If you sold any stock, cashed in employee stock options, liquidated an IRA or 401K you should give us a call. We would like to make sure you bring all the required documents to your tax appointment. Often clients forget about transactions and sometimes banks and brokers are slow to get out the statements in January.
If you sold stock we will need to know when and how much you paid for the stock. The same is true for the employee option sales. Often the employer gives you a statement at year end with all the info we need.
In these tough economic times we know more clients will want to get their returns done early.
We also offer several bank products so you can get your refunds quickly. the fees are affordable and we use a very good company for the rapid refunds.
Thursday, November 6, 2008
Wednesday, October 22, 2008
2008 Tax Year is Ending Soon
Well it is almost that time again. We understand that many clients may have sold homes under a short sale or lost their home due to foreclosure. It is very important that you let us know about any short sales or home losses. They can have significant impact on your tax situation.
Please call us if you have any questions about how that might impact your tax liability.
Also let us know about any stock you may have sold this year.
Please call us if you have any questions about how that might impact your tax liability.
Also let us know about any stock you may have sold this year.
New office in Lomita
Well if you have not heard already we moved in August this year.
We love our new location and look forward to seeing you all very soon.
As always if you have any tax related questions or your get a notice from the IRS or FTB please give us a call. We are in our office full time year round.
We love our new location and look forward to seeing you all very soon.
As always if you have any tax related questions or your get a notice from the IRS or FTB please give us a call. We are in our office full time year round.
Monday, July 14, 2008
IRS Sends out a warning to all Taxpayers
This information comes from the IRS website. We have had several clients call us about these emails. Please call us if you have any questions and never give out any personal information to anyone in an email.
Scammers Use e-Mail, Fax to Pose as IRS
IR-2008-88, July 10, 2008
WASHINGTON — The Internal Revenue Service cautions taxpayers to be on the lookout for a new wave of scams using the IRS name in identity theft e-mails, or phishing, that have circulated during the last two months.
In May and June alone, taxpayers reported almost 700 separate phishing incidents to the IRS. In 2008 so far, taxpayers have reported about 1,600 phishing incidents to the IRS.
“Taxpayers should take steps to keep their personal information out of the hands of identity thieves,” said IRS Commissioner Doug Shulman. “That includes not falling for any of the phony e-mails or faxes now in circulation pretending to come from the IRS.”
The most common scams involve tax refunds and, this year, economic stimulus payments.
Although most of these scams consist of e-mails requesting detailed personal information, the IRS generally does not send e-mails to taxpayers, does not discuss tax account matters with taxpayers in e-mails, and does not request security-related personal information, such as PIN numbers, from taxpayers.
Refund e-Mail Scam
There are several variations of the refund scam, in which an e-mail claiming to come from the IRS falsely informs the recipient that he or she is eligible for a tax refund for a specific amount. The bogus e-mail instructs the recipient to click on a link to access a refund claim form. The form requests personal information that the scammers can use to access the e-mail recipient’s bank or credit card account.
This notification is phony. The IRS does not send unsolicited e-mail about tax account matters to taxpayers.
Filing a tax return is the only way to apply for a tax refund; there is no separate application form. Taxpayers who wish to find out if they are due a refund from their last annual tax return filing may use the Where’s My Refund? interactive application on this Web site. IRS.gov is the only official IRS Web site.
Economic Stimulus Payments Scam
In this scam, a taxpayer receives an e-mail pretending to come from the IRS which tells the recipient he or she is eligible for an economic stimulus payment. The message recommends direct deposit into the taxpayer’s checking or savings account. To receive the payment, recipients must click on a link to complete and submit an online form by a certain date; otherwise, the e-mail warns, payment may be delayed. The form requests personal and financial data, including checking or savings account numbers that the scammers can use to gain access to the accounts.
In reality, the way members of the public receive their economic stimulus payment is to file a tax return with the IRS, not a special form. Additionally, the IRS does not request personal or financial information via e-mail.
Information on how to obtain an economic stimulus payment may be found in the Economic Stimulus Payments Information Center on the this Web site. For more information on stimulus-related scams, see IR-2008-11.
