Who couldn’t use a few extra dollars these days? How about $1,086?

That’s the average refund owed 1,619 Marylanders whose tax refunds were returned to the IRS as undeliverable because of mailing errors. And some taxpayers are owed more than one check, the IRS says.

Nationally, 107,831 refunds totaling $123.5 million have been returned to the IRS as undeliverable.

Taxpayers owed a refund can update their address online with the “Where’s My Refund?” tool at www.irs.gov. They must submit a Social Security number, filing status and the amount of refund owed.

Or, taxpayers can call the IRS to update their addresses at 800-829-1954.

Posted by Eileen Ambrose at 5:20 PM | Permalink | Comments (0)
Categories: Taxes
        

We have been answering lots of questions about the first-time homebuyer credit at Consuming Interests. Many buyers legitimately qualify for the $8,000 credit. Some, not so much.

Putting an infant’s name on the deed of a house when parents otherwise won’t qualify, for example, or simply refinancing a mortgage doesn’t entitle a homeowner to taxpayer money.

The IRS has seen an uptick in fraudulent claims, according to the New York Times. And this fraud could put an extension of the credit in jeopardy.

Posted by Eileen Ambrose at 12:58 PM | Permalink | Comments (1)
Categories: Taxes
        

Time is running out for the first-time homebuyer credit worth up to $8,000. Sales must close by Nov. 30. And if you’re constructing a house, you need to be in it by that date, too.

According to the IRS, more than 23,000 Maryland taxpayers have been able to take advantage of the credit as of Sept. 17. Nationally, more than 1.4 million have benefited from it.

At Consuming Interests, we are still getting questions about the credit. I typically forward them to the IRS. Answers either trickle out or come in a gush. Here’s a recent trickle:

Q. I qualify as far as the guidelines read for a first-time home buyer. I purchased my house with cash this year so there is no mortgage. Its is my primary and only residence. I put my daughter on the title with me for estate purposes. She and her husband do have interest in their own home and live in their own home. My question is: Am I eligible for the $8,000 credit regardless of my daughter being on the title?

IRS: Yes. Your daughter is not a first-time homebuyer and cannot claim any portion of the credit, but you may claim the entire credit ($7,500 for purchase in 2008; $8,000 for purchase in 2009), if the home was purchased as your primary residence.

Posted by Eileen Ambrose at 9:06 AM | Permalink | Comments (2)
Categories: Taxes
        

The IRS is giving folks who have been trying to avoid paying taxes here by opening offshore accounts a deadline of Oct. 15 to make good with Uncle Sam.

Today, the IRS announced that it's providing information on how to come clean in six other languages other than English in case a language barrier is keeping you from paying your taxes. The languages are Chinese, French, Korean, Russian, Spanish and Vietnamese.

Posted by Eileen Ambrose at 12:06 PM | Permalink | Comments (0)
Categories: Taxes
        

Responding to recent videos of ACORN employees trying to help people skirt tax laws, ACORN CEO Bertha Lewis announced that the group had stopped accepting new tax clients as of noon today while an internal investigation is undertaken.

In a release, the Lewis said:

 “As a result of the indefensible action of a handful of our employees, I am, in consultation with ACORN’s Executive Committee’, immediately ordering a halt to any new intakes into ACORN’s service programs until completion of an independent review. I have also communicated with ACORN’s independent Advisory Council, and they will assist ACORN in naming an independent auditor and investigator to conduct a thorough review of all of the organizations relevant systems and processes. That reviewer, to be named within 48 hours, will make recommendations directly to me and to the full ACORN Board. We enter this process with a commitment that all recommendations will be implemented.”

Lewis also ordered in-service training for all frontline staff within 48 hours.

Udate: Local ACORN staffer says intakes for other services, such as benefits screening, have also been suspended.

Posted by Eileen Ambrose at 1:25 PM | Permalink | Comments (1)
Categories: Taxes
        

Time is running out if you want to take advantage if you want to take advantage to the credit for first-time buyers.

Will you qualify?

Find out Tuesday - Sept. 8 - during our live chat with the IRS’ Jim Dupree. The chat starts here at noon. But you can submit questions early to me at eileen.ambrose@baltsun.com

Meanwhile, read some recent questions and answers on the credit here.

Posted by Eileen Ambrose at 7:55 AM | Permalink | Comments (1)
Categories: Taxes
        

The Internal Revenue Service provided the answers below to some complicated - and questionable - questions about the first-time homebuyer credit.

If you have questions on the first-time homebuyer credit, join us for a live chat on Tuesday, Sept. 8th, where IRS spokesman Jim Dupree will answer your questions live. Can't make it? Submit your questions early to me at eileen.ambrose@baltsun.com and view Dupree's answers later on the blog.

Meanwhile, enjoy these Q&As:

Q. Me and my husband purchase the 1st house 3 years ago then we don’t qualify the 1st time home owner credit. But can I use my baby’s name (he is 3 years old ) to purchase a house and let him qualify $ 8,000 credit? Should we file the tax return for year 2009 separately or we can still file him as dependent and get the $8,000 credit?

A: To qualify for the credit, an individual mustbe a purchaser of aprincipal residence and have not had an ownership interest in a principal residence during the three year period ending on the date of purchase. Taxpayers who do not otherwise qualify for the credit do not become eligible for the credit simply by using a minor child’s name. In addition, understate law children under the age of 18 generally are not bound by any contract they sign and cannot be required to comply with the terms of the contract. Thus, it is extremely unlikely that a seller of a home, or a lender if financing is required, would enter into a bona fide sale of a home to a minor child. Merely using the child’s name to purchase a home does not qualify the child for the credit if, in substance, the child is not a bona fide purchaser of the home.

Q. My husband and I are looking to purchase a new home. He is a 100% disabled veteran and on Social Security. He does not pay any taxes. I own a townhouse that we have lived in for the last 3.5 years, and that I purchased prior to our marriage. Can he claim the new home purchase tax credit even if he pays in no taxes so long as he files taxes? If he purchases the new home in his name alone (which is likely the best scenario for us while I try to sell the townhouse), can he still claim the tax credit if we file taxes separately? Under that scenario if he can’t get the tax credit, would it be easier for us to file for divorce by the end of the year so he can file 2009 taxes as single and then donate half of the house to me after remarriage? I’m a lawyer, and worst case scenario under these facts, I pay the $300 for the divorce and $100 or so to get remarried. Did I mention we have a prenuptial agreement? Would that have any effect on the above facts?

A. No. A first-time homebuyer is an individual who has not had an ownership interest in a principal residence at any time during the three years before the date of purchase of the residence. If an individual is married on the date of purchase, the individual’s spouse must also be a first-time homebuyer forthe individualto be eligible for the credit. This requirement must be met even if the spouses file married filing separate returnsor onlyone spousepurchasesthe residence.

Q. I am divorced from my husband and we have been separated since 2005, but only divorced in June of 2009. I filed head of household. He owned a home during this time in another state. I never lived there, had nothing to do with it, wasn’t on the mortgage etc. Am I disqualified?

A. A first-time homebuyer is an individual who has not had an ownership interest in a principal residence at any time during the three years before the date of purchase of the residence. If an individual is married on the date of purchase, the individual’s spouse must also be a first-time homebuyer. In the above situation, if the individual purchased the residence before the divorce, then the individual had a spouse who was not a first-time homebuyer, and therefore the individual is not eligible for the first-time homebuyer credit. However, if the individual purchased the residence after the divorce, then the individual may be eligible for the first-time homebuyer credit. Even though the spouses were treated as not married for filing status purposes (i.e., head of household filing status) under section 7703, that provision does not apply to the first-time homebuyer credit in determining whether an individual is married.

Q. Can you file IRS Form 5405, the First Time Homebuyer Credit, if you are on SSI & Social Security Disability? If so, how when you have never paid income taxes before? Do I just send in Form 5405 after I close on a home in 2009?

A. Form 5405 must be attached and filed as part of a Individual Income Tax return, Form 1040. If you qualify for the credit, you should submit the form along with a Form 1040, even if you have no other tax filing requirement. After you close on the home, you may file an Form 1040 for tax year 2008 and claim the credit even if the home is purchased in 2009 or you can wait to file a 2009 tax return.

Q. I separated with my husband in Jan 07 and I am now divorced but buying a home with my boyfriend who has never owned a home. Will he qualify although my name will be on it too?

A. Yes. A first-time homebuyer is an individual who has not had an ownership interest in a principal residence at any time during the three years before the date of purchase of the residence. A first-time homebuyer may still be eligible for the first-time homebuyer credit even though he co-purchases a residence with an individual who is not a first-time homebuyer and who can not take the credit.

Q. My fiancé and I are buying a home and both of us are on the loan. I am a first time home buyer and I would think my fiancé would be a first time home buyer as well. My fiancé has never owned her own home, but she was in a relationship with a person who owned a home within the last 3 years. She’s has been divorced since November of 08. Her ex-husband’s home was inherited from family. My fiancé’s name was not on the title, but her ex-husband refinanced the home in 2006 and she signed as a tenant. We want to get married before the end of the year. However, we’ve been advised it may eliminate me from receiving the first time homebuyer credit. Need help? Please advise?.

A. A first-time homebuyer is an individual who has not had an ownership interest in a principal residence at any time during the three years before the date of purchase of the residence. If an individual is married on the date of purchase, the individual’s spouse must also be a first-time homebuyer. In the above situation, whether the individual could claim the first-time homebuyer credit depends on whether the ex-wife had an ownership interest in the ex-husband’s home. If the ex-wife had an ownership interest in the previous home and is not a first-time homebuyer, and if the individual purchases the new residence before the date of marriage, then the individual may be eligible for the first-time homebuyer credit. If the ex-wife had an ownership interest in the previous home and is not a first-time homebuyer, and if the individual purchases the residence after the date of marriage, then the individual has a spouse who is not a first-time homebuyer on the date of purchase, and the individual is not eligible for the first-time homebuyer credit. If the ex-wife did not have an ownership interest in the home and is a first-time homebuyer, then the individual may be eligible for the first-time homebuyer credit whether the individual purchases the residence before or after the date of marriage.

Posted by Eileen Ambrose at 6:20 PM | Permalink | Comments (2)
Categories: Taxes
        

Tuesday’s live chat here is all about the $8,000 first-time homebuyer credit. If you got questions about it, like the one below, Jim Dupree of the IRS will try to answer them starting at noon, Sept. 8.

You can also submit questions in advance — a good idea if you have a tricky credit question — by forwarding them to eileen.ambrose@baltsun.com

Meanwhile, here’s a question from Josh K along with Dupree’s response:

Josh: I received the $8,000 tax credit on a condo I bought in February 2009. The bulk of the money went to renovations and paying down debt. Now, due to obligations of the military, I am being forced to relocate just about 100 miles away. So, if I move will I be forced to pay back the $8,000? My wife and I were considering leaving it as a "primary residence" status for one of us and moving. Any way of getting around paying it back while moving away? I don’t know what else to do.

Good news for Josh.

Dupree says: If you do not sell the residence, your military deployment may be considered a "temporary absence" and your home may still be used as your principal residence.

Posted by Eileen Ambrose at 9:01 AM | Permalink | Comments (11)
Categories: Taxes
        

Posted by Maryann James at 11:36 AM | Permalink | Comments (2)
Categories: Taxes
        

Got questions on income taxes, AMT or deductions?

Get answers Tuesday from Steve Albert, a tax partner at Glass Jacobson. Albert will answer questions on our live chat here at noon.

You can also submit your questions in advance to me at eileen.ambrose@baltsun.com and we can get Steve working on them early. Then you can check Tuesday's live chat for the answers.

Posted by Eileen Ambrose at 9:00 AM | Permalink | Comments (0)
Categories: Taxes
        

Got tax questions? Get answers here Tuesday at noon.

Steve Albert, a tax partner with Glass Jacobson in Owings Mills, will answer them on our half-hour live chat. You can submit questions during the chat or in advance to me at eileen.ambrose@baltsun.com.

We get lots of questions on taxes, particularly the first-time homebuyer credit, on the blog. Hope you all take advantage of the chance to get you questions answered from Albert.

Posted by Eileen Ambrose at 9:51 AM | Permalink | Comments (2)
Categories: Taxes
        

Alex is getting married next month and he has a question about the first-time homebuyer credit.

“Any help would be greatly appreciated. Time is really of the essence here,” he writes in an email.

 The situation: Alex and his fiancee are getting married Sept. 13 and have entered into a contract on a property. The two can’t get approved for a mortgage together, he says, but he can get approved as an individual. He earns $100,000 a year; she earns $50,000.

His two questions:

1) If we get married, and then I purchase the property in my name only, and then we file jointly, will we get the $8k tax credit?

2) Would this result change if I purchased the property under my name only, and then we got married on 9/13/09, and then we file jointly, will we get the $8k tax credit? In both scenarios the title and deed will only be under my name.

I called Jim Dupree of the IRS to see if he can give the lovebirds some good news — before the wedding. And he did.

Dupree writes: “You may qualify for the credit if you (and your spouse, if married) have not owned a home in the three years prior to the purchase. The maximum credit of$8,000 is available for either a qualified single taxpayer or married couple filing a joint return, but only half of that amount for married persons filing separate returns.

“Bear in mind the credit is reduced or eliminated for higher-income taxpayers. The credit is phased out based on your modified adjusted gross income (MAGI). For a married couple filing a joint return, the phase-out range is $150,000 to $170,000.”

So, Alex, if neither you nor your fiancee has owned a house in recent years, it looks like you could qualify.

And congrats on the wedding!

UPDATE: Got more questions about the $8,000 first-time homebuyer credit? E-mail them to Eileen.ambrose@baltsun.com before Tuesday, Sept. 8, 2009 and then tune in at noon on Sept. 8 for her live chat with IRS spokesman Jim Dupree to get the answers.

Posted by Eileen Ambrose at 2:03 PM | Permalink | Comments (0)
Categories: Taxes
        

Jim Dupree of the IRS answers another round of your first-time homebuyer credit questions. Unfortunately, Jim has some bad news for homebuyers, including one whose parents bought a house for her while she attended college.

Q. While my daughter was going to college we purchased her a house to live in. My husband was the only one on the loan. All three of us, however, were put on the deed. My daughter just bought a home and it is in her name only. We are trying to sell the college home now. Does she qualify for the $8,000.00 credit?

A. An ownership interest in the college home would preclude your daughter from being considered a first-time homebuyer. As long as she owned and used the prior home as her principal residence ,she is not a first-time homebuyer, even if she did not buy the prior residence.

Q. I have just recently gotten divorced and am looking at trying to buy a home on my own. My husband and I owned the home together, although he was the only source of income for our family. Am I eligible for the first time home buyer assistance, since I have never bought a house "on my own"?

