taxes

Prison Inmates Claim the Tax Credit

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The First Time Home Buyer tax credit has been the target of many debates over the last year. Originally crafted by the Bush administration and then expanded by the Obama administration, is in the process of being extended yet again to allow more potential homebuyers to take advantage of it. If passed, the new deadline could be moved to September 30 of this year. The goal of the credit was to boost the nation's ailing housing markets and help stabilize the economy.

Has it been effective? It depends on who you talk to. The National Association of Realtors credits a million new home sales directly to the tax credit. However not everything has been coming up roses. A big complaint among consumers is the wait to receive the credit. Initially home buyers were told to expect the credit with 12 weeks of filing an amendment, but some have reported waiting five months or even longer. The long delays have not endeared the IRS to taxpayers waiting on their refunds. The internet is awash is speculation about the reasons for the delays and how they can speed up the process.

Some recent events have shed some light on the causes for the delays in receiving the tax credit.

The tax credit generated a flood of amended returns for both the 2008 and 2009 tax season. With fraud on the rise, more returns were being audited and the results were appalling. Now, an investigation has been launched by the Treasury Department Inspector General for the tax administration, J. Russell George. The report generated by the investigation focused on taxpayers who claimed both the 2008 and 2009 First Time Home Buyer tax credit.

The report showed more than 14,100 taxpayers wrongly received at $26.7 million in tax credits. The fact that some taxpayers decided to try to fraudulently claim the credit isn't the most shocking thing; it’s who was able to get the credit.

Roughly 1,300 prison inmates received over $9 million in tax credits for homebuyers at the time they were incarcerated when they claimed they bought a home according to a government investigator. 4,608 state and federal inmates filed for the credits. 241 of the inmates who received the credit were serving life sentences.

How were so many prisoners able to falsely claim the credit? Part of the blame does fall on the IRS because they don't keep current records of who is in prison, according the IG report. Another reason is that prisons are not required to provide the IRS with information about inmates, although many do voluntarily. IRS spokesman Frank Keith defended their recent track record, stating "When the IRS has reliable data, we do a very effective job of using it to ensure compliance. When the IRS does not have reliable data, it is a much more difficult process for us."

The IRS also claims to have blocked almost 400,000 questionable claims and opened over 150 criminal investigations. In its statement, the IRS claims that "These aggressive efforts have saved taxpayers more than $1 billion."

Keith also stated that the IRS has asked Congress to enact legislation to ensure the agency gets up-to-date inmate information. In the interim, the IRS plans to reach out to prison officials to start a task force to improve inmate information sharing.

However it isn't just inmates cashing in on the tax credit falsely. The IG report estimates that 2,555 taxpayers wrongly received over $17 million in tax credits for homes that were bought prior to the tax credit being enacted. Another estimated 10,282 taxpayers received credits for properties that were also used by someone else to claim the credit. 206 taxpayers filed for the credit on multiple addresses. And to add insult to injury, investigators also found 87 IRS employees who may have improperly claimed the credit, although the review is still ongoing.

It’s no wonder that the average taxpayer is waiting over 16 weeks to get tax credit. Obviously, there was an error in estimating the effectiveness of the tax credit and the unfortunate side effects.

Mr. George had this to say in a statement. "This is very troubling. Congress created and modified the homebuyer credit to stimulate the economy and help taxpayers achieve the American dream, not to line the pockets of wrongdoers." Of course the IRS is taking action to reclaim the cash. According to IRS figures, over 2.6 million taxpayers claimed the tax credit through the April deadline. All things considered, the amount of fraud uncovered so far has been minimal, but its just more fuel for the fire. Taxpayers are tired of hearing about delays or requests for the same paperwork they have already submitted.

Assistant Treasury Secretary Michael Mundaca stated that, despite its problems, the homebuyer tax credit helped to spur more than 2.5 million new home purchases and helped to stabilize the housing market.

If you are one of the thousands of taxpayers still waiting for your refund, there are a couple of things you can do. First, you can contact a tax advocate. They will help you make sure you have submitted the correct paperwork and that the IRS has received it. Second, you can contact the IRS directly to check on the status of your refund. Quite often the IRS representative will give you a rough time frame in which you can expect your credit. The IRS will also pay you interest on your credit as well.