Substitute Form 1040 Fax Scam
This scam consists of a cover letter and form that are faxed, rather than e-mailed. The cover letter is addressed “Dear Valued Tax Payer (sic)” and appears to be signed by an IRS employee. The letter says that the IRS is updating its files and that recipients who supply the requested information will receive a nominal tax refund. It also states that those who fail to immediately return the completed form risk additional tax and withholding. The attached form is labeled a substitute Form 1040 and is titled “Certificate of Current Status of Beneficial Owner For United States Tax Recertification & Withholding.”
It requests a large amount of detailed personal and financial information, such as mother’s maiden name (often used in security screening), bank account numbers, estimated assets and more. It asks the recipient to sign and fax back the completed form, as well as a copy of the recipient’s driver’s license and passport.
The letter, signature and form are all fraudulent. Moreover, the IRS does not send unsolicited faxes to taxpayers and does not request such detailed personal and financial information.
This is a variant of earlier scams. For more information, see news releases IR-2004-104 and IR-2004-75.
Company Report Scam
This e-mail appears to come from an IRS.gov e-mail address, addresses recipients by name and references the company the recipient works for. These personalized details may convince the recipient that the e-mail is legitimate. The e-mail says that the IRS has a report on the company and asks the recipient to review a copy by clicking on a link to download the report. However, when the link is clicked, malware is downloaded to the recipient’s computer.
There are various types of malware, which can hijack a victim’s computer hard drive to give someone remote access to the computer, search for passwords and other information and send them to the scammer, or cause other types of identity theft or damage.
The IRS does not compile reports on companies or send e-mails to company staff asking them to review a report. Generally, the IRS does not send unsolicited e-mails to taxpayers.
Tax Court Scam
In this scam, an e-mail that appears to come from the U.S. Tax Court contains a petition involving a court case between the IRS and the recipient. The document instructs the recipient to download other files. The downloads transfer malware, or malicious code, to the recipient’s computer.
There are various types of malware, which, for example, can hijack a victim’s computer hard drive to give someone remote access to the computer, or can search for passwords and other information and send them to the scammer.
The truth is that the Tax Court is not e-mailing notices to anyone who currently has a case before the court. Visit the court’s Web site at http://www.ustaxcourt.gov/ for more information. Recipients are advised to avoid clicking on any links in the e-mail and to delete the e-mail.
How Scams Work
To lure their victims, phishing scams use the name of a known institution, such as the IRS, to either offer a reward for taking a simple action, such as providing information, or threaten or imply an unpleasant consequence, such as losing a refund, for failing to take the requested action.
The goal of the scams is to trick people into revealing personal and financial information, such as Social Security, bank account or credit card numbers, which the scammers can use to commit identity theft.
Typically, identity thieves use a victim’s personal and financial data to empty the victim’s financial accounts, run up charges on the victim’s existing credit cards, apply for new loans, credit cards, services or benefits in the victim’s name, file fraudulent tax returns or even commit crimes. Most of these fraudulent activities can be committed electronically from a remote location, including overseas. Committing these activities in cyberspace allows scammers to act quickly and cover their tracks before the victim becomes aware of the theft.
People whose identities have been stolen can spend months or years — and their hard-earned money — cleaning up the mess thieves have made of their reputations and credit records. In the meantime, victims may lose job opportunities or may be refused loans, education, housing or cars.
What to Do
Anyone wishing to access the IRS Web site should type www.irs.gov into their Internet address window, rather than clicking on a link in an e-mail or opening an attachment, either of which may download malicious code or send the recipient to a phony Web site.
Those who have received a questionable e-mail claiming to come from the IRS may forward it to the following address: phishing@irs.gov. Use the instructions contained in an article on this Web site titled “Protect Yourself from Suspicious E-Mails or Phishing Schemes.” Following the instructions will help the IRS track the suspicious e-mail to its origins and shut down the scam. Find the article by entering the words “suspicious e-mails” into the search box in the upper right corner of the page.
Those who have received a questionable telephone call that claims to come from the IRS may also use the phishing@irs.gov mailbox to notify the IRS.
