than claiming it now on the 2008 tax return. This could benefit taxpayers who might qualify for a higher credit on the 2009 tax return. This could include people who have less income in 2009 than 2008 because of factors such as a job loss or drop in investment income.
The IRS reminds taxpayers the amount of the credit begins to phase out for taxpayers whose modified adjusted gross income is more than $75,000, or $150,000 for joint filers. Taxpayers can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately.

IRS.gov provides more information, including guidance for people who bought their first homes in 2008. To learn more about the overall implementation of the Recovery Act, visit www.Recovery.gov.
As a Reno – Sparks real estate consultant I encourage any questions or  comments on the Reno – Sparks real estate market or about any of the articles I post.  You can email me at chance@ballard-company.com