Given the rather large pool of taxpayers claiming credit the amount of fraud uncovered so far has been minimal. However as a result, the processing time of returns is now longer than ever.

So as a home buyer, would say that the First Time Home Buyer tax credit was a primary factor in your decision to buy a home? Please feel free to answer in comments.

Thank you for reading our Las Vegas real estate blog.

Source: Associated Press, IRS.com

First Time Home Buyer Tax Credit Extended

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There has been a lot of debate of the First Time Home Buyer Tax credit in the last several months, intensifying as the original November 30 deadline approached. Today, President Barack Obama signed into law bill H. R. 3548, granting an extension of the credit until April 30, 2010. The measure passed with an unprecedented show of bi-partisanship with a vote of 403-12 in the house and the Senate approving it unanimously.

First Time Home Buyer Tax Credit Changes

The bill made some changes to the original tax credit, aside from extending the deadline to April 30, 2010 to claim it. However, you have until June 30, 2010 to close on a property and still be able to claim the credit. So, say you put in an offer on a home towards the end of April next year. The offer is accepted and you open escrow on the 28th. As long as you close escrow before June 30, you can still claim the credit (of course, you have to meet the other requirements as well).

Credit Extended to Current Home Owners

Another significant change to the original credit is the addition of a smaller credit of $6,500 for current home owners if they purchase a new primary residence. There are of course, some requirements. In order to qualify for the credit, existing home owners must have lived in their primary residence for the last consecutive five years of out eight. The new home purchased can't exceed more than $800,000. You must also meet the new income requirements (see below) and just like first time home buyers, you must live in the new home for at least three years. Otherwise, you will be forced to repay the credit.

Income Limits

The other major change to the tax credit is the raising of the income limits. Under the original tax credit, a single person could earn no more than $75,000 a year and married couples $150,000. Now the income eligibility limits for both groups of home buyers have been raised to $125,000 a year for singles and $225,000 for married couples.

Military Personnel

Members of the Armed Forces and certain federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and still qualify for the credit. An eligible taxpayer must buy or enter into a binding contract to buy a home by April 30, 2011, and settle on the purchase by June 30, 2011.

The bill H. R. 3548 also extended unemployment benefits for another 14 weeks for those out of work people who have exhausted their benefits. It also provides additional tax relief for small businesses.

Thank you for reading our real estate blog and feel free to contact us for all of your Las Vegas NV real estate needs.  

Source: Associated Press

Time Running Out for the First Time Home Buyer Tax Credit

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Attention to all of you sitting on the fence. Time is running out for the First Time Home Buyer Tax Credit. Rumors have been flying around Washington for the last several months about a possible extension of the credit, but do you really want to gamble on the Federal government? After all, congress could simply reinstate the 2008 tax credit of $7,500  again that has to be paid back!

The 2009 credit officially ends on November 30th of 2009. In order to claim it, you have to meet certain qualifications which have been posted on this site. The major hurdle facing any buyer that wishes to claim the credit is closing in time. Right now, unless you are paying cash, homes are taking anywhere from 35 to 45 days or more to close escrow from the time the offer has been accepted.

What does that mean for you? Simply put, if you are looking to buy a property this month, in order for you to close in time to claim the credit, the property needs to be in escrow as soon as possible. Preferably, by the end of next week at the very, very latest.

This only applies to bank owned homes. If you are buying a new Las Vegas home or condo directly from the builder or an actual regular listing being sold by the owner, then you have up until the end of the month to get your offer accepted and escrow started. Many new home builders are stating that they will guarantee close of escrow before November 30th on any of their homes.

The Las Vegas real estate market is still a buyer's market (as are most of the major real estate markets in US) and you have to allow additional time to close escrow on a property. If you are currently thinking about buying a property and claiming the tax credit, you might want to consider a new home. New home builders are offering some fantastic deals right now and you'll avoid a lot of headaches as far as closing on the property.

Thanks for stopping by our Las Vegas real estate blog and feel free to share your experiences with us.