The IRS has issued previous warnings on scams that use the IRS name to lend the scam legitimacy. More information on identity theft, phishing and telephone scams using the IRS name, logo or spoofed (copied) Web site is available this Web site. Enter the terms “phishing,” “identity theft” or “e-mail scams” into the search box in the upper right corner of the page.
Scammers Use e-Mail, Fax to Pose as IRS
IR-2008-88, July 10, 2008
WASHINGTON — The Internal Revenue Service cautions taxpayers to be on the lookout for a new wave of scams using the IRS name in identity theft e-mails, or phishing, that have circulated during the last two months.
In May and June alone, taxpayers reported almost 700 separate phishing incidents to the IRS. In 2008 so far, taxpayers have reported about 1,600 phishing incidents to the IRS.
“Taxpayers should take steps to keep their personal information out of the hands of identity thieves,” said IRS Commissioner Doug Shulman. “That includes not falling for any of the phony e-mails or faxes now in circulation pretending to come from the IRS.”
The most common scams involve tax refunds and, this year, economic stimulus payments.
Although most of these scams consist of e-mails requesting detailed personal information, the IRS generally does not send e-mails to taxpayers, does not discuss tax account matters with taxpayers in e-mails, and does not request security-related personal information, such as PIN numbers, from taxpayers.
Refund e-Mail Scam
There are several variations of the refund scam, in which an e-mail claiming to come from the IRS falsely informs the recipient that he or she is eligible for a tax refund for a specific amount. The bogus e-mail instructs the recipient to click on a link to access a refund claim form. The form requests personal information that the scammers can use to access the e-mail recipient’s bank or credit card account.
This notification is phony. The IRS does not send unsolicited e-mail about tax account matters to taxpayers.
Filing a tax return is the only way to apply for a tax refund; there is no separate application form. Taxpayers who wish to find out if they are due a refund from their last annual tax return filing may use the Where’s My Refund? interactive application on this Web site. IRS.gov is the only official IRS Web site.
Economic Stimulus Payments Scam
In this scam, a taxpayer receives an e-mail pretending to come from the IRS which tells the recipient he or she is eligible for an economic stimulus payment. The message recommends direct deposit into the taxpayer’s checking or savings account. To receive the payment, recipients must click on a link to complete and submit an online form by a certain date; otherwise, the e-mail warns, payment may be delayed. The form requests personal and financial data, including checking or savings account numbers that the scammers can use to gain access to the accounts.
In reality, the way members of the public receive their economic stimulus payment is to file a tax return with the IRS, not a special form. Additionally, the IRS does not request personal or financial information via e-mail.
Information on how to obtain an economic stimulus payment may be found in the Economic Stimulus Payments Information Center on the this Web site. For more information on stimulus-related scams, see IR-2008-11.
Substitute Form 1040 Fax Scam
This scam consists of a cover letter and form that are faxed, rather than e-mailed. The cover letter is addressed “Dear Valued Tax Payer (sic)” and appears to be signed by an IRS employee. The letter says that the IRS is updating its files and that recipients who supply the requested information will receive a nominal tax refund. It also states that those who fail to immediately return the completed form risk additional tax and withholding. The attached form is labeled a substitute Form 1040 and is titled “Certificate of Current Status of Beneficial Owner For United States Tax Recertification & Withholding.”
It requests a large amount of detailed personal and financial information, such as mother’s maiden name (often used in security screening), bank account numbers, estimated assets and more. It asks the recipient to sign and fax back the completed form, as well as a copy of the recipient’s driver’s license and passport.
The letter, signature and form are all fraudulent. Moreover, the IRS does not send unsolicited faxes to taxpayers and does not request such detailed personal and financial information.
This is a variant of earlier scams. For more information, see news releases IR-2004-104 and IR-2004-75.
Company Report Scam
This e-mail appears to come from an IRS.gov e-mail address, addresses recipients by name and references the company the recipient works for. These personalized details may convince the recipient that the e-mail is legitimate. The e-mail says that the IRS has a report on the company and asks the recipient to review a copy by clicking on a link to download the report. However, when the link is clicked, malware is downloaded to the recipient’s computer.
There are various types of malware, which can hijack a victim’s computer hard drive to give someone remote access to the computer, search for passwords and other information and send them to the scammer, or cause other types of identity theft or damage.