A. No. Section 36(c)(1)of the Internal Revenue Code requires that the taxpayer and the taxpayer’s spouse not have an ownership interest in a principal residence within the three years prior to the date of purchase. While individuals do not have to be married to get the credit, marriage (and legal separation) imputes ownership of a previous home upon the other spouse.

Q. I am getting ready to have a home built in August 2009 and I don’t think that it will be completed by the deadline December 1st. Will I be able to get the tax credit of $8,000 next year?

A. To qualify for the first time home buyer credit, the residence must be purchased before Dec. 1, 2009. By statute, a residence which is constructed by the taxpayer is treated as purchased on the date the taxpayer first occupies the residence.

Q. I own a mobile home, but not the land. I pay lot rent. It has a title not a deed and is not on a foundation. Yes, it is my residence, but then again living under a bridge is someone’s residence as well. It seems that I am the type of purchaser that this stimulus is intended to spur into a home purchase, as I am doing in the next month. I’ve read several blogs and seen conflicting answers. What’s the deal, am I or am I not qualified?

A. Taxpayers who have had an ownership interest in a principal residence at any time during the three years ending on the purchase date of the new residence cannot claim the first-time homebuyer credit. A principal residence may include a house trailer or a mobile home, whether or not it is on a foundation. Thus, a taxpayer will not qualify for the first-time homebuyer credit if the taxpayer has owned and used a house trailer or mobile home(whether or not on a foundation) as a principal residence at any time during the three years ending on the date he or she purchases the new home.

UPDATE: Got more questions about the $8,000 first-time homebuyer credit? E-mail them to Eileen.ambrose@baltsun.com before Tuesday, Sept. 8, 2009 and then tune in at noon on Sept. 8 for her live chat with IRS spokesman Jim Dupree to get the answers.

Posted by Eileen Ambrose at 8:47 AM | Permalink | Comments (1)
Categories: Taxes
        

The IRS says it has prosecuted its first successful case against someone fraudulently claiming the first-time homebuyer credit.

Last week, according to the IRS, a Florida tax preparer pled guilty to falsely claiming the credit on a client’s federal tax return, the IRS said. The potential penalty is steep. The preparer now faces the prospect of three years in jail and a $250,000 fine.

The IRS says it has executed seven search warrants and has 24 open investigations involving the credit. Granted, the credit - worth up to $8,000 - is complicated. But watch out for preparers guaranteeing that they can get you the credit even if it’s iffy you would qualify.

You’re responsible for what appears on your return, and you don’t want to get hit with back taxes and penalties because your preparer crossed the line.

Posted by Eileen Ambrose at 10:59 AM | Permalink | Comments (4)
Categories: Taxes
        

Readers have been submitting questions to the blog about the first-time homebuyer credit. IRS spokesman Jim Dupree has been answering them. This time around, Dupree has some bad news for questioners:

Q. My husband and I separated in May 2009. He is residing in the home I co-signed for because we were married. He has 6 months to assume the mortgage in his name only. I have purchased a residence in my name. Do I qualify for the credit?

A. No. Section 36(c)(1) of the Internal Revenue Code requires that the taxpayer and the taxpayer’s spouse not have an ownership interest in a principal residence within the three years prior to the date of purchase. While individuals do not have to be married to get the credit, marriage (and legal separation) imputes ownership of a previous home upon the other spouse. The taxpayer may not take the credit even if filed on a separate return.

Q. In March, I became officially divorced. During the previous three years my former spouse owned a home that I lived in as my principal residence. I was not on the deed. Do I qualify for the first-time homebuyer credit?

A. Eligibility for the first-time homebuyer credit is determined on the date of purchase. If your wife had ownership interest in a principal residence within the prior three years, neither taxpayer may take the first-time homebuyer credit. Section 36(c)(1) of the Internal Revenue Code requires that the taxpayer and the taxpayer’s spouse not have an ownership interest in a principal residence within the prior three years from the date of purchase.

Q. We had a trailer on a lot that we owned. But in 2008, we got a new house. Can we get the new home credit? Does owning a trailer count as a home?

A. Taxpayers who have had an ownership interest in a principal residence at any time during the three years ending on the purchase date of the new residence cannot claim the first-time homebuyer credit. A principal residence may include a house trailer or a mobile home, whether or not it is on a foundation. Thus, a taxpayer will not qualify for the first-time homebuyer credit if the taxpayer has owned and used a house trailer or mobile home (whether or not on a foundation) as a principal residence at any time during the three years ending on the date he or she purchases the new home.

Posted by Eileen Ambrose at 1:16 PM | Permalink | Comments (1)
Categories: Taxes
        

A big thank you to Jim Dupree of the IRS for answering these complicated questions on the first-time homebuyer credit:

Q. My wife and I separated in December and will be divorced in July 2009. We lived in her home for 20+ years and she is selling it now. I want to buy a condo for $85,000 (2br, 1-1/2 bath!) in August. Since I have not owned a home during this period, do I qualify for the First-Time Homebuyer Credit? May I refile the joint 2008 tax return or claim the credit on the 2009 return. The AGI limit for single may impact the 2009 return and credit amount. During our marriage the mortgages were paid from a joint checking account.

A. No. The purchase date determines whether a taxpayer is a first-time homebuyer. Since your wife had ownership interest in a principal residence within the prior three years, and you were legally married, you can’t take the first-time homebuyer credit.

Section 36(c)(1) of the Internal Revenue Code requires that the taxpayer and the taxpayer’s spouse not have an ownership interest in a principal residence within the prior three years from the date of purchase. While individuals do not have to be married to get the credit, marriage (and legal separation) imputes ownership of a previous home upon the other spouse.

Q. My husband and I are closing on a house in 2 weeks. We file separate returns due to his taxes going towards back child support. I am the primary on the mortgage and he is the secondary on the mortgage, if I do not out him on the deed, will I be able to claim the full 8000.00 credit?

A. For a married person to be eligible for the first-time homebuyer credit, both the taxpayer and the taxpayer’s spouse must not have had an ownership interest in a principal residence at any time during the three year sending on the purchase date of the residence. Further, if a married person files a separate return, the amount of the credit is limited to $4,000. These rules apply even if only one spouse is the owner of the residence.

In the second scenario, if both the taxpayer and her spouse have not had an ownership interest in a principal residence at any time during the last three years and all the other requirements are met, the taxpayer may take the first-time homebuyer credit either on a joint return for a maximum credit of $8,000 or on a married filing separate return for a maximum credit of $4,000, even if the taxpayer is the sole owner of the residence.

For the taxpayer’s spouse to claim the first-time homebuyer credit on his own married filing separate return for a maximum credit of $4,000, that spouse must own the property and meet all other requirements. If both spouses qualify for the credit, then each spouse may claim a maximum credit of $4,000 on their respective married filing separate returns.

Posted by Eileen Ambrose at 11:49 AM | Permalink | Comments (2)
Categories: Taxes
        

IRS spokesman Jim Dupree has some bad news for readers wondering if they would qualify for the first-time homebuyer credit.

Q. I live and work in Southern Louisiana eight months of the year but do not want to buy a house here due to the associated risk. Can I buy a house in another state and establish that house as my principal residence in order to receive the credit? I wouldn’t be living in the house but four months per year.

Dupree: A home must be purchased as the taxpayer’s principal residence for purposes of the first-time homebuyer credit to qualify.

In the case of a taxpayer using more than one property as a residence, whether a particular property is a principal residence depends on all the facts and circumstances.

Section 1.121-1(b)(2) of the Income Tax Regulations governs the definition "principal residence" for purposes of the first-time homebuyer credit. It provides that if a taxpayer alternates between 2 properties, using each as a residence for successive periods of time, the property that the taxpayer uses a majority of the time during the year ordinarily will be considered the taxpayer’s principal residence.

In addition to the taxpayer’s use of the property, relevant factors in determining a taxpayer’s principal residence, include, but are not limited to--

(i) The taxpayer’s place of employment;

(ii) The principal place of abode of the taxpayer’s family members;

(iii) The address listed on the taxpayer’s federal and state tax returns, driver’s license, automobile registration, and voter registration card;

(iv) The taxpayer’s mailing address for bills and correspondence;

(v) The location of the taxpayer’s banks; and

(vi) The location of religious organizations and recreational clubs with which the taxpayer is affiliated.

Q. I’m buying a house now. Do I qualify even though I had a trailer that I bought in 1989 and paid off in 2001?

Dupree: Sorry. If you owned and lived in a trailer as your principal residence at any time during the three years prior to the date of purchase of your new home, you would not qualify.

UPDATE: Got more questions about the $8,000 first-time homebuyer credit? E-mail them to Eileen.ambrose@baltsun.com before Tuesday, Sept. 8, 2009 and then tune in at noon on Sept. 8 for her live chat with IRS spokesman Jim Dupree to get the answers.

Posted by Eileen Ambrose at 11:53 AM | Permalink | Comments (0)
Categories: Taxes
        

Ah, love and relationships, how they can complicate your finances.

Almost all tax questions today deal with the first-time homebuyer credit and divorce, separation and a boyfriend.

Give a hand to Jim Dupree of the IRS for answering these tough questions.

Q. I have been divorced for the past five years but my name is still on the deed to the house that I purchased with my ex-wife. She is still living in the house. I have not lived there or paid any part of the mortgage since our divorce. My divorce papers state that she gets the house. Do I still qualify for the tax credit even though I don’t own this home?

A. Yes. A taxpayer is not considered a first-time homebuyer if the taxpayer has an ownership interest in a property which was his principal residence at any time during the last three years. In your case, if you did not live in the marital home during the past three years, the marital home would not be your principal residence during that time. Therefore, you would not be disqualified from receiving the credit based on your ownership interest in the martial home.

Q. I have owned a home since 2003. I want to add my boyfriend to the deed. Will he qualify for the 8,000 credit? We are not related.

A. No, he won’t.

This questioner, who we’re glad to hear is not related to her boyfriend, had this follow-up:

Q. Would it be different if I quit claimed it to him, would he then be able to claim the credit?

A. No. Your boyfriend must "purchase" a home, as his principal residence, to qualify for the credit.

Q. My husband bought a house year 2004, and it’s all under his name; though married we always file separate. He sold the house this year. Am I qualified as a first time buyer?

A. No. Since your husband had ownership interest in a principal residence within the prior three years, neither of you may take the first-time homebuyer credit. Section 36(c)(1) of the Internal Revenue Code requires that the taxpayer and the taxpayer’s spouse not have an ownership interest in a principal residence within the prior three years from the date of purchase. You cannot take the credit even if you filed on a separate return.

Q. I have been legally separated for a year now, but have not filed for divorce. I am looking at buying a house and this will be my first, however, my husband owns one. Does this mean I will not qualify for the tax credit? Do we need have our divorce final by the time of signing for it to count? What if we’ve filed, but it’s not final yet?

A. No. Section 36(c)(1) of the Internal Revenue Code requires that the taxpayer and the taxpayer’s spouse not have an ownership interest in a principal residence within the three years prior to the date of purchase. While individuals do not have to be married to get the credit, marriage (and legal separation) imputes ownership of a previous home upon the other spouse. You cannot take the credit even if you filed on a separate return.

Q. I own my residence as 50/50 tenants-in-common with one daughter who does not live with me. My second daughter, who has never owned a house, is just graduating from school, starting a job locally, coming to live in the house, and wants to buy out her sister’s 50% share. Will daughter #2 qualify for the $8,000 homebuyer credit if she buys her sister’s half of the house from her before Dec 1, 2009?

A. No. You cannot take the credit if you buy your home from a close relative.

Q. My ex-husband and I separated June, 2005. We were divorced Feb. 2007. I have never owned a home my name was not on the deed or mortgage. November 2008 he transferred the deed over to me and I refinanced the home January 2009. Now the home is in my name. Do I qualify for the $8,000 first time homeowner’s tax credit?

A. No. Section 36(c)(1) of the Internal Revenue Code requires that the taxpayer and the taxpayer’s spouse not have an ownership interest in a principal residence within the three years prior to the date of purchase. Your husband had principle ownership in the property within the three year period.

Posted by Eileen Ambrose at 11:56 AM | Permalink | Comments (26)
Categories: Taxes
        

Jim Dupree of the IRS answers readers' questions on the first-time homebuyer credit: 

 Q. Do you have to repay the $8,000 first-time homebuyer credit if it does not remain as your primary residence for 3 years? (Example, primary residence for 2 years and then used as rental property)?

A. If, within 36 months of the date of purchase, the property is no longer used as your principal residence; you are required to repay the credit. Repayment of the full amount of the credit is due at that time the income tax return for the year the home ceased to be your principal residence is due. The full amount of the credit is reflected as additional tax on that year’s tax return. IRS Form 5405, "First Time Homebuyer Credit, "and its instructions will be revised for tax year 2009 to include information about repayment of the credit.

Q. I was separated 3 years ago and signed house over to husband. Can I qualify as a first-time home buyer?

A. Section 36(c)(1) of the Internal Revenue Code requires that the taxpayer and the taxpayer’s spouse not have an ownership interest in a principal residence within the three years prior to the date of purchase. While individuals do not have to be married to get the credit, marriage (and legal separation) imputes ownership of a previous home upon the other spouse. If your spouse has not owned a main home in the last three years, then you may claim the credit.

Q. My fiance and I have purchased a home. Both of us are on the loan and deed. I owned a home two years ago, but he never has. Would he qualify for the $8,000?

A. Eligibility for the first-time homebuyer credit is determined on the date of purchase. If your fiancé, a first-time homebuyer, buys a house and then later that year marries you, not a first-time homebuyer, the credit is allowable to him. Your fiancé may take the maximum credit.

Q. I have never owned a home and am looking to buy in 2009. My husband was separated from his ex-wife in 2002 and left their principal residence at that time. However, their divorce was not final and his name taken off of their house until 2007. Do we quality for the tax credit?

A. No. The purchase date determines whether a taxpayer is a first-time homebuyer. Since your husband had ownership interest in a principal residence within the prior three years, neither of you may take the first-time homebuyer credit. Section 36(c)(1) of the Internal Revenue Code requires that the taxpayer and the taxpayer’s spouse not have an ownership interest in a principal residence within the prior three years from the date of purchase. You would not be able to take the credit even if you filed on a separate return.

Q. My dad quit claimed his home to me and my mom in August of 2005. In August of 2006, I quit claimed the home to my mom because I got married. My husband and I just purchased a home in May 2009. My husband is a first-time home buyer but I’m not clear if I am. Would we qualify for the $8,000 credit?

A. No you won’t. Section 36(c)(1) of the Internal Revenue Code requires that the taxpayer and the taxpayer’s spouse not have an ownership interest in a principal residence within the three years prior to the date of purchase.

