by NFS | Feb 23, 2010 | Archives
Claiming the First-Time Homebuyer Tax Credit on your 2009 tax return might mean a larger refund but it can seem complex. Are you confused about the documentation requirements? The IRS recognizes that the settlement documents can vary from location to location, so here are five tips to clarify the documentation requirements.
- Settlement Statement: Purchasers of conventional homes must attach a copy of Form HUD-1 or other properly executed Settlement Statement.
- Properly Executed Settle Statement: Generally, a properly executed settlement statement shows all parties’ names and signatures, property address, sales price and date of purchase. However, settlement documents, including the Form HUD-1, can vary from one location to another and may not include the signatures of both the buyer and seller. In areas where signatures are not required on the settlement document, the IRS encourages buyers to sign the settlement statement when they file their tax return — even in cases where the settlement form does not include a signature line.
- Retail Sales Contract: Purchasers of mobile homes who are unable to get a settlement statement must attach a copy of the executed retail sales contract showing all parties’ names and signatures, property address, purchase price and date of purchase.
- Certificate of Occupancy: For a newly constructed home, where a settlement statement is not available, attach a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.
- Long-Time Residents: If you are a long-time resident claiming the credit, the IRS recommends that you also attach documentation covering the five-consecutive-year period such as Form 1098, Mortgage Interest Statement or substitute mortgage interest statements, property tax records or homeowner’s insurance records.
For more information about the First-Time Homebuyer Tax Credit and the documentation requirements, please contact me.
by NFS | Feb 23, 2010 | Archives
The IRS offers five tips for taxpayers who have moved or are about to move. If you’ve changed your home or business address, make sure you update that information with the IRS to ensure you receive any refunds or correspondence from the IRS.
1. How to Change Your Address You can change your address on file with the IRS in several ways:
- Correct the address legibly on the mailing label that comes with your tax package;
- Write the new address in the appropriate boxes on your tax return;
- Use Form 8822, Change of Address, to submit an address or name change any time during the year;
- Give the IRS written notification of your new address by writing to the IRS center where you file your return. Include your full name, old and new addresses, Social Security Number or Employer Identification Number and signature. If you filed a joint return, be sure to include the information for both taxpayers. If you filed a joint return and have since established separate residences, both taxpayers should notify the IRS of your new addresses; and
- Should an IRS employee contact you about your account, you may be able to verbally provide a change of address.
2. Notify Your Employer Be sure to also notify your employer of your new address so you get your W-2 forms on time.
3. Notify the Post Office If you change your address after you’ve filed your return, don’t forget to notify the post office at your old address so your mail can be forwarded.
4. Estimated Tax Payments If you make estimated tax payments throughout the year, you should mail a completed Form 8822, Change of Address, or write the IRS campus where you file your return. You may continue to use your old pre-printed payment vouchers until the IRS sends you new ones with your new address. However, do not correct the address on the old voucher.
5. Postal Service The IRS does use the Postal Service’s change of address files to update taxpayer addresses, but it’s still a good idea to notify the IRS directly.
by NFS | Feb 22, 2010 | Archives
If you received Social Security benefits in 2009, you need to know whether or not these benefits are taxable. Here are seven facts the Internal Revenue Service wants you to know about Social Security benefits so you can determine whether or not they are taxable to you.
1. How much – if any – of your Social Security benefits are taxable depends on your total income and marital status.
2. Generally, if Social Security benefits were your only income for 2009, your benefits are not taxable and you probably do not need to file a federal income tax return.
3. If you received income from other sources, your benefits will not be taxed unless your modified adjusted gross income is more than the base amount for your filing status.
4. Your taxable benefits and modified adjusted gross income are figured on a worksheet in the Form 1040A or Form 1040 Instruction booklet.
5. You can do the following quick computation to determine whether some of your benefits may be taxable:
- First, add one-half of the total Social Security benefits you received to all your other income, including any tax exempt interest and other exclusions from income.
- Then, compare this total to the base amount for your filing status. If the total is more than your base amount, some of your benefits may be taxable.
6. The 2009 base amounts are:
- $32,000 for married couples filing jointly.
- $25,000 for single, head of household, qualifying widow/widower with a dependent child, or married individuals filing separately who did not live with their spouses at any time during the year.
- $0 for married persons filing separately who lived together during the year.
7. For additional information on the taxability of Social Security benefits, see IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits. Publication 915 is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
by NFS | Feb 22, 2010 | Archives
Have you heard of capital gains and losses? If not, you may want to read up on them because they might have an impact on your tax return. The IRS wants you to know these ten facts about gains and losses and how they could affect your tax situation.
- Almost everything you own and use for personal purposes, pleasure or investment is a capital asset.
- When you sell a capital asset, the difference between the amount you sell it for and your basis – which is usually what you paid for it – is a capital gain or a capital loss.
- You must report all capital gains.
- You may deduct capital losses only on investment property, not on property held for personal use.
- Capital gains and losses are classified as long-term or short-term, depending on how long you hold the property before you sell it. If you hold it more than one year, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term.
- If you have long-term gains in excess of your long-term losses, you have a net capital gain to the extent your net long-term capital gain is more than your net short-term capital loss, if any.
- The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income. For 2009, the maximum capital gains rate for most people is15%. For lower-income individuals, the rate may be 0% on some or all of the net capital gain. Special types of net capital gain can be taxed at 25% or 28%.
- If your capital losses exceed your capital gains, the excess can be deducted on your tax return and used to reduce other income, such as wages, up to an annual limit of $3,000, or $1,500 if you are married filing separately.
- If your total net capital loss is more than the yearly limit on capital loss deductions, you can carry over the unused part to the next year and treat it as if you incurred it in that next year.
- Capital gains and losses are reported on Schedule D, Capital Gains and Losses, and then transferred to line 13of Form 1040.
by NFS | Feb 18, 2010 | Archives
Some taxpayers may have needed to take an early distribution from their retirement plan last year. The IRS wants individuals who took an early distribution to know that there can be a tax impact to tapping your retirement fund. Here are ten facts about early distributions.
- Payments you receive from your Individual Retirement Arrangement before you reach age 59 ½ are generally considered early or premature distributions.
- Early distributions are usually subject to an additional 10 percent tax.
- Early distributions must also be reported to the IRS.
- Distributions you rollover to another IRA or qualified retirement plan are not subject to the additional 10 percent tax. You must complete the rollover within 60 days after the day you received the distribution.
- The amount you roll over is generally taxed when the new plan makes a distribution to you or your beneficiary.
- If you made nondeductible contributions to an IRA and later take early distributions from your IRA, the portion of the distribution attributable to those nondeductible contributions is not taxed.
- If you received an early distribution from a Roth IRA, the distribution attributable to your prior contributions is not taxed.
- If you received a distribution from any other qualified retirement plan, generally the entire distribution is taxable unless you made after-tax employee contributions to the plan.
- There are several exceptions to the additional 10 percent early distribution tax, such as when the distributions are used for the purchase of a first home, for certain medical or educational expenses, or if you are disabled.
- For more information about early distributions from retirement plans, the additional 10 percent tax and all the exceptions contact my office.