The IRS does not compile reports on companies or send e-mails to company staff asking them to review a report. Generally, the IRS does not send unsolicited e-mails to taxpayers.
Tax Court Scam
In this scam, an e-mail that appears to come from the U.S. Tax Court contains a petition involving a court case between the IRS and the recipient. The document instructs the recipient to download other files. The downloads transfer malware, or malicious code, to the recipient’s computer.
There are various types of malware, which, for example, can hijack a victim’s computer hard drive to give someone remote access to the computer, or can search for passwords and other information and send them to the scammer.
The truth is that the Tax Court is not e-mailing notices to anyone who currently has a case before the court. Visit the court’s Web site at http://www.ustaxcourt.gov/ for more information. Recipients are advised to avoid clicking on any links in the e-mail and to delete the e-mail.
How Scams Work
To lure their victims, phishing scams use the name of a known institution, such as the IRS, to either offer a reward for taking a simple action, such as providing information, or threaten or imply an unpleasant consequence, such as losing a refund, for failing to take the requested action.
The goal of the scams is to trick people into revealing personal and financial information, such as Social Security, bank account or credit card numbers, which the scammers can use to commit identity theft.
Typically, identity thieves use a victim’s personal and financial data to empty the victim’s financial accounts, run up charges on the victim’s existing credit cards, apply for new loans, credit cards, services or benefits in the victim’s name, file fraudulent tax returns or even commit crimes. Most of these fraudulent activities can be committed electronically from a remote location, including overseas. Committing these activities in cyberspace allows scammers to act quickly and cover their tracks before the victim becomes aware of the theft.
People whose identities have been stolen can spend months or years — and their hard-earned money — cleaning up the mess thieves have made of their reputations and credit records. In the meantime, victims may lose job opportunities or may be refused loans, education, housing or cars.
What to Do
Anyone wishing to access the IRS Web site should type www.irs.gov into their Internet address window, rather than clicking on a link in an e-mail or opening an attachment, either of which may download malicious code or send the recipient to a phony Web site.
Those who have received a questionable e-mail claiming to come from the IRS may forward it to the following address: phishing@irs.gov. Use the instructions contained in an article on this Web site titled “Protect Yourself from Suspicious E-Mails or Phishing Schemes.” Following the instructions will help the IRS track the suspicious e-mail to its origins and shut down the scam. Find the article by entering the words “suspicious e-mails” into the search box in the upper right corner of the page.
Those who have received a questionable telephone call that claims to come from the IRS may also use the phishing@irs.gov mailbox to notify the IRS.
The IRS has issued previous warnings on scams that use the IRS name to lend the scam legitimacy. More information on identity theft, phishing and telephone scams using the IRS name, logo or spoofed (copied) Web site is available this Web site. Enter the terms “phishing,” “identity theft” or “e-mail scams” into the search box in the upper right corner of the page.
Saturday, July 12, 2008
Short Sale and Walking away from your home
It has been a tough time for many home owners. If you are one of the thousands that has had a short sale or just walked away from your home you could have serious tax concerns.
Please call our office to discuss how this will effect your 2008 tax return. Recent changes in the law can benefit you and should be considered before selling your home short.
Do not assume you will not owe any taxes on the short sale. If your realtor says do not worry you will not owe any taxes you should be concerned. Many unscrupulous Realtors out there have duped home owners and told them that they can walk away tax free. Consult your tax advisor before making any decisions.
Please call our office to discuss how this will effect your 2008 tax return. Recent changes in the law can benefit you and should be considered before selling your home short.
Do not assume you will not owe any taxes on the short sale. If your realtor says do not worry you will not owe any taxes you should be concerned. Many unscrupulous Realtors out there have duped home owners and told them that they can walk away tax free. Consult your tax advisor before making any decisions.
Getting ready for 2008
Well it is going to be tax time before you know it. Get ready now before the end of the year and make your tax time less painful. Download an organizer from our website and get started now on gathering receipts, medical bills and statements.
Do not forget to give us info on any stock trades or purchases.
Give us a call if you have any quesitons.