Q. I have owned a house for 15 years. I am about to co-sign for my daughter to buy her first home. I guess she would qualify for the first home buyer’s credit. But when I am filing the 2009 taxes for myself, how do I report the new house to the IRS. Or should my daughter only report it?

A. Since you are not a first-time homebuyer, you cannot claim any portion of the credit, but your daughter may claim the entire credit ($7,500 for purchase in 2008; $8,000 for purchase in 2009), if the home was purchased as her primary residence.

UPDATE: Got more questions about the $8,000 first-time homebuyer credit? E-mail them to Eileen.ambrose@baltsun.com before Tuesday, Sept. 8, 2009 and then tune in at noon on Sept. 8 for her live chat with IRS spokesman Jim Dupree to get the answers.  

Posted by Eileen Ambrose at 11:51 AM | Permalink | Comments (1)
Categories: Taxes
        

  A round of applause for Theresa Bandell, director of the Baltimore accounting firm Stegman & Co., for answering these readers' questions:

Q. A couple bought a house 40 years ago for $30,000. He died 10 years after buying the house and the fair market value was $70,000 at that time. She sold the house in 2008 for $400,000. What is her basis in the house without regards to improvements or settlement fees? I was told that it is $50,000: one half the fair market value at the time of purchase plus half of the market value at the time of her husband’s death. Is that correct?

A. The wife may be entitled to a full-step up in basis as of the date of death if the house was a pre-77 spousal joint interest, and the wife did not contribute toward the purchase of the property. In this situation the property was purchased in 1969; therefore the wife is entitled to basis of $70,000 as long as she did not contribute money to the purchase of the property.

Q. We are homeowners who will be non-occupying co-borrowers for a house our son will purchase and be on the title. It will be his primary residence. He will be paying a portion of the mortgage and we will be paying the rest (25 him /75% us). We are pretty sure he will be eligible for the first time homebuyer’s tax credit, but if we rent out a room in the same house to help make our portion of the mortgage payment, will this disqualify him from getting the tax credit? Many thanks for any help you can provide on this!

A. Your son will qualify for the credit based on the percentage he purchased and paid 25%. The fact that you are renting your portion of the property does not affect his credit.

Q. My boyfriend and I purchased a house in Pennsylvania in August 2008. I am a first-time homebuyer; he has owned a house before but not in the last 6 years. We are not living in it yet, as we are living in a rental apartment in New Jersey during renovation work. Do we qualify for the first-time homebuyer credit?

A. You both may be entitled to the credit allocated between the two of you, but you must take possession and occupy the property as your principal residence by December 1, 2009.

UPDATE: Got more questions about the $8,000 first-time homebuyer credit? E-mail them to Eileen.ambrose@baltsun.com before Tuesday, Sept. 8, 2009 and then tune in at noon on Sept. 8 for her live chat with IRS spokesman Jim Dupree to get the answers.

Posted by Eileen Ambrose at 11:57 AM | Permalink | Comments (1)
Categories: Taxes
        

Thank Theresa M. Bandell, diector of Stegman & Co. in Baltimore, for answering this latest round of economic stimulus questions:

Q. In 2003, my mom purchased a town home (mortgage and title under her name). In 2007, I quit claim deed my name on the title for exemption purposes. Now in June 2009, my husband and I are going to purchase a new home and my mom is going to rent out the town house. Can we qualify for the credit? My husband does not own any property.

A. You may qualify for the credit as long as your mother’s house, which you are on the deed, was not your principal resident within the past three years. If you lived in the house with your mother any time during the past three years, you would not qualify for the credit.

Q. I have a question on the energy related tax credit. Does the credit of 30% on an energy related investment (like windows, furnaces, insulation) up to a maximum of $1,500 apply to rental houses or only to the house occupied by the owner?

A. The non-business energy credit is only available on the taxpayer’s principal residence.

Q.  I have a full time college student that we claim as a dependent and if we jointly purchase a home and it’s his primary residence and he’s on the deed, can we get the credit? Also since he’s a starving college student, he has no taxable income and pays no tax. I’m assuming since it’s a refundable credit that he could still claim the $8,000 credit for 2009?

A. First, no, you are not entitled to the credit since you are not a qualified home buyer and it will not be your principal residence. You are correct the credit is refundable and he would be eligible for the credit even though he has no taxable income. But the credit is not available if the house is gifted to your son. The taxpayer must pay for the house either with personal funds or mortgage.

Q. My wife owned a condo that she sold in August 2006. However, she did not live in the condo from August 2004 through August 2006. She bought the condo in 2003. Does she still have an ownership interest in a personal residence if she was not actually living there in the past 3 years? She did elect to use her capital gain exemption for the 2006 sale (which probably saved her $300). Would amending her 2006 return and not using the exemption qualify us for the stimulus credit?

A. She does not have an ownership interest in a personal residence with regards to the condo. However, if you have an interest in a personal residence, neither of you can qualify for the credit. Using the residence exemption with the 2006 sales would not change her eligibility for the credit.

Q. A friend has quick claim deed his property in 2007 to me and my husband. Now, my husband and I are planning on getting a new property since we don’t have any mortgages just the title of the home we are living in as it was claim deed to us. Will we qualify as first time home buyers?

A. No you do not qualify for the credit because you have an ownership interest in your personal residence.

Q. My boyfriend and brother bought a home together in June 2006. Both of their names are on the deed and mortgage. I am not on either. I have just lived with them. We agreed to live in the house for three years and then go our different ways. I would like to buy the house and I would be considered a first time home buyer, however, I read that you can not buy from a close relative. Therefore, I was wondering if we could remove my brother from the deed by doing a quit claim, but keep him on the mortgage since my boyfriend alone would not qualify for the house loan. Since my brother would now be off the deed (but still on the mortgage) would I be able to buy the house and qualify for the credit since now the deed would only be in my boyfriend’s name?

A. You would be fine qualifying for the credit even with your brother on the deed, because “related” person for this purpose only includes spouse, ancestors (parents, grandparents) and lineal descendants. Thus, a purchase that would otherwise qualify for the credit will not be disqualified merely because the property was acquired from a sibling.

Q. I have read through all of the questions, can’t find the answer. I purchased a home early 2004, got married late 2004. I am the only one on the deed. We have both lived in the house. We are considering purchasing new home, would my wife qualify for first time home credit? If so, would she have to purchase this home by herself?

A. Because you are married and you have an interest in your principal residence neither of you qualify for the credit.

Q. I’m a real estate agent. My buyers file their taxes separately but are married. They are both first-time homebuyers. If they amend their taxes do they each have to do it to get $4,000 each, or can one of them do it and get the full $8,000.?

A.  For married individuals filing separate the credit is limited to $4,000.

Posted by Eileen Ambrose at 11:59 AM | Permalink | Comments (2)
Categories: Taxes
        

Thank Jackson Hewitt’s Mark Steber for these answers to your questions:

Q. I have filed my taxes for 2008. My preparer told me that I was eligible for the $8,000 tax credit if I was going to buy a new home this year. I responded that I thought that I had to purchase the home first and then apply for credit in 2009. He stated that as long as I purchased before Nov. 31st, it was okay. Was this correct? And if not, how do I correct the situation?

A. The IRS allows taxpayers the opportunity to claim and receive the $8,000 credit for a qualifying home purchase between January 1, 2009 and November 30, 2009 to be claimed on a 2008 tax return. If you have already filed your 2008 tax return after you purchase the house, you may amend your 2008 return and claim the credit now or wait and claim the credit on your 2009 tax return next year when you file.

Q. I moved to America this year and I will be transferring my money from Australia to America by wire transfer and I was wondering if I will be taxed for bringing money into America. The money will be about $60,000 dollars. I have been told that I will not be charge any tax on this money in Australia since I have been paying taxes each year. Can you please answer if I will be taxed on the money? Thanks.

A. You will not be taxed on money you bring into the U.S. by the U.S. government, but you may have some tax consequences to Australia.

Q. Hello, I moved from Australia in 2007 and I married my wife (U.S citizen) and we are currently in the process of buying a house. We are looking at the $8,000 first house buyer’s tax and I cannot find an answer to my question. I owned a house in Australia and recently I have sold the property, now the problem is can my wife and I apply for the $8,000 even though I owned a house outside America. Can you please tell me if the $8,000 is only if you have not owned a property inside America in the last 3 years or is it if you owned a property anywhere in the world? Thanks.

 A. If you did not own a principle residence within the U.S. during the last three years preceding the purchase of your new home in the U.S., you may qualify for the first-time homebuyer’s credit. Your wife also must qualify for you to qualify for the credit.

Q. Married 4 years, husband has not filed for 10+ years; I have no income. Am I liable for anything? Should I file?

A. You are not liable for your husband’s tax debt unless you filed a joint return for any of the outstanding years.

Q. I am a first time buyer of a home. It will be my residence only. My sister is going to co-sign with me, she will be on the deed and mortgage, and owns her home now. Will I quality for the $8,000. credit? Thank you in advance for your answer.

A. If you meet all of the qualifications for the First-time Homebuyer’s Credit, you will qualify for the full allowable credit. The maximum allowed credit is 10% of the purchase price up to $8,000.

Q. I am going through a divorce, was married for a year and lived in husband’s house. I just bought my first house and wonder if I qualify for the tax credit when I file 2009 taxes after the divorce is finalized?

A. If you were married when you bought the house and your spouse does not qualify for the credit, you will not qualify for the credit even if you are divorced when you file your 2009 tax return. Marital status eligibility requirements are determined as of the day the house is purchased.

Q. We are refinancing our mortgage and would like to add our daughter to the title who would be a first time home buyer. Would she qualify for the $8,000 credit if she met all the other IRS guidelines for qualifying?

A. Your daughter cannot buy a home from you (this includes a refinance where she is added to the loan) and qualify for the First-time Homebuyer’s Credit If your daughter does not live in the home with you, she could buy her own house before Dec. 1 and possibly qualify for the First-time Homebuyer’s Credit.

Q. My husband and I have had our mobile home for 11 years. My name is on the loan and deed. We want to buy a doublewide. Would we be considered first time home buyers?

A. The qualifications for the first-time homebuyer’s credit are: ¨ You must not have owned a principle residence any time during the three years preceding the purchase of the new home ¨ Your income must be below $95,000 ($170,000 if married filing jointly) ¨ The home must be in the U.S. ¨ The home cannot be purchased from a related party such as; spouse, parent, grandparent, child, sibling, or their descendants ¨ The home cannot be acquired as a gift or inheritance Because you were one of the owners of the home that you lived in for the last 11 years, you do not qualify for the First-time Homebuyer's Credit.

Q. I am a single mother of 3, working two jobs to make sure my kids are taken care of but because I live in a world where I have to work two jobs to put my kids in the right school district, I am penalized at every turn for making "too much" money! I wish I made too much money. What happened to the tax break for 95% of Americans??? Does President Obama mean to tell me that my income of $98,000 per year working two full time jobs puts me in the top 5% of the nation and makes me ineligible for every single aspect of this so called stimulus!! This is terrible. I am buying my first new home after working very hard to come up with some down payment because I make "too much" money for any DPAP and now I find out I can’t even qualify for this $8,000.00 tax credit!! I am so angry. I am about to buy a home for 289,000.00 in a struggling economy and I am able to do it from pure hard work as a middle class American and I am the one who gets screwed!! Why is it always middle class America and why does hard work never seem to pay off!!

A. Her income is basically too high for the common adjustments to income that may lower her income, however, if she is not covered by a pension plan, and she puts a contribution of up to $5,000 ($6,000 if she is 50 or over) into a traditional IRA she can lower her AGI and qualify. For example, if she has an AGI of $98,000, is not covered by a pension plan in either job, and she puts $5,000 into her IRA she will lower her AGI to $93,000. She will qualify for $800 credit (10% of the max allowed credit of $8,000)

Q. I was just told I need a co-signer in order to get my FHA loan approved on a condo. My mother (my co-signer) and I are first-time home buyers. Would we each qualify for the $8000 tax credit, or would we each have to split the $8000 tax credit. Thanks!

A. You can split the allowed credit any way you wish, but you may not exceed the maximum allowed credit amount of 10% of the purchase price or $8,000 whichever is greater. The split includes 100% and 0% up to 50% and 50%. How you split the credit is up to the taxpayers.

Q. My daughter is a full time college student 22 years old. I claim her as a dependent. She currently lives in my house. She would be a first time home buyer. Can we jointly purchase a home for her to live in after June 1, 2009 and before Dec. 1, 2009 and her claim the $8,000 refundable tax credit and I claim her as a dependent for 2009.

A. As long as your daughter meets the requirements for the credit, she will be eligible for the credit even if she qualifies as your dependent for 2009.

The qualifications for the First-time Homebuyer’s Credit are:

¨ You must not have owned a principle residence any time during the three years preceding the purchase of the new home

¨ Your income must be below $95,000 ($170,000 if married filing jointly)

¨ The home must be in the U.S.

 ¨ The home can not be purchased from a related party such as; spouse, parent, grandparent, child, sibling, or their descendants

¨ The home can not be acquired as a gift or inheritance

You should review the rules for dependents annually when you file a tax return. To claim a child as a dependent the child must meet the following qualifications:

¨ Be a U.S. citizen or resident, or resident of Canada or Mexico, for part of the year

¨ Be under 19 or a full-time student under 24

¨ Live with you except for temporary absences (such as school)

¨ The child cannot provide more than ½ of their own support

Q.I bought a house 4 years ago and had to let that go about a year ago. My soon to be husband is planning to get a house. He is purchasing the house on his own, my name will not be on the title. He will be the first time home buyer. If we get marry before he purchase a house, would he be qualify for the tax credit? If we file for tax separately next year, will it change anything?

A: Your fiancé will not qualify for the First-time Homebuyer’s Credit if you marry before you buy the house. If you wait to get married after the house is purchased, he will qualify for the credit even if you marry before the end of the year. Just don’t get married until you close on the house. If you marry before he closes on the house, he will not qualify for the credit even on a separate return.

Posted by Eileen Ambrose at 12:23 PM | Permalink | Comments (10)
Categories: Taxes
        

We spent a ton of time answering your tax questions here at Consuming Interests, and we're happy to do it. Eileen shared last-minute filing tips and ways to avoid tax problems and I compiled lists of free or cheap Tax Day treats to help relieve the pressure. But some tax scofflaws haven't paid millions in taxes in years (although there might be ... other reasons why they haven't written their checks).

Doesn't it make you wonder whether filing a tax return has to be so stressful in the first place?  

Well, it turns out even Ordinary Citizens can make a difference.