Renewable Energy and Energy Efficiency Tax Credits

With so much attention being given to the new first time home buyer tax credit, some potentially lucrative tax incentives for home improvements have been overlooked. There are some new tax incentives as well as some expansions given to the current tax credits for home improvements relating to energy efficiency and renewable energy additions like solar panels. Now I am NOT an accountant or tax professional. When it comes to your taxes, I recommend you seek the advice of an accredited tax professional. Hopefully the IRS will issue some firm guidelines on the details of these credits soon as there are bound to be a lot of questions regarding qualification.

Here are the new tax credits in a nutshell. There is a tax credit of up to $1,500 for installing qualifying windows, doors, water heaters, roofs, insulation, heating and cooling equipment (HVAC, qualifying wood and pellet stoves) to your home in 2009 and 2010. On the renewable energy side, the tax credit is 30% of the qualifying solar technology, geothermal and wind energy systems with no limit through 2016. So if you install some solar panels and a wind power generator, you will receive a 30% tax credit which lowers your tax bill dollar for dollar for the cost of the upgrade.

 

Notably the big increase is in the energy-efficiency tax credit, which went from 10% of the qualifying costs to 30% and the cap also goes up from $500 originally to $1,500 (that’s a total credit for all applicable improvements combined in 2009 and 2010). The credit also includes stoves that use renewable biomass fuel. Another big change with the 30% renewable energy credit is the removal of the cap on claims   for systems (except for fuel cells) installed after 2008.

Under the prior guidelines the cap was $2,000 for a solar system. Now you can take 30% of the qualifying cost instead.

If you live in an older home, these tax credits are targeted at you. Just replacing your older single pane windows with new dual pane, low e vinyl  replacements will have a significant impact on your utility bills. Not only will you save money, but living in your home will be more comfortable year round. Before making any decisions, I recommend you consult with your tax professional to maximize your tax benefits. Check out the web for more information about renewable energy sources and the differences between them.
Source: Wall Street Journal

First Time Home Buyer Tax Credit

There has been a lot of talk (and confusion) about the economic stimulus bill and what it means to home buyers. Who qualifies? What year can I claim the credit? How much of a refund would I get back? What are the criteria to receive the credit? So I'm going to attempt to answer the most common questions about the bill. Keep in mind, I am NOT a tax professional or accountant and always recommend when it comes to your taxes to seek the advice of an accredited tax professional.

That being said, the bill states that first time home buyers can claim a tax credit worth $8,000 OR 10% of the home's value, whichever amount is less. So, if you bought a condominium for $65,000, your tax credit under the bill would be $6,500, not $8,000.

Qualifying

In order to qualify for the credit, the home purchase must be made between January 1st and November 30th of 2009 (so if you buy a home on December 1, 2009 you are not eligible). In addition, there are income restrictions as well. To qualify, a single person must make less than $75,000 a year. Married couples must make under $150,000 a year. However, higher income buyers may receive a partial credit. You must also live in the house purchased for at least three years or you will be required to pay back the credit. The property being purchased can not be owned by a close relative like a parent, grandparent or one of your children. The definition in bill for a first time home buyer is anyone that has not owned a home in the last three years.

Tax Filing

The credit can be claimed on your 2008 or 2009 income taxes. Now as I said you can claim the credit on your 2008 tax filing. If you have already filed them, you can file an amended return to claim the credit if you wish to do so. Based on the feeback we've been getting, the process takes about 12 weeks. Another great thing about the credit it that it is fully refundable, so even if your total tax bill (refund) is less than $8,000 (and you qualify for that amount of a credit), you would still receive the full $8,000 back plus the amount you had overpaid.

For example, John's taxes showed that he had paid $5,000 in taxes over the year. He filed his return and he actually only owed $3,000 in taxes. Normally he would have received a refund of $2,000. But under this bill, he would receive the full $10,000 instead! To claim the credit on your taxes is just a matter of filling out the form, without any additional paperwork involved.

This is a simplified breakdown of the economic stimulus bill. I highly recommend consulting a professional tax service regarding your taxes. You can download the tax form here: http://www.irs.gov/pub/irs-pdf/f5405.pdf

Thank you for reading our real estate blog and feel free to contact us for all of your Las Vegas NV real estate needs.  

Source: CNNMoney.com

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