Do not forget to give us info on any stock trades or purchases.
Give us a call if you have any quesitons.
Monday, April 28, 2008
Deadlines for 2008 Stimulus
You must file your 2007 tax return by October 15, 2008 to receive the stimulus payment.
If you have not filed yet please call our office ASAP to set up an appointment.
The sooner you file the faster you will receive your stimulus payment.
If you have not filed yet please call our office ASAP to set up an appointment.
The sooner you file the faster you will receive your stimulus payment.
What happened to my Economic Stimulus Check?
Some taxpayers may receive smaller economic stimulus payments than they anticipated.
By law, the stimulus payments are offset to satisfy past-due taxes, student loans, child support and certain other debts.
If you did not get your check you can contact the IRS directly for more information.
By law, the stimulus payments are offset to satisfy past-due taxes, student loans, child support and certain other debts.
If you did not get your check you can contact the IRS directly for more information.
The Checks are coming....
Below are the schedules for economic stimulus payments related to tax returns processed by April 15, 2008:
Direct Deposit Payments
If the last two digits of your Social Security number are:
Your economic stimulus payment deposit should be transmitted to your bank account by:
00 – 20 May 2
21 – 75 May 9
76 – 99 May 16
Direct Deposit Payments
If the last two digits of your Social Security number are:
Your economic stimulus payment deposit should be transmitted to your bank account by:
00 – 20 May 2
21 – 75 May 9
76 – 99 May 16
If you received a Paper Check for you 2007 refund then:
If the last two digits of your Social Security number are:
Your check should be in the mail by:
00 – 09 May 16
10 – 18 May 23
19 – 25 May 30
26 – 38 June 6
39 – 51 June 13
52 – 63 June 20
64 – 75 June 27
76 – 87 July 4
88 – 99 July 11
Monday, March 24, 2008
IRS Has $1.2 Billion for People Who Have Not Filed a 2004 Tax Return
IRS Has $1.2 Billion for People Who Have Not Filed a 2004 Tax Return
The deadline is approaching for about 1.3 million people who didn’t file a federal income tax return for 2004.
To collect the money, taxpayers must file a 2004 return with an IRS office no later than April 15, 2008. Find out more at the IRS website www.IRS.Gov
The deadline is approaching for about 1.3 million people who didn’t file a federal income tax return for 2004.
To collect the money, taxpayers must file a 2004 return with an IRS office no later than April 15, 2008. Find out more at the IRS website www.IRS.Gov
Friday, March 7, 2008
You must file your return by April 15, 2008
You must file your return by April 15, 2008
The first round of checks will be produced on May 16, 2008.
For the taxpayer to receive one of the first round of checks, the return must be submitted in time to be processed by April 15, 2008.
The first round of checks will be produced on May 16, 2008.
For the taxpayer to receive one of the first round of checks, the return must be submitted in time to be processed by April 15, 2008.
Thursday, March 6, 2008
Stimulus Plan the checks are coming...
Stimulus Plan tax returns are due April 15, 2008. Contact us ASAP to find out if you are eligible for the payment.
We are filing Stimulus returns for Senior citizens and others that do not normally file returns. Contact us for more info.
Remember you must file a return to get the payment.
We are filing Stimulus returns for Senior citizens and others that do not normally file returns. Contact us for more info.
Remember you must file a return to get the payment.
Saturday, February 23, 2008
Stimulus Plan Update
STIMULUS PLAN UPDATE
The IRS issued guidance Friday, February 15, 2008, on how to paper-file returns so recipients of Social Security, certain veterans’ benefits, and low-income workers who normally are not required to file a tax return can receive the rebate check.
DIRECT DEPOSIT FACTS
If you receive your 2007 return via direct deposit then you should receive the rebate check as a direct deposit. If a tax return is filed with a bank product ( Refund Anticipation Loan), the taxpayer will receive the stimulus payment via paper check in the mail.
For those filing balance due returns with the amount due taken from the taxpayers’ bank account, the IRS will not use this direct debit information for the purpose of depositing any rebates due that taxpayer. Instead, the IRS will issue the taxpayer a check.
ELECTRONIC FILING
The IRS is updating its systems to accept these returns electronically.