Continue reading "You can change the tax system" »

Posted by Liz Kay at 8:52 AM | Permalink | Comments (0)
Categories: Consumer Web Site of the Week, Taxes
        

Tax Day discounts, deals and freebies are popping up all over.

We told you about free McDonalds coffee on April 15, as well as free Tax Day ice cream, Cinnabon Bites and massages.

You can also enjoy cheap or discounted meals on Wednesday as well.

Check out these tips: 

Continue reading "Tax Day discounts, deals & freebies: April 15" »

Posted by Liz Kay at 10:31 AM | Permalink | Comments (0)
Categories: Taxes
        

Snap up Tax Day freebies to reward yourself for completing the task by April 15!

We told you Tuesday about free McDonalds McCafe coffee on Tax Day.

But the folks at Walletpop.com have compiled a list of other free April 15 stuff, including:

Continue reading "Tax Day freebies: more Cheap Trick Thursday" »

Posted by Liz Kay at 10:56 AM | Permalink | Comments (1)
Categories: Budgeting, Cheap/Frugal, Shopping, Taxes
        

You got questions about your April 15th filing or the economic stimulus package or anything else in the monster tax code?

We'll get you answers.

Participate in a live online chat with Jim Dupress of the IRS on Friday at 11 a.m. on this blog. You can submit questions to Jim then, or post them now in the comment section and the answers will be posted on Friday, too.

Posted by Eileen Ambrose at 6:48 AM | Permalink | Comments (3)
Categories: Taxes
        

The April 15 tax deadliine is fast approaching. If you have any nagging questions before filing your 1040, get your answers here on Friday, April 10.

Join us for a live chat then with Jim Dupree of the Internal Revenue Service at 11 a.m. Jim will spend an hour on the blog answering your questions.

You can post your questions during the hour, or submit them in advance here in the comment section.

Posted by Eileen Ambrose at 4:40 PM | Permalink | Comments (4)
Categories: Taxes
        

Give a hand to Jackson Hewitt’s Mark Steber, vice president of tax resources, for answering this round of questions:

Q. I qualify for the 2008 tax credit, which you must pay back. If I sell my house before the 15 years are up but I do not make a profit on the sale, do I still owe the balance of the loan?

A. If you sell your house to someone not related, you must repay the lesser of the credit recapture remaining or the gain on the sale of the house. For example, you bought your house for $75,000 in 2008 and sold your house for a $7,000 gain 2009. The credit recapture, the amount you will pay back, is limited to $7,000 ($7,500 credit minus the $500 profit).

Q. My parents took out a line of credit against their home in 2006 to purchase a condo. The condo is paid off and the mortgage is against their house. Two years later they added me to title, but I was not originally on the loan or the purchase. Now I am getting ready to buy a home. Am I still considered a first time home buyer since I have never even applied for a loan?

A. You do not qualify for the first-time homebuyer’s credit because you owned a home within the three years prior to purchasing a home.

Q. I have a question. My income was $90,000 in 2008. My boyfriend's income was $60,000 in 2008. We are buying a single-family home for over $100,000 together in April 2009. Is there some way we can do it where we can each claim half of the income tax credit ($4,000)? Neither one of us has ever bought a home. I'm wondering what our options are for getting the tax credit.

Here is what I have thought of. 1) My boyfriend gets the entire $8,000 tax credit. However, that feels unfair to me!

2) What if I put $15,000 or so into my 457 DCF plan in 2009 to reduce my taxable income down to $75,000? Then would I qualify for half of the income tax credit on my 2009 tax return?

A. You are correct. The credit can be split anyway you wish. The $75,000 phase-out is applied to each taxpayer so your boyfriend is eligible for the entire credit amount allowed him and you are in the phase-out range for the credit amount allowed you. If you put the max contribution into your retirement account and your income is no more than $90,000, you would not have to reduce the eligible credit under the phase-out rules.

Q. I own the home my boyfriend and I have lived in since 2005. I want to sell this home to both he and I as we love this home. He is a first time homebuyer. Would this qualify for the $8,000 tax credit?

A. As long as you sell the house and he is the purchaser or co-purchaser, he would qualify. If you just add him to the loan or the title, he does not qualify for a purchase.

Q. I bought a house in 2006 and got married in 2007. My husband lived there for 1 1/2 years, but I never added him to the house. In November, 2008, we sold that house a bought a new one. Would he qualify as a first time home buyer if we file together? What if we file separately?

A. Married taxpayers must both be eligible first-time homebuyers to qualify for the credit regardless of filing status.

Q. My father and my husband are buying a home together. My husband has never owned a home but my father has. Can my husband still claim the credit or not? (Not sure if this makes a difference, but my father will be living in the new home.)

A. If you currently own the home you and your husband live in, your husband would not qualify for the credit since married taxpayers must both qualify for the credit to claim the credit. However, your husband could qualify for the credit if all of the following conditions are met:

• You do not own a home, and

• Your husband and father purchase a home together, and

• Your husband is living in the home as his principle residence

UPDATE: Got more questions about the $8,000 first-time homebuyer credit? E-mail them to Eileen.ambrose@baltsun.com before Tuesday, Sept. 8, 2009, and then tune in at noon on Sept. 8 for her live chat with IRS spokesman Jim Dupree to get the answers.

Posted by Eileen Ambrose at 1:52 PM | Permalink | Comments (0)
Categories: Taxes
        

Make your Making Work Pay tax credit work for you, recommends Eileen Ambrose in her Sunday column.

Sure, it's not a ton of money --- $15 per week --- but our smart colleague Dave Zeiler at Apple a Day plans to sock away that extra cash by increasing his 401(k) contribution.

Eileen offers some great ideas ...

Continue reading "Consumer Sundays: Making Work Pay tax credit " »

Posted by Liz Kay at 2:08 PM | Permalink | Comments (0)
Categories: Budgeting, Cheap/Frugal, Taxes
        

Keith E. Huebel, a certified public accountant with Huebel & Associates in Bel Air, answers this latest round of questions:

Q. Like several of my co-workers, who received a decrease in the federal income tax withheld from our paycheck today, I am concerned that I will not have enough funds deducted from my paycheck to cover the taxes I owe when I file my 2009 tax form. You mentioned earlier that my employer will be receiving a new withholding table, but does that mean that the tax tables for 2009 will also be changed? I honestly do not understand the object of the stimulus if I have to return the funds that weren't withheld now, next year.

A: The reduced withholding per pay is an advanced receipt of the "Making Work Pay Credit" as passed in the American Recovery & Reinvestment Act of 2009. Unlike the 2008 Stimulus Rebate received in the form of a single check, this benefit (stimulus) is received periodically throughout the year in the form of reduced withholding in your paycheck.

Your federal withholdings are reduced and a corresponding credit will be permitted to "qualifying" individuals when the 2009 return is filed. If you "qualify" for the credit, then it should wash.

As you note, it is possible to receive the reduced withholding throughout the year, and not qualify for the credit and wind up having to pay when you file the return. If you feel you'll owe, you can adjust your withholding allowances to compensate.

Q. I had my house before me and my wife married. I bought it in 2002 and in 2005 we had to file bankruptcy. My house was not re-affirmed thus included, but we lived in it till now making normal payments to the bank but it doesn’t show on my credit, it shows included in bankruptcy. She has been approved for a new home and would be first-time homebuyer. Would we still be able to get the credit? Any help would be great. The company she is buying it from and the mortgage lender are saying she can, but I have my doubts.

Continue reading "Answers to some complicated economic stimulus questions" »

Posted by Eileen Ambrose at 6:51 AM | Permalink | Comments (2)
Categories: Taxes
        

Your questions are answered here by Bob D. Scharin, Senior Tax Analyst from the Tax & Accounting business of Thomson Reuters:

Q. I am aware that the up to $8,000 tax credit applies to building a home. I was hoping you could clear up the time frame necessary to qualify for the loan. Must construction begin by a certain date? Must you reside in the house by a certain date? Under a construction loan, the bank would make partial payments to the builder as the job progresses. Is the tax credit for that portion of the loan taken in 2009? I apologize if my questions are unclear. My wife and I are planning to build a home starting in the fall. We are wondering if we need to move the starting date up to qualify for the first time home buyers tax credit.

A. The up-to-$8,000 first-time homebuyer credit applies to principal residences purchased before December 1, 2009. In defining the term “purchase” for this purpose, the Internal Revenue Code states that a residence you construct is treated as purchased on the date you first occupy it. Thus, the date you move into the new home is the relevant one.

Q. After twenty years of marriage my husband and I are getting a divorce. My husband has left the country for a job promotion, our new house we purchased together in 2004 has been listed on the market for the last seven months, once the house sells, I will need to purchase a much smaller home I can afford on my own. I will have full custody of our two children ages 14 and 18. Would I still qualify for the $8,000 tax credit? I have gone on HUD's Web site and they have a listed several criteria. you have to meet just one that would qualify as a first-time homebuyer. One of the listed is as followed: A single parent who has only owned with a former spouse while married. With meeting the criteria, I would think I would qualify, it is very confusing. I had asked my Realtor and she thought I would not qualify.

A. For purposes of the first-time homebuyer credit, the tax law defines a first-time homebuyer as someone who has not had an ownership interest in a principal residence during the three-hear period ending on the date of the purchase of the principal residence for which the credit is being claimed. (If the homebuyer is married, the spouse must not have had an ownership interest in a principal residence during that three-year period either.) Thus, if you are selling the house now, you would not meet the three-year rule in the tax law and could not claim the credit for a subsequent home purchase.

I am not familiar with the HUD Web site, but suspect that the rules you read there refer to eligibility to participate in a first-time homebuying program that is separate from the income tax credit.

Q. My now ex-husband and I foreclosed on a home on May 10, 2006. That is the actual date that it went to the trustee. I was out as of January 1, 2006. I plan on buying a condo and will close on March 24th 2009, as a single woman. Do I qualify for the 2009 tax credit for first time home owner?

A. To qualify for a first-time homebuyer credit, you must not have had a present interest in ownership interest in a principal residence during the three-year period ending on the date of purchase. If your ownership interest ended on May 10, 2006, you will not have met the three-year requirement on March 24, 2009, so you will not be eligible to claim the credit. If you delay the closing for a couple of months, however, your purchase may be eligible for the credit.

Q. My husband and I purchased a house Jan. 2nd, 2009 but did not get married until Jan. 10th, 2009. He currently owns another home in a different state and I have never owned a home. We tried to get the mortgage together but since I had no credit the mortgage company would only let my husband obtain the mortgage. I am on the deed but not the mortgage. I put $60,000 for the down payment that was gifted to me by my mother. Since she is claiming the gift on her taxes to me... and the mortgage company has it recorded that I put the down payment down am I able to claim the any of the $8,000 for the 2008 taxes and if I am, am I able to claim it all since he can not?

A. Congratulations on your marriage on the timing of your home purchase. Because you were not married at the time of the purchase, the homeownership status of your now-husband does not affect your eligibility for the credit. IRS guidance indicates that when two individuals who are not married to each other collectively purchase a residence, the credit may be allocated among them in any reasonable manner—provided none of the credit is allocated to someone who is not eligible to claim the credit. Because your husband is not eligible to claim the credit, you should be able to claim the full amount.

Q. My husband and I are remodeling our lake cabin, and want to take advantage of the credit for nonbusiness energy property for 2009. He is at the cabin approximately three to four days a week, all year. Can we file separately, with me using our home as my primary and he using our cabin as his primary?

A. Determining which home is your husband’s principal residence depends on a variety of facts and circumstances. According to IRS regulations, if a taxpayer alternates between using two properties as a residence, the property that the taxpayer uses the majority of time during the year generally is considered the taxpayer’s principal residence.

The IRS, however, also lists these relevant factors that may (among other things) be considered to determine which property is the taxpayer’s principal residence:

• The taxpayer’s place of employment.

• The principal place of abode of the taxpayer’s family members.

• The address listed on the taxpayer’s federal and state tax returns, driver’s license, automobile registration, and voter registration card.

• The taxpayer’s mailing address for bills and correspondence.

• The location of the taxpayer’s banks.

• The location of religious organizations and recreational clubs with which the taxpayer is affiliated

Posted by Eileen Ambrose at 6:50 AM | Permalink | Comments (0)
Categories: Taxes
        

These answers to your questions come from Theresa M Bandell, certified public accountant and director of Stegman & Co. in Baltimore:

Q. I currently own a home. But if I buy another home this year with my future wife who will be a first time homeowner, will she be able to file an amended return and claim the $8000 credit (as a co-signer) in 2008 since she already filed as a single person, and since she can't claim it in 2009 since she will be married to a person that already has a house? We are about to be a newly married couple but are planning to buy the house before we are officially married. We will both be living at the new house, and I plan to keep my old house (that only has my name on the title) as an investment property. Any insight you can provide will be most helpful.

A. As long as they purchase the house before they are married, the future wife would be able to claim the credit on her 2008 return. If they were both eligible for the credit, they would have to allocate the credit between the two individuals based on a reasonable method.

Q. I own several older rental properties. I would like to replace the furnaces and air conditioning units, windows, roofs, and perhaps hot water heaters. Can I get a deduction for each expenditure for rental properties? What are the guidelines for "energy efficiency"?

A. The nonbusiness energy property credit for energy-efficient improvements is only available for the taxpayer’s principal residence; therefore, it would not be available for the improvements to rental properties.

Q. Regarding the homebuyer credit: My wife and I are building a home that we started in 2008. It will be completed and ready for our occupancy in May 2009 at which point we will get permanent financing. Is this considered a purchase that qualifies for the credit?

A. A home under construction by a taxpayer is treated as purchased by the taxpayer on the date of occupancy.

Q. I filed my taxes on Feb 12th and claimed the $7,500, but I am not closing on my house until Feb 26th, are my taxes going to be rejected? Will I just get the amount of my refund minus the $7500? Or will I have to amend my taxes to claim the $8,000?

A. Don’t worry, your taxes are not going to be rejected and you will receive $7,500 credit. To receive the additional $500, you need to file an amended return.

Q. My husband and I have had a construction loan since August 2008, and have also been living in the house since September 2008. Within the next few weeks, we will be signing a 30 year mortgage. Is there any way to make 2009 the year we are considered "first-time home buyers", so we can get the $8,000 tax credit?

A. Sorry, no you cannot make 2009 the year you are considered a first-time home buyer. A home under construction is treated as purchased by the taxpayer the date of occupancy, since you took occupancy in September 2008, that is your date of purchase.

Q. I presently am on a tax repayment plan with the IRS. I will be closing on a house in 2009, will I receive the refund or, will IRS take the refund as payment on the taxes that I am in repayment agreement for. I am not delinquent on my repayment agreement.  By the way, I am receiving gift money for the down payment and, the closing cost is being paid by the builder.

