RISMEDIA, March 17, 2010—With the U.S. federal income tax filing deadline of April 15 now just weeks away, taking time to review your tax situation and plan for any needed action will save you time, stress and, quite possibly, money.
With the economic recession impacting so many Americans in 2009, many people will have complicated filing situations this year, says Jeff Staley, president of Freedom Tax Relief, LLC. “This is the time to prepare, review your tax obligations and evaluate your alternatives for payment if you find you may have difficulty in paying your tax bill this year.” Staley recommends taxpayers follow these steps now in order to be ready for April 15:
1. Make a plan for filing. Make plans now to ensure that you will be able to file your income tax return on time. If that is impossible, file an extension. The Internal Revenue Service (IRS) is more forgiving of those who follow the rules than those who skip filing. Even if you cannot pay your tax debt in full on April 15, filing the required forms will result in smaller penalties.
2. Understand tax on unemployment benefits. Unemployment income is taxable. If you received unemployment benefits during 2009, you should have received a Form 1099-G providing the total amount received. If your employer paid separate unemployment compensation, that income should be reported on your W-2 form as income. Note that the first $2,400 of government benefits received in 2009 is exempt from tax, thanks to the American Recovery and Reinvestment Act.
3. Prepare documentation for tax credits. Review your 2009 expenses to know whether you qualify for credits. The American Recovery and Reinvestment Act of 2009 (e.g., stimulus package) included many tax credits, ranging from an expanded health coverage tax credit to new education benefits.
4. Maximize deductions. If you made donations to nonprofit organizations in 2009, make sure you obtain needed appraisals or valuations to list these contributions accurately in your tax forms, per IRS guidelines.
5. Contribute to your retirement plan. If you plan to contribute to a retirement plan, you can still make tax-deferred contributions for 2009 until April 2010.
6. Estimate your payment. You can estimate your tax obligation by reviewing a copy of last year’s tax form, completed with your 2010 data. If you purchase tax return software, you can use that. Or go to www.irs.gov and download a PDF version of your form to fill out.
7. Plan for payment. If it looks like you will have a larger tax bill than you can afford to pay in full by April 15, the IRS suggests taxpayers find any means possible to pay that bill, including bank loans, cash advances on credit cards, using savings, borrowing against retirement or life insurance, or using equity in assets (such as a home) to pay. However, if you are in dire financial circumstances, exchanging one debt for another will not make things easier, and putting a home at risk is almost always a bad idea. Consult a tax and/or financial adviser before making a decision.
8. Evaluate your alternatives. If you will absolutely be unable to pay your tax bill, contact the IRS. The agency sometimes gives some leeway to taxpayers who contact them directly or pay a late bill voluntarily. The IRS might waive penalties for those who cannot pay because of a death in the family, serious illness, financial records lost in a natural disaster or another “reasonable cause.”
Another alternative is tax debt resolution. Tax resolution specialists can often negotiate directly with the IRS on behalf of consumers who owe $10,000 or more. These specialists usually are attorneys, enrolled agents or certified public accountants with special training and experience. They can navigate the maze of IRS forms and calculations, help consumers understand what the IRS wants, and help them resolve their tax debt.
“As the April tax filing deadline looms, it is time to face up to the demands of the IRS and determine a payment strategy for your tax bill,” says Staley. “In these economic times, it is good to know that help is available for those who need it.”
For more information, visit www.freedomtaxrelief.com.
March 13, 2010—According to the Federal Bureau of Investigation (FBI), mortgage fraud is an escalating problem. It is the fastest growing white collar crime in the U.S. The FBI estimates annual losses of $4 billion to $6 billion in mortgage-related fraud, and the numbers are expected to increase. While there are legitimate programs to help ailing homeowners, there are also many scams that capitalize on these programs. Money Management International (MMI) offers the following tips to avoid falling into a foreclosure trap:
-Talk to your mortgage lender first. If you think you are unable to make a payment, contact your lender right away. They may be able to help you identify options to bring your loan current.
-Don’t pay upfront fees. Someone asking you to pay an upfront fee in exchange for help should be a red flag that the person or company may not have your best interest at heart.
-Get promises in writing. Oral agreements relating to your home are usually not legally binding. Protect your rights with a written contract signed by the person making the promise.
-Make mortgage payments directly to your lender or mortgage servicer. Do not trust anyone else to make your mortgage payments for you.
-Be careful about transferring your title. Foreclosure scams often require you to sign ownership of your home over to a third party. Never sign over your deed without seeking legal advice first. Understand the terms of the deal you are making. By signing over your deed, you lose rights to your home and any equity.
For more information, visit www.moneymanagement.org.
RISMEDIA, March 12, 2010—As the deadline for filing taxes grows nearer, there are many tax rule changes that taxpayers should be aware of that could net them thousands of dollars in deductions or credits. Bills.com, one of the leading resources for free, personalized and expert money advice provides a rundown of the most important changes and some little known deductions that could add up to big savings.