All returns need to be transmitted before April 15th to qualify for the Stimulus Plan Refund.
If you plan to get an extension for time to file your return you should contact us regarding your options. Getting an extension will not qualify you for the Stimulus Plan Refund Check.
Call our office if you would like more information.
The IRS issued guidance Friday, February 15, 2008, on how to paper-file returns so recipients of Social Security, certain veterans’ benefits, and low-income workers who normally are not required to file a tax return can receive the rebate check.
DIRECT DEPOSIT FACTS
If you receive your 2007 return via direct deposit then you should receive the rebate check as a direct deposit. If a tax return is filed with a bank product ( Refund Anticipation Loan), the taxpayer will receive the stimulus payment via paper check in the mail.
For those filing balance due returns with the amount due taken from the taxpayers’ bank account, the IRS will not use this direct debit information for the purpose of depositing any rebates due that taxpayer. Instead, the IRS will issue the taxpayer a check.
ELECTRONIC FILING
The IRS is updating its systems to accept these returns electronically.
All returns need to be transmitted before April 15th to qualify for the Stimulus Plan Refund.
If you plan to get an extension for time to file your return you should contact us regarding your options. Getting an extension will not qualify you for the Stimulus Plan Refund Check.
Call our office if you would like more information.
Sunday, February 17, 2008
Make sure you file a tax return for 2007
This is the latest news from the IRS on the $600 checks coming this summer.
Even if you do not need to file you will want to file a return for 2007 to get the refund. Also it appears that they will be doing the refunds via direct deposit so make sure you do not change bank accounts until you receive your refund.
Also you will want to file in 2007 and include your dependants so you receive the $300 per child.
ECONOMIC GROWTH ACT OF 2008 - Stimulus Plan Latest news
Starting in May and continuing through late spring and summer, the Department of Treasury will send checks or make direct deposits to more than 130 million taxpayers. Individuals will have to file a Form 1040 or 1040A for 2007 to get a rebate in 2008, even if they are not otherwise required to file a 2007 return because of low income.
We understand that taxpayers who received refunds via a bank product(ie Refund Loans) will not receive their rebates via direct deposit, but will receive paper checks, and that the IRS is looking at ways to accept returns from those individuals who are not required to file.
Even if you do not need to file you will want to file a return for 2007 to get the refund. Also it appears that they will be doing the refunds via direct deposit so make sure you do not change bank accounts until you receive your refund.
Also you will want to file in 2007 and include your dependants so you receive the $300 per child.
ECONOMIC GROWTH ACT OF 2008 - Stimulus Plan Latest news
Starting in May and continuing through late spring and summer, the Department of Treasury will send checks or make direct deposits to more than 130 million taxpayers. Individuals will have to file a Form 1040 or 1040A for 2007 to get a rebate in 2008, even if they are not otherwise required to file a 2007 return because of low income.
We understand that taxpayers who received refunds via a bank product(ie Refund Loans) will not receive their rebates via direct deposit, but will receive paper checks, and that the IRS is looking at ways to accept returns from those individuals who are not required to file.
Monday, January 28, 2008
Your SSA 1099 might be incorrect...
The Social Security statements (SSA 1099)
SSA 1099 CORRECTION:
Due to a programming error, about 2.7 million SSA-1099s contained incorrect amounts. The Social Security Administration (SSA) has corrected the error and mailed revised SSA-1099s to affected beneficiaries by January 25, 2008. A fact sheet describing the problem is available on the SSA Websitehttp://www.ssa.gov/legislation/RecentIssues.html#SSA10992.7 million new statements are on the way out now to participants.
Please wait until you receive your new copy before completing your tax returns.
If you have any questions please give us a call.
SSA 1099 CORRECTION:
Due to a programming error, about 2.7 million SSA-1099s contained incorrect amounts. The Social Security Administration (SSA) has corrected the error and mailed revised SSA-1099s to affected beneficiaries by January 25, 2008. A fact sheet describing the problem is available on the SSA Websitehttp://www.ssa.gov/legislation/RecentIssues.html#SSA10992.7 million new statements are on the way out now to participants.
Please wait until you receive your new copy before completing your tax returns.