A. The refund would be treated as any other tax refund and applied to outstanding liabilities with the IRS, child support or possible state tax liabilities.

Posted by Eileen Ambrose at 11:54 AM | Permalink | Comments (6)
Categories: Taxes
        

Thanks to Cindy Hockenberry, research coordinator with the National Association of Tax Professionals, for the answers to these questions:

Q. I sold my home in May 2006. I purchased a new home on February 27, 2009. Does this mean I am not eligible for the credit? Is it exactly 3 years to the date?

A. A “first-time homebuyer” is an individual who had no present ownership interest in a principal residence during the three-year period ending on the date of the purchase. This means that you count back three years from the date the home was purchased. Since you had an ownership interest in a principal residence during the three year period from February 2006 to February 2009, you do not qualify for the credit.

Q. I receive SSDI benefits. If I'm entitled to the $250 one-time payment, what about my children?

A. The $250 payment is only available to adults and retirees. If you are collecting Social Security disability payments, you qualify. Your children do not.

Q. My son closed on a house 2/27/09. He is married and neither he or his wife have ever owned a primary residence. The deed and loan are in both of our names. His wife is not on either. I currently own a home and will continue to live in it. Can he claim the $8,000 credit?

A. Yes. He will qualify for the full $8,000 credit. The fact that your name is on the title and mortgage does not matter.

Q. Under new the stimulus package, will persons turning 65 who lose their health and dental plans be able to get help with COBRA for their spouses who are not, yet 65? I am covered under my husband's health and dental plans. He will turn 65 in October 2009. I will not be 65 until November 2010 and will need to find dental and health care coverage. We are way under the $250,000 adjusted gross income.

A. Yes. A spouse or dependent of a terminated employee can independently elect COBRA coverage and can independently receive a subsidy.

Q. I presently own a co-op. Is this considered a "home," thereby disqualifying me from the credit if I purchase a home this year?

A. An ownership interest in co-operative housing is considered a personal residence if you live there as your home. If you sell the co-op and buy another home, you are not eligible for the credit.

Q. I understand that self-employed people will get a stimulus payment, but in what form will that be? I am hearing that people will receive a lowering of their withholding tax. But if we don't have a "paycheck," will we receive a check in the mail or a deduction on the taxes we file or some other means?

A. A self-employed person can claim the credit when they file their 2009 tax return. If they want the benefit in advance, they can reduce their estimated tax payments for the remainder of 2009.

Posted by Eileen Ambrose at 11:59 AM | Permalink | Comments (3)
Categories: Taxes
        

  Thanks to Mark Steber, Vice President of Tax Resources for Jackson Hewitt Tax Service, for answering this latest batch of economic stimulus questions:

 Q. I receive SSDI (social security disability income). Will I get the $250 one-time economic stimulus payments? I'm reading that supplemental security income recipients qualify, but I'm on SSDI. It's Social Security, but not the same. Do I still qualify?

A: Those individuals receiving SSDI will qualify for and should receive the $250 payment. Generally, beneficiaries of all forms of Social Security payments are eligible for the $250 payment.

Q. When will the $25 per week payment on unemployment start? Will it be retroactive to the first of the 2009 year?

A: The specific start date and retroactive date of the additional $25 per week is determined by each individual state.

Q. If they take less federal income tax out of our paychecks this year, when we go to file our taxes next year we will receive a smaller refund. Because when you figure out your refund, if you qualify you can get back all the federal tax they withheld. So unless they do something different, all you are doing is getting some of the money that you would have gotten next year at tax time now.

A: The amount of reduced withholdings per pay period is generally going to be equal to the amount of credit taxpayers would otherwise qualify for when they file their 2009 tax return. As long as the change in withholdings is equal to or less, the lower withholdings amount should not affect the potential refund next year. Of course, if there are other changes to the tax situation including increased income, income from multiple sources, income with no withholdings and lower deductions the potential refund, the potential refund could be reduced.

Q. I receive only pensions and Social Security (no earned income). Will the new tax tables be used on my pension income? If so, I'll have less tax withheld this year, I won't be eligible for the credit, and have a tax bill next year. Is my only option to change withholding this year?

A: The tax tables are the same for pension withholdings and wage withholdings. You can either submit an updated W-4P so your withholdings remains the same or you can make quarterly estimates to cover the expected shortfall. If you choose to submit a new W-4P, you should calculate the difference between the old withholdings and the new withholdings and adjust your allowances accordingly. You can leave the status and allowances the same and request an additional specified dollar amount be withheld also.

Posted by Eileen Ambrose at 10:26 AM | Permalink | Comments (1)
Categories: Taxes
        

Mark Steber, Vice President of Tax Resources for Jackson Hewitt Tax Service, answers more questions about the $8,000 First-Time Homebuyers credit:

Q. I am planning on purchasing a home in June 2009. I am getting married May 23, 2009. My fiancé has owned a home in the past three years. I am not planning on putting his name on anything. If I buy the house after we are married but amend my 08 taxes do I still qualify since I was single in 08? I am trying to figure out if amending to 08 will qualify me even after we are married. I forgot to mention I have never owned a home. I think I am in a gray area and no one has an answer.

A. Unfortunately you will not qualify for the First-Time Homebuyers credit if you buy the house after you are married, even if you claim the credit on your 2008 tax return. The qualifications for married taxpayers are you both have to qualify as first-time homebuyers when you buy the house. To qualify, neither of you could have owned an interest in a personal residence any time in the three years prior to the purchase date of the new house. However, if you buy the house before you are married, you will qualify for the credit.

These are similar questions, and the answers are the same:

Q. I may need to have my sister co-sign a loan for me. She does own a home already and will not be living with me in the house I am buying, would I be able to receive the $8,000 tax credit?

Q. I am closing on our house February 25, 2009. I am a first-time homeowner but my fiancé co-signed the home with me and he has owned a home before. Do I qualify for the $8000 credit on my income tax?

Q. I am looking to buy a house and get a loan under my name (primary) and my mom's name (secondary). My mom will not be living in the house. If I am a first time home buyer but my mom isn't, am I still eligible for the tax credit? Her name won't be on the deed.

A. You would be able to claim the First-Time Homebuyers credit of 10% of the purchase price up to $8,000. You also have the option of waiting to file your 2009 tax return to claim the credit, or claiming the credit on your 2008 tax return and receiving the money now. If you have already filed the return, you may amend your return to claim the credit.

Q. My wife and I got married in August 2007. At that time, I was the owner of a house where we lived for some time. The house was foreclosed on in the middle of 2008. Is my wife considered a first time home buyer? She never bought any property.

A. Unfortunately you will not qualify for the First-Time Homebuyers credit. The qualifications for married taxpayers are you both have to qualify as first-time homebuyers when you buy the house. To qualify, neither of you could have owned an interest in a personal residence any time in the three years prior to the purchase date of the new house.

Q. I'm scheduled to be married in June, 2009 and have never owned a home, but my fiancée has. Can we still qualify for this deduction if we are not married before we purchase the home? Can we still qualify if I leave her off the deed but keep her on the loan? Alternatively, could we just amend our 08 filings to include the home?

A. You would be able to claim the First-Time Homebuyers credit of 10% of the purchase price up to $8,000. You also have the option of waiting to file your 2009 tax return to claim the credit, or claiming the credit on your 2008 tax return and receiving the money now. If you have already filed the return, you may amend your return to claim the credit.

Posted by Eileen Ambrose at 11:55 AM | Permalink | Comments (75)
Categories: Taxes
        

Out-of-work Americans will pay a lot less for COBRA health coverage under the stimulus plan, thanks to a government subsidy that will reimburse former employers for nearly two-thirds of the cost for nine months, according to Excellent Eileen's Sunday column.

Normally COBRA allows out-of-work employees keep their former health coverage for up to 18 months by letting them play their share as well as the amount the employers used to pay, as well as an administrative free. 

That can be an amazingly expensive outlay of cash each month, particularly when you're not receiving your regular paycheck.

Of course, there are a number of things to keep in mind, Eileen said.

Continue reading "COBRA stimulus subsidy questions: Consumer Sundays" »

Posted by Liz Kay at 8:30 AM | Permalink | Comments (3)
Categories: Healthcare, Taxes
        

Cindy Hockenberry, research coordinator with the National Association of Tax Professionals, answers these questions about the first-time homebuyer credit:

Q. Regarding the $250 one-time payment for those on Social Security Disability: If back child support is owed, will this payment be claimed as child support as the 2008 stimulus payment was?

A: Yes. The payments will be subject to the Treasury Offset Program. The law allows an administrative offset of claims by federal agencies. An economic recovery payment isn't considered a benefit payment or cash benefit made under the applicable program. Thus, all amounts paid will be subject to offset to collect delinquent debts (back taxes, student loans, child support, etc.).

Q. My husband and I are in the process of building a house that won't be finished until June. We don't start paying our mortgage until it is finished, but technically we closed in November 2008. Which credit would we be eligible for?

A: You will be eligible for the $8,000 credit. The “date of purchase” for a newly constructed home is the date the home is occupied.

Q. We obtained a construction loan in November of 2008. The modification from construction to a permanent loan will be April 2009. Do we qualify for the first-time homebuyer credit? (We have not owned a home in 3 years.)

A: Yes, provided you occupy the home and use it as your principal residence prior to December 1, 2009.

Q. My wife and I are buying my parents house (at market value). Do we qualify for the $8,000 credit? We're first time home-buyers and within the income qualifications. The $7,500 credit indicated buying from parents/family disqualified you, but I have not seen anything about this with the $8,000 credit.

A: No, you do not qualify for the first-time homebuyer credit. A home purchased from a related party does not qualify for the credit.

Q. I bought a house in May 2008. I was the only name on the mortgage and on the title. A few days after closing the escrow, I added my cousin name on my title as the co-owner just in case something might happen to me. How the first time home buyer credit of $7,500 works on my case? Do I get all of $7,500 or will he get some? (He has owned his house for 5 years). I am the only one making monthly mortgage payment on this house.

A: This home is considered your home. The fact that you added your cousin’s name to the title does not change this fact. The entire $7,500 credit is yours to claim. He does not qualify for any of the credit because this home is not his principal residence.

Q. I'm closing on a house on Feb 24th. I know I get the $8,000 tax credit but I want to know if I can file an amended tax return for 2008 and get the money now. If so, how do I do that?

A. Yes, you can file an amended return for 2008 and claim the $8,000 credit. The credit is claimed on Form 5405.

UPDATED: Don't miss Eileen's other economic stimulus posts, including Q&A on economic stimulus law, more answers to your economic stimulus questions, Economic Stimulus Q&A on $250 payment and other credits and Answers to your economic stimulus questions. 

Posted by Eileen Ambrose at 11:45 AM | Permalink | Comments (2)
Categories: Taxes
        

The first-time home buyer credit and the $250 one-time payment for those receiving certain government benefits continue to generate questions.

This batch is answered by Theresa M. Bandell, director of Stegman & Co. in Baltimore:

Q. Can you pay off the $7,500 credit earlier then the 15 years?

A. Because you must accelerate payment if the property no longer qualifies as your principal residence or if you sell the residence, I would assume you would be able to pay the credit back early; however, the Act does not specifically address that issue. It may be addressed through future IRS regulations. The question is why would you want to pay the credit off early since it is an interest-free loan?

Q. My husband is on Social Security Disability and me and the children get a check also. Do we qualify for the $250 one-time payment or just him?

A.  It depends on which type of benefits he is receiving from Social Security. If the disability payments are from the disability insurance program under Title II of the Social Security, only adults are eligible for the $250 payment. However, if the disability payments are under Title XVI, supplemental security income benefits, individuals of any age are entitled to the payment.

Continue reading "Answers to your economic stimulus questions" »

Posted by Eileen Ambrose at 6:37 AM | Permalink | Comments (1)
Categories: Taxes
        

This latest round of answers to your questions comes from Keith E. Huebel of Huebel & Associates CPAs in Bel Air:

Q. I am a first-time home buyer who qualifies for the tax credit on my own. I'm purchasing a house within my means, which would allow for the $8,000 credit. However, my father co-signed on my loan to get a better interest rate, since I am a recent college grad with little credit history. Do I still qualify for the credit, or does my father's owning of a primary residence disqualify me? I will be the only name on the title, but his name will be on the note.

A. The full credit would be allocated to you, the owner.

Q. I keep seeing that people on Social Security Disability will receive $250.00. Do you know when this payment will go out?

A. The stimulus bill instructed Treasury to send the checks ASAP. Unofficial word indicates qualified recipients will receive the payment in late May, 2009.

Q. We install geothermal equipment and I'm receiving information that the $2000 cap on geothermal installation has been removed. Does this mean that 30% of the entire job is now available for a tax credit? Does it include new and retro fit installations? Any info would be appreciated!

A. The $2,000 cap was lifted for qualified property and generally effective for 2009.

Q. If I have a pellet stove insert installed, can I use it for next year's tax write off?

A. If a 2008 install, possibly not. If a 2009 purchase and install, I'm not sure. Proposed legislation spoke of a maintaining a 75% efficiency requirement, which came from a 2005 Act, as well as "all pellet stoves" to qualify. Will need to dig deeper into the conference committee reports to see what made the final cut. Manufacturers should be providing details to retail sites.

UPDATED: Don't miss Eileen's other economic stimulus posts, including Q&A on economic stimulus law and more answers to your economic stimulus questions.  

Posted by Eileen Ambrose at 1:24 PM | Permalink | Comments (4)
Categories: Taxes
        

Questions about the new tax credits, particularly the $8,000 first-time homebuyer credit, continue to pour in.

Bob D. Scharin, Senior Tax Analyst from the Tax & Accounting business of Thomson Reuters, answers this latest round of queries:

Q. Do we know yet how we claim the $8,000 first-time homebuyer’s tax credit? Are they going to make up a special form like they did for the $7,500 credit last year? Any idea when that form will be available?

A. Form 5405 was issued to claim the up-to-$7,500 credit. I have not yet heard how taxpayers should report homes purchased in 2009 that qualify for the up-to-$8,000 credit. Because first-time homebuyers can treat a credit-eligible purchase made during 2009 as being made on December 31, 2008 (and thus eligible for claiming a credit on the 2008 return), guidance needs to be issued quickly. I assume the guidance will direct homebuyers to use the existing 2008 version of Form 5405, but provide instructions for completing it using the revised tax law (e.g., an $8,000 credit maximum). The form already has a checkbox for taxpayers to indicate that they are completing the form for 2009 purchases. Of course, taxpayers should wait for word from the IRS and not rely on assumptions. This does create the problem of delaying a homebuyer’s ability to file his or her tax return and get the refund that can be spent to stimulate the economy.

