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.
Monday, January 28, 2008
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
eFile now...Fast Refunds
Get your refund in around 10 days (direct deposit) if you file early. The process can take longer the longer you wait. So hurry in and file as soon as you get your W2's.
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.
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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