If you have any questions please give us a call.
Short Sale and how will it affect you and your Taxes
Many families are in crisis and you think that a short sale will help you get out of a mortgage payment you can not afford.
In the past your lender would send you a 1099-C and you would pay taxes on the taxable portion of the short sale.
Congress and the President have come the rescue in the form of the Mortgage Forgiveness Debt Relief Act of 2007 (See the full Act below).
It is very confusing and I wanted to make it easy to understand so I created a few examples below.
Example #1:
You bought your home for $400,000 (more than 2 years ago & it was your only residence) your refinanced loan is $600K and you plan to sell the home for $450,000. The short sale is $150,000. On the tax return for that year using form :Sale of Residence” You list the purchase price at $400K less the short $150K so the basis for the purchase price will be $250,000.
When you take the selling price of $450K and subtract the adjusted purchase price of $250K and the taxable amount would be $200K. But, because you owned the home for 2 of the last 5 and used it as your primary residence that amount falls under the exemption of $250K (single person) or $500K (married couple). So you will not owe any tax on this short sale.
Another Example:
You purchased your home in 1980 for $100K you have refinanced it several times and you now owe $700K. You are married and have used this as your primary residence the entire time.
You have an offer for $575K and the lender as accepted the short sale.
Your tax basis would be as follows:
The short sale amount is $125K so the purchase basis would be $ 0 take the $125K from the 100K ( no negative amount allowed so we will use $0)
So the taxable amount would be $575K but as a married couple you are exempt for $500K and the taxable amount would be $75K of the $125K
On Your tax return the $75K would be taxed at your current tax rate. Additional taxes and capital gains may apply for some tax situations.
Here is the full Act...
Mortgage Forgiveness Debt Relief Act of 2007 - Amends the Internal Revenue Code to exclude from gross income amounts attributable to a discharge, prior to January 1, 2010, of indebtedness incurred to acquire a principal residence. Limits to $2 million the excludable amount of such indebtedness. Reduces the basis of a principal residence by the amount of discharged indebtedness excluded from gross income. Disallows an exclusion for a discharge of indebtedness on account of services performed for the lender or any other factor not directly related to a decline in the value of the residence or to the financial condition of the taxpayer. Sets forth rules for determining the allowable amount of the exclusion for taxpayers with non qualifying indebtedness and taxpayers who are insolvent.
Extends through 2010 the tax deduction for mortgage insurance premiums.
Sets forth alternative tests for qualifying as a cooperative housing corporation for purposes of the tax deduction for payments to such corporations. Qualifies a corporation if: (1) 80% or more of the total square footage of the corporation's property is used or available for use by its tenant-stockholders for residential purposes, or (2) 90% of the corporation's expenditures are for the acquisition, construction, management, maintenance, or care of its property for the benefit of the tenant-stockholders.
Allows members of a qualified volunteer emergency response organization (i.e., an organization that provides firefighting and emergency medical services) an exclusion from gross income for state and local tax benefits and for certain payments for services. Terminates such exclusion after 2010.
Allows certain full-time students who are single parents and their children to live in housing units eligible for the low-income housing tax credit provided that their children are not dependents of another individual (other than a parent of such children).
Allows a surviving spouse to exclude from gross income up to $500,000 of the gain from the sale or exchange of a principal residence owned jointly with a deceased spouse if the sale or exchange occurs within two years of the death of the spouse and other ownership and use requirements have been met.
Increases the penalty for failure to file a partnership tax return and extends from five to 12 the number of months in which such penalty may be imposed. Limits disclosure of tax return information that includes individual taxpayer identify information.
Imposes an additional penalty on S corporations for failure to file required tax returns.
Amends the Tax Increase Prevention and Reconciliation Act of 2005 to increase the estimated tax payment due in the third quarter of 2012 for corporations with assets of at least $1 billion.
The following summary is provided by the Congressional Research Service, which is a nonpartisan government entity that serves Congress and is run by the Library of Congress. The summary is taken from the official website 12/20/2007--Public Law. (This measure has not been amended since it was passed by the Senate on December 14, 2007. The summary of that version is repeated here.)