Q. Will the self-employed receive any type of Stimulus Bill payment?

A. Self-employed individuals are entitled to the same type of “making work pay credit” as are employees. This credit is 6.2% of earned income, up to a maximum credit of $400 ($800 on a joint income tax return). In general, the term “earned income” includes self-employment income. (An exception applies to net earnings from self-employment that are not taken into account for computing taxable income.) Credit eligibility begins to phase out when modified adjusted gross income exceeds $75,000 ($150,000 on a joint return). This modified adjusted gross income could be derived from wages, self-employment income, investment income, or other sources.

Q. I am 61. Retired. NO earned income. Too young for SS. Have a private pension which I pay tax on. What would my rebate be?

Continue reading "Got economic stimulus questions? We got answers" »

Posted by Eileen Ambrose at 6:45 AM | Permalink | Comments (27)
Categories: Taxes
        

When does the Hope Scholarship expanded credit kick in? What energy-related credits are available? Will I qualify for the first-time homebuyer credit if I get a raise?

These are some of your questions about the new economic stimulus package. The answers to these and other questions are provided here by Steve Albert, director of taxation, and Sam Cohen, senior tax manager, with Glass Jacobson in Owings Mills.

Q. Does this expansion to the Hope Credit (up to $2,500) apply to the '08 tax returns or to the '09 returns? If '08, will they be re-printing the Form 8863 revising to the $2,500 max credit?

A. The credit does not apply to 2008, only 2009-2010.

Q. I currently make just below $75,000 a year. However, around August of 2009 I'm expecting to be bumped above the 75K salary. Two questions: If I purchase a home before November of ’09, can I claim the $8,000 credit for tax season 2009 even though my salary increased during the year? Any definitive last day a first-time homebuyer must purchase a house to claim the credit on 2008?

A. There are a few changes to the first time home buyer credit in the package:

— the credit was increased from $7,500 to $8,000

— recapture does not apply (previously, the credit had to be paid back over several years, now the home buyer does not have to pay it back)

— the credit was extended from July 1st, 2009 through Nov. 30, giving homebuyers another 6 months. However, the credit starts to phase out once adjusted gross income reaches $75,000 for singles, and disappears once income tops $95,000. So, it sounds like this person will qualify for something, just not the full $8,000 credit. Unless he’s getting over a $20,000 raise!! Without knowing what the new salary will be and the new AGI, I can’t say how much of the credit he/she will qualify for.

Regarding the second part of the question, the credit can be taken on your 2008 tax return.

Q. Any there any energy-related tax credits for homeowners in the new stimulus bill? ...

Continue reading "More answers to your economic stimulus questions" »

Posted by Eileen Ambrose at 11:30 AM | Permalink | Comments (2)
Categories: Taxes
        

Some of your questions about the economic stimulus package have been forwarded to Mark Luscombe, principal federal tax analyst with CCH, the group that publishes tax books used by professionals. Here are his answers:

Q. Was laid off in Dec. & must decide on COBRA this month. How would the stimulus subsidy affect me? Would I have to pay 2-3 months of full cost (back to 1/1/09)? Any info or helpful websites appreciated.

A. The COBRA premium subsidy begins in the period of coverage beginning after the date of enactment (February 17). Therefore, if the period of coverage is monthly, it would begin in March, 2009. A terminated employee is entitled to the premium subsidy unless they affirmatively elect out. A terminated employee might elect out if their income was too high to be eligible for the subsidy and did not want to be subject to a recapture tax.

Q. Hi, my son and his wife owned a condo together which they sold in 2007 as part of a divorce. My son, as an individual, bought a house where he is stationed in the army in his name only. Do you think he could qualify as a first-time homebuyer since he bought this house by himself rather than in joint name? This is just a shot ... he could use the credit.

Continue reading "More answers to your economic stimulus questions " »

Posted by Eileen Ambrose at 6:56 AM | Permalink | Comments (6)
Categories: Taxes
        

Lots of questions about the new economic stimulus law. I posed some to tax professionals. Here are your questions, and their answers.

Q. Regarding the first-time homebuyer credit: If a couple is married and one spouse does qualify for a first time home buyer credit, but the other spouse does not qualify for the credit because he already bought and sold a house year’s ago, is there any credit available to the couple? For example, the husband bought and sold a condo a few years ago before he was married. Only his name was on the condo. His wife has never bought a house before. If the couple is buying the house together, is their any tax credit available to them?

A. Both spouses must meet the qualifications for either to get any tax benefit associated with this credit, says Mark Steber, Vice President of Tax Resources for Jackson Hewitt Tax Service. A "first-time homebuyer" is any individual (and spouse if married) who had no present ownership interest in a qualifying principal residence during the 3-year period ending on the date of purchase of the principal residence for which a first-time homebuyer credit is being claimed.

Q. The Making Work Pay credit is worth up to $800 per married joint filers. What if one spouse is unemployed? Does the couple still get $800? A. Eligible Individuals may receive a credit of 6.2% up to $400 ($800 if married filing jointly) of their earned income for tax years 2009 and 2010.

Individuals must have earned income from wages or self-employment, Steber says. Combat pay is considered earned income for purposes of calculating this credit.

Q. Will you have to file a tax return to get the $250 credit for Social Security beneficiaries?

A. Consumers do not have to file a tax return to get the credit, Steber says. This payment will come from the Treasury Department who will get the information from the Social Security Administration, the Railroad Retirement Board, and the Veteran’s Administration. Eligible individuals only need to have received a payment of any type of Social Security or Railroad Retirement benefit, Supplemental Security benefit, or Veteran’s Disability compensation or Veteran’s Pension benefit during the three month period directly preceding the signing of the bill.

Continue reading "Q&A on economic stimulus law" »

Posted by Eileen Ambrose at 6:58 AM | Permalink | Comments (9)
Categories: Taxes
        

The president is about to sign the economic stimulus legislation.

For much of the morning and early afternoon, I’ve been answer readers’ questions about the tax breaks in the package. Some I can answer. For questions that are a bit more complicated, I’m lining up tax experts to answer them. So, here are some questions and answers we have so far. We’ll post others as they come in.

Q. I’m retired and receive two monthly checks in from pensions and a monthly social security check. All told, they amount to a relatively fixed income which seems to be eroding each year. Is my monthly pension income considered ‘earned income’? What should I expect from the $787B recently approved as a stimulus?

A. No, your pension won't be earned income. You can expect to get a one-time payment of $250. Whether you benefit other ways, such as getting an energy tax break for improving the energy efficiency of your home, depends on your situation.

Q. Any there any energy-related tax credits for homeowners in the new stimulus bill ? Our very old house has no insulation in the walls and our gas bill is too high. We got an estimate for the blow-in type insulation last year but it was very expensive so we decided to hold off. Maybe this is the year to go ahead and do it.

A. Yes, there are. For adding insulation and eco-friendly windows, there is a maximum $1,500 credit available this year and next.

Also, this info from CCH, a company that provides tax information: “The stimulus contains a number of energy-related tax provisions. Among them is removal of dollar limitations on credits for certain small wind property, solar water heating and geothermal heat pumps credits. All would be eligible for an uncapped 30-percent credit. The legislation extends the tax credits for improvements to energy-efficient existing homes through 2010 and increases the credit from 10 to 30 percent. It also extends a credit for electricity produced from renewable sources, such as biomass, solar and wind – through 2012 for wind power and 2013 for other types.”

Q. We bought a home on January 16, 2009 and have already collected the $7,500.How do I receive the additional $500?

A. From the tax experts I spoke with, you will have to file an amended return.

Continue reading "Economic stimulus tax breaks and you" »

Posted by Eileen Ambrose at 3:06 PM | Permalink | Comments (42)
Categories: Taxes
        

The $8,000 tax credit for first-time homebuyers and the new-car tax credit led to lots of questions from readers last week, so check out Eileen Ambrose's Sunday column this week for great answers to those and some other details of the stimulus bill passed last week.

The credit, she explains, is

" ... a revision of one passed last year that was worth 10 percent of the home's price --- not to exceed $7,500 --- on purchases from April 9 last year through June 30 this year.

The catch: The credit was really an interest-free loan that must be repaid over 15 years. The new and improved credit is worth up to $8,000 on purchases made this year through Nov. 30. You won't have to repay the credit as long as you don't sell the house within three years.

That "first-time homebuyer" label is a little loose, however ...

Continue reading "$8000 tax credit and property taxes: Consumer Sundays" »

Posted by Liz Kay at 8:05 AM | Permalink | Comments (0)
Categories: Taxes, Watchdog
        

AARP Tax-Aide centers are open. They provide free tax preparation for low- to middle income consumers, particularly those 60 and up. You must make an appointment.

Also, AARP is holding Maryland Tax Day on Feb. 28, where you can get your returns prepared on a first-come, first-served basis. You can check the AARP Tax-Aide site for centers near you. Or, call toll free 1-888-227-7669.

Posted by Eileen Ambrose at 1:02 PM | Permalink | Comments (0)
Categories: Taxes
        

Tax guru Clint Stretch from Deloitte says the stimulus package worked out between the House and Senate is still undergoing tweaking.

Even so, Stretch in a conference call to reporters spelled out some of the changes:

The Making Work Pay credit is worth $400 per worker.  It's the equivalent of getting a $500 pay raise, once taxes are taking into consideration, Stretch says. The credit starts phasing out once income exceeds $75,000 for singles and $150,000 for joint filers.

Retirees on Social Security, disabled Veterans and SSI recipients will get a one-time $250 payment.

The credit for first-time homebuyers is worth $8,000 for houses purchased from the beginning of this year through November, according to Deloitte's reading of the legislation. The credit would have to be repaid if the house is sold within three years of purchase.

You will be able to deduct the sales tax paid on new car purchases with a price tag of up to $49,500. The perk is available to singles with incomes up to $125,000 and joint filers earning twice that.

Also, the maximum Hope Scholarship credit for tuition, fees and now books will go up form $1,800 to $2,500. The credit starts to phase out after income exceeds $80,000 for singles and $160,000 for joint filers.

Posted by Eileen Ambrose at 7:05 AM | Permalink | Comments (130)
Categories: Taxes
        

If those nominated to lead our nation's highest offices can't even manage to pay their taxes, how can we lowly mortals escape fault?

Excellent Eileen's Sunday column about nanny taxes --- payroll, unemployment and other taxes paid for household workers, including gardeners, cooks, maids, childcare workers and others --- helps answer some of the complicated questions involved.

You'll also have to watch out for perks from anyone you have a business relationship with, making sure to report that as taxable income. That's what took down Tom Daschle.

Watchdog took a look at an out-of-order fire hydrant in Southwest Baltimore ...

Continue reading "Consumer Sunday: unpaid tax troubles and out-of-order hydrants" »

Posted by Liz Kay at 6:04 AM | Permalink | Comments (0)
Categories: Taxes, Watchdog
        

Unpaid taxes could really derail your cabinet nomination hearings, some recent perspective appointees for the Obama cabinet have found. 

First, it was Treasury Secretary Timothy Geithner who admitted he was lax in paying the taxes he owed out of his paycheck from the International Monetary Fund. Then, former Sen. Tom Daschle withdrew his nomination for Health and Human Services secretary after it was discovered that he had at the last minute paid $140,000 in taxes on a car and driver a friend provided (why don't I have friends like these?!). And Nancy Killefer recognized she couldn't be in charge of ensuring government effficiency because she had failed to pay taxes for a worker in her household.

About 90 percent of Americans say you shouldn't cheat on your taxes, ever, so how can you avoid these pitfalls yourself just in case you get tapped for, I dunno, FEMA administrator? Read Eileen's column Sunday to find out how to ensure you pay the nanny tax.

Watchdog tackles a potentially hazardous situation ... 

Continue reading "Consumer Sunday: unpaid tax troubles and out-of-order hydrants" »

Posted by Liz Kay at 5:53 PM | Permalink | Comments (0)
Categories: Taxes, Watchdog
        

Tax tips abound in Excellent Eileen's column this week, where she rattles off eight ways to beef up your tax return depending on your situation. First-time homebuyer? Collecting unemployment? Lost money in the stock market? You need to check out her column.

She brings up an important reminder if you didn't receive the maximum tax rebate in 2008. Your situation may have changed --- perhaps you earned more money, for example --- so you should check to see whether you qualify this time around.

Watchdog tackles an all-too-common problem this week:

Continue reading "Taxes and unlit lights: Yes, it's Consumer Sunday again" »

Posted by Liz Kay at 6:04 AM | Permalink | Comments (0)
Categories: Taxes, Watchdog
        

Free File is a low-cost option available to more people than ever this year. The IRS raised the maximum adjusted gross income to qualify for this service to $56,000 for 2009.

If your paychecks are a little higher than that, this year the Internal Revenue Service has come up with a way for anyone to file their taxes electronically for free, according to this Living for Less tip by Eileen. 

It's called Free File Fillable Forms (someone likes their alliteration, don't they?) and lets you fill out electronic versions of the traditional paper federal returns.

The new service doesn't sound as user-friendly as Free File, but it will do some basic calculations for you, which is a plus. And did we mention it's free? 

Regardless of how you submit your federal return, Maryland offers its own free way to file Maryland taxes electronically, called iFile.

Either federal option should result in your refund being direct-deposited in your bank account in as little as 10 days. With such a short turnaround, let's hope few if any people this year fall for the allure of refund anticipation loans.

Continue reading "Free tax filing: Cheap Trick Thursday" »

Posted by Liz Kay at 6:05 AM | Permalink | Comments (3)
Categories: Cheap/Frugal, Taxes
        

Folks, I have an amazing cheap tip for you! You should all go rush out and buy lots of stuff, when it's discounted 6 percent!

Sorry about the sarcasm above, but you *won't* save a lot of money if the National Retail Federation gets its way and finagles three tax holidays in 2009.

Sun business columnist and blogger Jay Hancock describes them as one of many industry groups advocating for a government bailout, this time in the form of 10-day tax-free shopping stints.

Seriously, there are unfortunately many things that make me shake my fist in the air in aggravation --- adjacent strip malls with bad pedestrian access between them, licorice in my herbal tea, inconsiderate street parkers --- and sales tax holidays are high on that list.

Sales taxes were *not* what prevented people from shelling out big bucks during the holiday season, and stuff was marked down in some cases as much as 75 to 80 percent! So why buy stuff when it's only discounted 6 percent --- the state's sales tax rate?!

It's not even that great a deal for retailers, and especially not for the federal government, Hancock says: 

Continue reading "Retail industry lobbying for tax-free shopping holidays" »

Posted by Liz Kay at 6:02 AM | Permalink | Comments (2)
Categories: Cheap/Frugal, Shopping, Taxes
        

While I was out running errands over the weekend, I stopped by a Marshall's and the line at the layaway counter was full of people, who had their arms and carts full of merchandise. The store in Towson was packed because there was a 25 percent sale on already marked down prices.