Home Buyer Tax Credit
Through the combination of two rule changes, individuals purchasing a new home between January 1, 2009 and April 30, 2010 could be eligible for as much as $8,000 in a home buyer tax credit. Those who have not owned a principal residence during the past three years and who purchase a new home between these dates can qualify for the $8,000 home buyer tax credit. Those who have owned the same home as a primary residence for five consecutive years during the last eight years and who purchase a replacement home between November 6, 2009 and April 30, 2010 are eligible for up to $6,500 in a home buyer tax credit. Note that income and other limits apply to qualify for either credit.
Energy-Efficient Home Improvement Credit
There are two primary and distinct credits for energy efficient home improvements. The first covers general home efficiency repairs such as insulation, windows and doors and high-efficiency furnaces. This credit is 30% of the cost up to an aggregate of $1,500. The second credit covers larger-ticket improvements. Homeowners can take up to 30% of the total cost of installing solar hot water systems, solar electric generating equipment, wind energy equipment or geothermal heat pump systems with no fixed cap.
Government Retirees Credit
Government retirees could be eligible for a one-time 2009 refundable tax credit of up to $250 for an individual and $500 for a married couple filing jointly. To qualify, individuals must have received past government retirement benefits that were not subject to Social Security tax withholding at the time and they must be ineligible for the $250 economic recovery payment provided to certain government program participants.
Making Work Pay Credit
Working individuals can claim a refundable credit in the amount of 6.2% of their earned income up to a maximum of $400 for a single filer or $800 for a married couple filing a joint return. Self-employed individuals and those who have not already seen an adjustment in their withholding this year will have to adjust their liability on their 2009 tax return.
Unemployment Compensation Deduction
Generally, unemployment compensation counts as taxable income. However, new rules allow for a one-year exemption for the first $2,400 of 2009 unemployment compensation.
Vehicle Sales Tax Deduction
This is a new deduction for state and local sales or excise taxes paid on the purchase of new vehicles between February 17, 2009 and December 31, 2009. This covers new cars, motor homes, light trucks and motorcycles and is available on the first $49,500 of the vehicle purchase price even if you do not itemize deductions.
Job Search Expense Deduction
For those itemizing deductions, you may be eligible to write off expenses associated with a new job search during the last year.
Haitian Relief Donation Deduction
Congress has allowed deductions made to Haiti relief efforts between January 12th and February 28, 2010 eligible for 2009 write-offs. Qualifying contributions include those made by check, money order, credit card, charge card, debit card or even text message. Small donations require only a cancelled check or statement, while those over $250 require a receipt from a charity.
Gambling Loss Deduction
As hard as it may be to believe, gambling losses up to the amount you’ve won are eligible for a deduction. These losses must be documented through a written journal, receipts or betting stubs.
For more information, visit www.bills.com.
RISMEDIA, March 11, 2010—After a couple years of tight credit and rising identity-theft rates, financial literacy may be the greatest tool for consumers struggling with their personal finances.
Some federal agencies are taking action to help Americans understand their rights, and the director of student retention at one Minnesota university launched a financial literacy program to educate young people about money management.
The rules are changing
Last year, Congress signed the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009. This established new protections for consumers against unfair credit card practices, like sudden interest-rate or penalty hikes. A tracking study conducted by FreeScore.com showed that over 50% of American consumers are unaware of the effect that the new law will have on them.
The Federal Reserve Board launched a website to help consumers better understand what this law meant for their credit. PDFs and interactive pop-ups walk consumers through some of the Credit CARD Act’s protections.
“These online tools and resources will help consumers make well-informed decisions about their use of credit,” said Fed governor Elizabeth A. Duke. “We will update the site regularly to provide the most useful and current information.” Parts of the website, including the “5 Tips” guides on responsibly maintaining credit, are available in Spanish. A glossary of credit-related terms and laws on the website may further clear up credit questions. It also provides links and information about contacting the Fed.
After noticing that debt derailed many a student’s education, St. Catherine University’s Ellen Richter-Norgel launched a financial literacy program. According to a report in the (Minneapolis-St. Paul) Star Tribune, the school hosted a series of speakers and sparked dialogue about debt and budgeting. “Sometimes, I think you have to be in a crisis to get the help you need,” Richter-Norgel told the newspaper.
Trade commission takes action
Starting April 1, 2010, websites advertising “free credit reports” will be required to include a disclosure from the Federal Trade Commission (FTC). This disclosure will direct visitors to the government-endorsed annualcreditreport.com and away from websites that often charge monthly fees for monitoring.
The FTC also launched a new animated video to educate consumers about filing a complaint. The video, which is available in Spanish, identifies various types of scams and directs consumers to ftc.gov/complaint to file a report.
Identity theft and credit card fraud in particular topped the list of consumer complaints last year, according to the FTC. This crime accounted for 21% of total complaints, with the highest incidence reported in metropolitan areas.
According to a recent report by Javelin Strategy & Research, more than 11 million Americans, or one in every 20 adults, were victims of identity fraud last year. The report also showed that consumers reported such crimes more quickly than in previous years. The FTC suggests that those suspecting they are compromised place a fraud alert on their credit reports as soon as possible. The next steps include closing any concerned accounts, filing a police report and reporting the fraud to the FTC.
For more information, visit www.creditfyi.com.