In the past your lender would send you a 1099-C and you would pay taxes on the taxable portion of the short sale.
Congress and the President have come the rescue in the form of the Mortgage Forgiveness Debt Relief Act of 2007 (See the full Act below).
It is very confusing and I wanted to make it easy to understand so I created a few examples below.
Example #1:
You bought your home for $400,000 (more than 2 years ago & it was your only residence) your refinanced loan is $600K and you plan to sell the home for $450,000. The short sale is $150,000. On the tax return for that year using form :Sale of Residence” You list the purchase price at $400K less the short $150K so the basis for the purchase price will be $250,000.
When you take the selling price of $450K and subtract the adjusted purchase price of $250K and the taxable amount would be $200K. But, because you owned the home for 2 of the last 5 and used it as your primary residence that amount falls under the exemption of $250K (single person) or $500K (married couple). So you will not owe any tax on this short sale.
Another Example:
You purchased your home in 1980 for $100K you have refinanced it several times and you now owe $700K. You are married and have used this as your primary residence the entire time.
You have an offer for $575K and the lender as accepted the short sale.
Your tax basis would be as follows:
The short sale amount is $125K so the purchase basis would be $ 0 take the $125K from the 100K ( no negative amount allowed so we will use $0)
So the taxable amount would be $575K but as a married couple you are exempt for $500K and the taxable amount would be $75K of the $125K
On Your tax return the $75K would be taxed at your current tax rate. Additional taxes and capital gains may apply for some tax situations.
Here is the full Act...
Mortgage Forgiveness Debt Relief Act of 2007 - Amends the Internal Revenue Code to exclude from gross income amounts attributable to a discharge, prior to January 1, 2010, of indebtedness incurred to acquire a principal residence. Limits to $2 million the excludable amount of such indebtedness. Reduces the basis of a principal residence by the amount of discharged indebtedness excluded from gross income. Disallows an exclusion for a discharge of indebtedness on account of services performed for the lender or any other factor not directly related to a decline in the value of the residence or to the financial condition of the taxpayer. Sets forth rules for determining the allowable amount of the exclusion for taxpayers with non qualifying indebtedness and taxpayers who are insolvent.
Extends through 2010 the tax deduction for mortgage insurance premiums.
Sets forth alternative tests for qualifying as a cooperative housing corporation for purposes of the tax deduction for payments to such corporations. Qualifies a corporation if: (1) 80% or more of the total square footage of the corporation's property is used or available for use by its tenant-stockholders for residential purposes, or (2) 90% of the corporation's expenditures are for the acquisition, construction, management, maintenance, or care of its property for the benefit of the tenant-stockholders.
Allows members of a qualified volunteer emergency response organization (i.e., an organization that provides firefighting and emergency medical services) an exclusion from gross income for state and local tax benefits and for certain payments for services. Terminates such exclusion after 2010.
Allows certain full-time students who are single parents and their children to live in housing units eligible for the low-income housing tax credit provided that their children are not dependents of another individual (other than a parent of such children).
Allows a surviving spouse to exclude from gross income up to $500,000 of the gain from the sale or exchange of a principal residence owned jointly with a deceased spouse if the sale or exchange occurs within two years of the death of the spouse and other ownership and use requirements have been met.
Increases the penalty for failure to file a partnership tax return and extends from five to 12 the number of months in which such penalty may be imposed. Limits disclosure of tax return information that includes individual taxpayer identify information.
Imposes an additional penalty on S corporations for failure to file required tax returns.
Amends the Tax Increase Prevention and Reconciliation Act of 2005 to increase the estimated tax payment due in the third quarter of 2012 for corporations with assets of at least $1 billion.
The following summary is provided by the Congressional Research Service, which is a nonpartisan government entity that serves Congress and is run by the Library of Congress. The summary is taken from the official website 12/20/2007--Public Law. (This measure has not been amended since it was passed by the Senate on December 14, 2007. The summary of that version is repeated here.)
Saturday, January 19, 2008
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We also offer Refund Loans from Chase Bank. When approved I can print the cashiers check in my office or you can have the money direct deposited.
Our loan fees are lower than the big guys, give us a call for more info.
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