At first, it made me think that maybe retailers won't be hurt as badly from the long-suffering economy as everyone is predicting. But then, I thought, if big sales are already being offered before Black Friday then how much money will retailers really make if they keep slashing prices to lure customers into stores?

I don't know the answer to that. But I do know I was heartened to see so many people taking advantage of the layaway plan since I do think it's the most useful tool out there right now for people trying to avoid racking up more debt, but who still want to be able to buy nice things for the holidays. 

Put some money down, make some payments over the few weeks until it's paid off and then take your goodies home with you worry-free. That's awesome. 

You know what else is awesome? Liz alerting the Department of Transportation's Adrienne Barnes to the dangerous crosswalk at Pratt and Eutaw streets. DOT will repaint those lines so drivers will see there is, indeed, a crosswalk there where they are supposed to let pedestrians have the right of way. DOT will also re-examine the timing of the lights to make sure impatient drivers aren't blowing through red lights because the green light is too short.

Continue reading "Consumer Sundays: Layaway, Crosswalks and Year-End Tax Planning" »

Posted by Dan Thanh Dang at 7:01 AM | Permalink | Comments (0)
Categories: Economy, Holiday shopping, Taxes, Watchdog
        

A jolly good morning to everyone out there!

We know the Obamas are set to visit the White House today. Think they'll talk about taxes at all? Eileen gave us a primer yesterday on what we can expect for our taxes and investments under an Obama administration.

How many people plan on selling investments to avoid higher taxes later? Do you think he'll be forced to raise taxes during the recession?

I'm still wondering what Acer was thinking when it figured putting a customer through eight repairs on a high-end laptop was OK? And then replacing the bad laptop with a just-as-bad refurb... only to completely blow Aaron Shepard off when all he asked for was a refund of the money he spent shipping his laptop back multiple times for repair.

Continue reading "Consumer Sundays: Bad laptops, Barriers and Barack Obama's tax plans" »

Posted by Dan Thanh Dang at 7:00 AM | Permalink | Comments (0)
Categories: Complaints, Computers, Economy, Investments, Taxes, Watchdog
        

And you thought there was nothing for you in that $700 billion rescue package... That was pretty useful information that Eileen told you about, wasn't it? There's mortgage debt forgiveness, a higher income amount for the alternative minimum tax, and two education tax breaks just to name a few to help out every day people cope in these tough times. 

If you missed it, check out Eileen's personal finance column for the other tidbits available to taxpayers in the rescue plan. 

Did you catch Liz's updates for prior Watchdog queries? She found the owner of that SUV that residents of the Park Circle neighborhood thought was abandoned. The clocktower in Govans is one step closer to telling the right time. Liz got the MTA to finally put up that bus shelter in Northeast Baltimore that Edna Moore Bedford wanted to rest in while she waited. Sadly, Ms. Bedford passed on July 25, ten days after Liz's initial column ran. Thanks to Ms. Beford, though, her fellow seniors will have a place to sit under shelter while they wait for the bus.

And finally, I know I can't be the only person getting these e-mail scams offering me money from the likes of people in Tanzania, Nigeria and even officials from the "IRS."

Continue reading "Consumer Sundays: Tax credits, Money scams & Watchdog updates" »

Posted by Dan Thanh Dang at 7:00 AM | Permalink | Comments (0)
Categories: Scams, Taxes, Watchdog
        

Another drumroll please....

This week, the Treasury Department sent out 15.575 million economic stimulus payments to American households totaling $13.562 billion.

The grand total so far?

Have you gotten your rebate yet? According to the Q&As we've been running, I'm supposed to get mine today, but I haven't checked my bank account yet.

Let us know if you got yours yet and how you spent or saved it.

Posted by Dan Thanh Dang at 4:45 PM | Permalink | Comments (1)
Categories: Tax rebates, Taxes
        

You’ve filed your taxes and now wonder the whereabouts of your federal tax refund.

You can find out online at “Where’s My Refund,” a feature on the IRS’ Web site.

To trace your refund you will need to enter your Social Security number, filing status and the exact amount of your refund reported on your return.

If you electronically filed your return, you can check after seven days to find where your refund is. Paper filers need to wait four to six weeks after mailing in their return to check on the status of their refund.

If you find that the IRS wasn’t able to deliver your refund because you moved, you can change your address online. Also, if the IRS says it sent out your refund and 28 days has gone by without you receiving it, you can put a trace on the refund through the site, too.

The IRS is also working on a similar online tool for taxpayers to track their economic stimulus payment. Tax rebates are expected to start going out in early May.

Posted by Eileen Ambrose at 3:27 PM | Permalink | Comments (0)
Categories: Taxes
        

It's Tax Day, ladies and gentlemen. Have you paid your dues to Uncle Sam yet? Or are you waiting until the very last possible minute?

Here is the Top 10 Tax Procrastinating Cities in American, courtesy of Intuit, the maker of TurboTax products (as determined by the number of tax returns electronically filed online via the TurboTax Online service from April 14-April 17, 2007):

1. Chicago, Ill. – (#2) – Chicago is the "Second City" no more as it takes the top spot for the first time in the seven years the list has been compiled.
2. New York, N.Y. – (#5) – After procrastinating less last year, the hustle and bustle of the Big Apple takes its toll on taxpayers as NYC climbs back up the list to rank at Number 2. The Giants may be number one in pro football, but New York is second on our list of late filers.
3. Houston, Texas – (#1) – Houstonians have topped our list more than any other city (three times) but must have tired of being the top procrastinators. Progress is progress and Houstonians drop two spots this year.

Continue reading "Which city has the biggest tax filing procrastinators?" »

Posted by Dan Thanh Dang at 12:00 PM | Permalink | Comments (1)
Categories: Taxes
        

April 15 is fast approaching. If you don’t have the money to pay your tax liability, don’t make matters worse by not filing by the tax deadline.

By ignoring the deadline, you will pay interest and late payment penalties.

The IRS advises filing your return on time and paying as much as you can. Then go to the agency’s Web site to request a payment agreement. Within minutes, the IRS says, you could set up a short-term extension or a monthly payment plan.

With an extension, you’ll get an extra 120 days. You’ll still owe interest and a late-payment penalty.

The monthly plan is for those who need more time to pay. You’ll still owe interest but the late-payment penalty is reduced. If you’re approved for the monthly plan, you can cut the $105 user fee in half by having your payments made through electronic debits from your bank account.

Some taxpayers get extra time because they are in combat zones or in a disaster area.

Service members in Iraq, Afghanistan and other combat areas don’t have to file until 180 days of leaving the combat zone.

Taxpayers in certain disaster areas of Illinois have until May 6 to file; the deadline is May 6 for disaster areas of Georgia and Missouri and May 27th for disaster areas in Arkansas.

Posted by Eileen Ambrose at 10:11 AM | Permalink | Comments (0)
Categories: Taxes
        

More and more taxpayers are telling the IRS to put their tax bill on their credit card.

Convenient, maybe. But does it make financial sense?

Ben Woolsey, director of marketing and consumer research for CreditCards.com, says filers might want to put away the plastic.

Of course, any bill put on a credit card can trigger interest costs if you don’t pay the balance off each month.

But on top of that, the IRS can’t pay credit card company the usual fee that merchants pay, says CreditCards.com. That 2.49 percent fee is passed on to you instead. So, a $1,000 tax bill paid with plastic carries a nearly $25 fee.

Plus, credit card interest rates typically run higher than what the government would charge under an installment plan, the group said.

When can it make sense to put taxes on a credit card? When you owe a big tax bill, need eight months or more to pay it off and your interest rate on the card is far, far lower than what the IRS installment plan charges.

So, have you paid off your tax bill with a credit card or thinking about it? Any thoughts on doing so?

Posted by Eileen Ambrose at 5:14 PM | Permalink | Comments (1)
Categories: Taxes
        

Refund anticipation loans are short-term loans tied to your expected tax refund. You get the money in a day or so, and then when your refund comes in within two weeks later, the loan is repaid.

Consumer advocates don’t like these loans because the fees tend to be high just to get a refund a little earlier. And most of those who take out refund loans are lower-income workers who need every penny.

The National Consumer Law Center and Consumer Federation of America publish a report on refund loans every year. This year’s report show positive signs, the groups say.

For instance, the number of taxpayers taking out loans has dropped and prices have fallen in some cases. The report’s findings are based on 2006 data, the latest figures available from the IRS.

Here are the report’s highlights:

— Nearly 9 million taxpayers took out a refund loan in 2006. That’s down from a high of 12.4 million two years earlier.

— These taxpayers paid $900 million in loan fees and more than $90 million in other fees. Of these filers, 5.7 million were the working poor who paid more than $570 million in loan fees

— H&R Block and refund loan lender JP Morgan Chase lowered their prices; Jackson Hewitt and

Continue reading "A little good news on refund loans" »

Posted by Eileen Ambrose at 11:43 AM | Permalink | Comments (0)
Categories: Taxes
        

Mark April 23rd on your calendar. That’s Tax Freedom Day, or the day when Americans have earned enough to pay all their federal, state and local taxes.

Freedom arrives three days earlier this year than last, according to the Tax Foundation which compiles the figures.

The Tax Foundation says we work longest to afford government taxes — 113 days. Of those, 74 go toward paying federal taxes. In comparison, we work 108 days to pay for food, clothing and housing combined.

Because the calculation takes state and local taxes into account, residents in some state reach Tax Freedom Day sooner than others.

Tax Freedom arrives latest, in order: Connecticut (May 8), New Jersey (May 7), New York (May 5), Washington, D.C., (May 3), California (April 30) Washington state (April 29), Massachusetts and Maryland (April 28), Minnesota (April 27) and Florida and Hawaii (April 26).

Alaska celebrates Tax Freedom Day the earliest: March 29.

Continue reading "Freedom from Taxes" »

Posted by Eileen Ambrose at 7:59 AM | Permalink | Comments (0)
Categories: Taxes
        

Every year, the IRS puts out its list of the top dozen tax scams to avoid. Here’s this year’s:

1. Phishing — This is when you get an e-mail that looks like it comes from the IRS, a bank or investment company but in reality it’s from con artists trying to get you to divulge account information. Consumers have forwarded 33,000 scam e-mails to the IRS, representing more than 1,500 different gimmicks. The truth: the IRS won’t contact you by e-mail about your taxes.

2. Scams Related to the Economic Stimulus Payment — Ignore e-mails purporting to be from the IRS that claim you must divulge personal information to get the tax rebate. To get the rebate, you only have to file a tax return.

3. Frivolous Arguments — Ignore people advising you to make false claims to avoid paying taxes. It’s not true, for example, that you can object to paying taxes on religious grounds.

4. Fuel Tax Credit Scams — Farmers may be eligible for a fuel tax credit, other individuals may not. Falsely claiming the credit can lead to a $5,000 penalty.

5. Hiding Income Offshore — This includes using offshore bank and brokerage accounts or using offshore debit cards, credit cards, wire transfers, foreign trusts, employee leasing schemes, private annuities or life insurance plans.

6. Abusive Retirement Plans — The IRS says it’s looking at investors trying to get around the contribution limits to Roth IRAs. One way is to move highly appreciated assets into the Roth at cost value, even though the fair market value exceeds that amount you can put into the IRA.

7. Zero Wages — Lying about your wages so you owe less in taxes is a no-no.

Continue reading "Watch out for these Dirty Dozen" »

Posted by Eileen Ambrose at 7:53 AM | Permalink | Comments (0)
Categories: Taxes
        

Doing your own tax returns? Don’t overlook deductions.

Here are 10 of the most overlooked deduction as cited by Ernst & Young Tax Guide 2008:

1. Accounting fees for tax preparation services

2. Appreciation on property donated to a charity

3. Costs associated with looking for a new job in your present occupation, including fees for resume preparation and employment of outplacement agencies

 4. Fees paid for childbirth preparation classes if instruction relates to obstetrical care

 5. Mortgage prepayment penalties and late fees

 6. Real estate taxes associated with the purchase or sale of property

 7. Health Insurance premiums, if self-employed

 8. Alcoholism and drug abuse treatment

 9. Depreciation of home computers

 10. Improvements to your home

 As always with deductions, they might only apply to those within certain income limits or other qualifications. Make sure you read the rules before claiming the deduction.

Posted by Eileen Ambrose at 4:02 PM | Permalink | Comments (0)
Categories: Taxes
        

It would be a lot easier if Uncle Sam just cut a tax rebate check to every household. That's because the way Congress set the rebate up has led to mass confusion.

Questions are pouring in. And IRS spokesman Jim Dupree in Baltimore has been responding as quickly as he can find the answers. In the latest Q&A:

Q. Once filling out a 1040A, where do I mail it?

A. If you live in Maryland, mail your IRS Form 1040A to: Department of the Treasury, Internal Revenue Service, Andover, MA 05501-0015.

Q. Does it make a difference if I use a 1040 or 1040A? The library had only a 1040 form.

A. You can use the 1040 form. Recipients of Social Security, certain Railroad Retirement and certain veterans’ benefits should report their 2007 benefits on Line 14a of Form 1040A or Line 20a of Form 1040. Taxpayers who already have filed but failed to report these benefits can file an amended return by using Form 1040X.

Q. On a joint return, does each spouse have to have qualifying income to get the rebate?

A. No. If the joint return has a combined income of at least $3000, and both spouses has a valid social security number, they should qualify.

Q. A great article on IRS rebates. My question is: Will an individual receive his/her rebate if he/she owes Federal taxes and is paying them on an installment plan? In other words, will the IRS intercept the rebate and apply it to his/her taxes owed? No one has addressed this in any of the numerous articles I’ve read on the subject.

Continue reading "Tax rebate questions keep coming" »

Posted by Eileen Ambrose at 3:45 PM | Permalink | Comments (1)
Categories: Tax rebates, Taxes
        

It sounds so simple: Give taxpayers $300 to $1,200 to spend and jumpstart our economy.

Since Congress passed the economic stimulus package, there’s been a lot of misinformation about the tax rebates. The IRS tried to clarify the details today. But even the pros can get confused by the convoluted rules.

IRS Acting Commissioner Linda Stiff gamely answered reporters questions during a telephone conference. She made the point that Social Security disability benefits would not be count toward the needed income to receive a rebate.

Are you sure? she was asked. An IRS notice sent out earlier in the day stated the opposite. Stiff said she was sure.

Not long after the teleconference, the IRS issued a clarification: "Just to follow-up on some of the questions at today's press briefing particularly in reference to Social Security benefits. The material on IRS.gov is correct regarding Social Security and Veterans' benefits. Part of the press briefing discussion involved types of Social Security benefits. Social Security disability benefits do count toward the qualifying income requirement laid out in the Economic Stimulus law; Supplemental Security Income payments (SSI) do not count."

If the IRS has trouble interpreting the stimulus package, heaven help the rest of us.

Posted by Eileen Ambrose at 6:54 PM | Permalink | Comments (0)
Categories: Taxes
        

By now, you’ve heard that tax rebate checks of $300 to $1,200 are going to 130 million taxpayers. Those with children get an extra $300 per child.

But here are other details on the rebates from the IRS:

You must have at least $3,000 of qualify income to receive a rebate. That income includes Social Security as well as certain veterans’ and railroad retirement benefits.

Benefits begin phasing out once adjusted gross income reaches $75,000 for individuals and $150,000 for couples filing jointly.

You’re not entitled to a rebate if you’re being claimed as a dependent on another’s tax return.

You must file a 2007 if you want a rebate check. That includes those who normally aren’t required to file a return, such as low-income workers, Social Security recipients and retired railroad workers.

The IRS has issued a special version of the Form 1040A for those that normally don’t file.

Payments will start arriving in early May. The IRS will be issuing checks through the end of the year.

You’ll receive rebates faster if you have your tax return directly deposited in your bank account.

If you don’t have a bank account where the IRS can directly deposit your rebate, you will receive a paper check. That includes filers who take out refund anticipation loans and don’t have a bank account year round.

Check out the IRS Web site more details.

Posted by Eileen Ambrose at 10:53 AM | Permalink | Comments (15)
Categories: Taxes
        

President Bush is expected to sign the economic stimulus package — which includes tax rebates — on Wednesday.

Rebates can be as high as $600 for singles, $1,200 for couples plus an extra $300 per child. The checks will arrive sometime in May.

But Senators Chuck Grassley and Charles Schumer aren’t waiting to put check cashers, payday lenders and tax preparers on notice. The two Chucks warned these groups against marketing high-priced products like refund anticipation loans to those receiving rebates.

In a letter today to industry players, including Financial Services Centers of America and H&R Block and Jackson Hewitt, the senators warned:

“These rebate checks are meant to be money in the pockets of working families, veterans, and seniors – not money in the till for tax preparers or payday loan vendors. We are determined that members of your industries not take any steps to publicize or otherwise encourage working families, veterans, or seniors to take a loan or other credit arrangement based on the rebate checks approved by Congress. Such actions will be harmful and undermine the intended goals of the legislation – namely, getting the full amount of the tax rebate into the hands of individuals and families who will spend the money and provide a short-term boost to the economy.

“Here are a couple of examples to clarify our concern. Consider a married couple with three children that is expecting a $2,100 check in June. Clearly, it is not the intent of Congress that a payday lender, tax preparer, or other entity would offer that family $1,600 in April in exchange for the $2,100 check two months later. Such an “advance” of the rebate would represent a loan at an annualized interest rate of 190 percent. Or consider a single mother with two children that pays a $200 fee to get her rebate back 60 days faster – which amounts to a 122 percent interest rate on the $1,000 loan she receives. Clearly, it is the intent of Congress that these checks should go into the pocketbooks and checking accounts of working families – not to enrich unscrupulous lenders. We will be monitoring this matter closely and will look to federal and state regulators to fully examine this issue if there are any improprieties.”

And in case some businesses don’t think the senators are serious, they add:

“In addition, we are particularly concerned that tax-exempt entities that engage in payday loans not engage in this behavior. We view such actions as raising legitimate concerns about whether such an effort would be in keeping with their tax-exempt status.”

H&R Block responded that the senators are jumping the gun. In a statement, the company said:  

If you see or hear of any instances where companies violate the senators’ wishes, let us know.

Posted by Eileen Ambrose at 3:55 PM | Permalink | Comments (3)
Categories: Taxes
        

Who says you can’t get something for nothing?

Feb. 23 is Maryland Tax Day, where AARP volunteers will prepare your federal and state tax returns for free.

The program is geared for low- to moderate-income taxpayers. All ages are welcome, although there’s an emphasis on helping those 60 and older.

Maryland Tax Day is way to call attention to AARP's Tax-Aide program that provides free tax preparation throughout the tax season around the country. Locations are posted on AARP's Web site.

Sure, this news isn't as good as avoiding taxes altogether. Still, if you have to pay taxes, you might as well have someone prepare your return for free.

Maryland Tax Day falls on a Saturday. Volunteers in 27 locations will be ready to prepare your return. No appointment is needed. Here’s a list of the sites and times:

Continue reading "Something for Nothing" »

Posted by Eileen Ambrose at 10:00 AM | Permalink | Comments (0)
Categories: Taxes
        

Remember the plight of poor Elizabeth Brooks, who owns a titling company in Towson, and her battle with the City Land Record Office to get a $300 refund owed to her client? I wrote about it on Jan. 20.

For six months. she got the runaround, broken promises and even yelled at by staff in the office. But in that story, when I reached Clerk of Courts Frank Conaway, he pledged to get Brooks her money. He said:

"I would not wait around that long for a refund. I don't train my people to treat my customers that way and I can assure you, give me a week, this woman will have her refund. Someone is going to pay for this. I am a stickler for good customer service."

Well, Brooks was kind enough to share with me today two letters she received from the Circuit Court of Baltimore City. Chief Judge Robert M. Bell wrote on Jan. 17 to say that, "The oversight responsibility for Clerk's Office personnel rests with the Clerk of the Court, in this case, the Honorable Frank Conaway. Aware of his well-known and oft expressed attitude about service to the public, I am confident that he will act to resolve this matter quickly and efficiently, once it is brought to his attention."

Bell's letter was cc'd to Conaway and Chief Deputy Lavinia Alexander.

Brooks also received a letter from Denise D. Smith, manager of the land records & license department. Smith wrote,

Continue reading "City Land Records blunder continues: 9 days & counting" »

Posted by Dan Thanh Dang at 4:47 PM | Permalink | Comments (0)
Categories: Complaints, Naughty businesses/NBotW, Taxes
        

My recent column advising people not to spend the tax rebate and to use it to better their personal finances, generated feedback:

“ Bravo! Right on!!! You should encourage your editor to re-run the advice when the checks are being mailed." — Jeff

“Your recent article on the rebate is spot on. The root of the perceived problem is lack of demand for goods and services. “Free money“ is sending the wrong message to the consumer, store owners, and global markets. Yes, there was a short spike this week with the announcements of rebates, etc. But the deeper problem is over-reaction by the Federal Reserve. Lowering the interest rates in a knee jerk reaction is not strategic and only delays the inevitable pain any economy (going through a natural contraction) must endure.

“Recessions are not all that bad; pretending, wishful thinking, and band-aids do not help in a recession that is occurring right now. The stock market for some unknown reason seems to be the health meter of the American economy. Maybe rebates should be spent on learning exactly what equities are and are not. Will rebates help the poor get a better job? Will rebates make the unemployed feel better? How about the average two parent working family that is bumping up to or in the AMT plan? How many of these checks will go for alcohol, cigarettes, guns, or gambling? Did anyone think of the unintended consequences of free money?

“One way for demand to increase for goods and services is through fair and meaningful tax cuts. If one reviews the increases to State and Federal taxes, one would see a system of aggregate negative impact on growth opportunities for business and most importantly a forced retarding of consumer demand. Something has give in a recession. Rebates may help the alcoholic for a week or two, a gambler for a day at the track, or a smoker for a few months, but at what cost?

“I don’t want to sound all negative, because some of the rebates will go to good causes and help at least for a short term families that are really feeling the pinch. The answer however, is never in free money give-a-ways! It is a slap in the face of hard working folks that do save for tough times and are prepared to buy the necessities and forgo on the luxuries in order to avoid unnecessary debt.

“Lastly, is this the beginning of a series of free money give-a-ways? Will young people begin to depend on the rebates as a source of regular income? What impact does this have on Social Security? Why now? Is there anyway to stop this rebate proposal from happening? Something is intuitively wrong with free money give-a-ways (because there is a price to pay at some point).

 “The public deserves to be better informed: the rebate remains a debate." — Mark

Continue reading "Tax rebate? No thanks" »

Posted by Eileen Ambrose at 2:00 PM | Permalink | Comments (0)
Categories: Taxes
        

What are you going to do with the $300 to $1,200 tax rebate the government will be handing out?

Save it? Pay off debt? Do your part to boost the economy by buying American-made products?

When interviewing economists and financial advisers last week about the rebates for my column, I asked them about their plans for the rebate if they got one. Here are their answers:

David Wyss, chief economist with Standard & Poor’s, is remodeling his kitchen. “Maybe as a result we would buy a fancier refrigerator than we would have otherwise.”

Nomura Securities chief economist David Resler isn’t keen on rebates because it adds to the country’s debt. He says he’ll use his rebate to buy some of the Treasuries the government will need to issue to pay for the program.

James Chessen, chief economist at the American Bankers Association, has a son who’s a senior in college and a daughter who will be a freshman in the fall. “I’m going to be dirt poor and every available dollar is going to my kid’s education.”

Diane Swonk, chief economist at Mesirow Financial, advocated that rebates should go to lower-income households that are most likely to quickly spend the money. “I don’t think I should get one,” she says.

Tom Ochsenschlager with the American Institute of Certified Public Accountants says he would invest his money in the stock market — as long as prices are still low when he gets his check.

Joanna Smith-Ramani, director of the Baltimore CASH Campaign, would use the cash to pay down a student loan.

Robert McIntyre, director of Citizens for Tax Justice says, “Save it. Right now, nothing looks good.”

Consumer Federation of America’s Executive Director Stephen Brobeck says he and his wife would initially save the money and later donate it to charity.

Silver Spring financial planner Peg Downey says, “I’ll invest it.”

In my case, I would put the money in the bank. And if I get to take a vacation in Europe this year, I’ll think of the rebate as helping to make up for the weak dollar.

So what would you use the rebate for?

Posted by Eileen Ambrose at 10:59 AM | Permalink | Comments (2)
Categories: Taxes
        

Great story today by my excellent colleagues Jamie Smith Hopkins and Laura McCandlish on residents cutting back on spending due to fears of a worsening economy.

As they say in the story:

Sharply rising costs for food and energy last year helped fuel the biggest jump in inflation since the recessionary year of 1990, the federal government said yesterday.

That means higher prices for consumers on top of rising taxes. Add markedly slowing U.S. job creation, slumping home sales, climbing foreclosures, defaults on subprime loans and a wildly fluctuating stock market, and it's not hard to see why people are feeling pessimistic.

Good to know I'm not the only one who is a pessimist. As I said in my post yesterday, the more worried consumers get about the economy and their budget, the more they'll pull back on spending. The more they pull back on spending, the more it will hurt the economy. All the state's new taxes won't help at all, either.

Posted by Dan Thanh Dang at 12:50 PM | Permalink | Comments (0)
Categories: Budgeting, Taxes, Wages
        

The IRS will begin accepting tax returns tomorrow, kicking off the tax filing season.

And if your income is at a certain level, you’ll be able to have your return prepared for free.

The IRS will open its Free File program tomorrow at www.irs.gov. The program is a partnership with 19 tax preparation companies to provide free tax service. To be eligible, your adjusted gross income must be $54,000 or less. About 97 million taxpayers are eligible, or 70 percent of all filers.

You might recall that Congress passed legislation late last year to fix the alternative minimum tax. The fix came too late for the IRS to update its systems to handle certain forms by the start of the tax season.

If you file one of these five forms, you must wait until Feb. 11 to file your return. Send the forms in before that, and the IRS will reject your return, says David Williams, director of Electronic Tax Administration for the IRS.

The five forms: Form 8863, education credits; Form 5695, residential energy credits; Schedule 2, Form 1040A, child and dependent care expenses; Form 8396, mortgage interest credit; and Form 8859, the D.C. first-time homebuyer credit.

About 3 million early filers usually one of the five forms to claim the credit.

Congress wanted the IRS to have 80 percent of returns filed electronically by 2007. Last year, 58 percent of tax payers electronically filed. The IRS aims to exceed 60 percent this season.

Filing electronic saves money for the government - and ultimately, us. It costs the IRS 29 cents to process an electronic return versus $2.65 for a paper return. The IRS will be launching a study on how to get more people to file electronically.

Posted by Eileen Ambrose at 3:00 PM | Permalink | Comments (1)
Categories: Taxes
        

Some tax professionals hate refund anticipation loans as much as consumer advocates do. Responding to today’s column about the IRS looking into these high-cost loans for the first time, Andrew H. Scholes writes in an e-mail:

 "I am a CPA in Dayton, Ohio, and have always tried to talk to people about the interest they are paying to get their money a couple of days faster. We have never offered RALs (nor will we). As you noted, taxpayers can receive their refunds in a very short period of time by having their return filed electronically and direct depositing their money into their bank account.

“Thank you again for trying to wake people up as to how much they are costing themselves to get their own money. The next step is to talk to them about W-4 planning so that they can have more in their weekly paycheck rather than giving an interest free loan to the government so they can have a refund in the thousands of dollars.”

But William Wilson, a Maryland tax preparer for about 14 years, says one reason refund loans won’t disappear is that taxpayers demand them. He writes:

“I intensely dislike selling them, but both you and the IRS are not dealing with reality in reference to the creation of the loan. The vast majority of the loans are demanded by the customer. I always attempt to discuss the three available methods for refunds, but very few minds are changed. I have been told not a few times “I don’t care what it costs...”

“You have also been misled on the speed at which electronically filed, direct deposit refunds are deposited. You will get Maryland state refunds in two to three days, but the federal will be 10 to 17 days. This results from both federal processing time and the fact that the IRS pays refunds on Fridays only.

“In short, I welcome the IRS inquiry, but as I stated above, in many cases the loans are demanded by the client. If any action were to be taken, it would have to be a total ban to maintain a level playing field.”

Posted by Eileen Ambrose at 11:05 AM | Permalink | Comments (1)
Categories: Taxes
        

Here's how budgeting works in my house. If I only make X-amount of dollars per year, then I try mighty hard not to spend X + 1. Sometimes, that means putting off a home repair I need (for instance, insulating my old home) until I have the money to cover it. If it looks like my spending could go over X, I take a hard look at all my needs and trim (I cut the cable for several years and cut back on eating out when times were lean).

Here's how the state of Maryland budgets: 

Hear that? That's the sound of crickets.

Continue reading "State of Md - 1, Consumers - 0" »

Posted by Dan Thanh Dang at 7:48 AM | Permalink | Comments (28)
Categories: Odds & Ends, Taxes