Expired tax breaks for homeowners could be restored — retroactive to Jan. 1 — by this summer

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Expired tax breaks for homeowners could be restored — retroactive to Jan. 1 — by this summer
Why Obama’s appointment of Max Baucus to serve as ambassador to China is great news for real estate
Ken Harney, Contributor
Feb 11, 2014

Though it’s not attracting much attention, the impending arrival of Sen. Ron Wyden, D-Ore., as head of the Senate Finance Committee could be good news for housing and real estate in the weeks ahead.

That’s especially true if you care about mortgage forgiveness relief and other tax code provisions that help homeowners, buyers and sellers.

Things are looking up.

Wyden replaces Max Baucus, D-Mont., who is leaving to serve as the Obama administration’s new ambassador to China. Baucus spent much of the past two years developing comprehensive tax reform legislative proposals with severely negative impacts on real estate, including total elimination of tax-deferred exchanges and lower depreciation write-offs for investors. Now he’s gone.

Baucus’ reform efforts were paralleled in the House by Ways and Means Committee Chairman Dave Camp, R-Mich., who is sitting on a closely guarded tax bill that is potentially so explosive — it would reportedly kill or limit pretty much all popular deductions, such as those for mortgage interest and property taxes — that the House Republican leadership convinced him not to release details late last year.

Camp’s bill would use the revenue that would be generated by eliminating deductions to offset the cost of lowering the top marginal tax brackets for individuals, as well as corporations, to 25 percent.

 

Meanwhile, Baucus’ and Camp’s insistence on major tax reform had stalled efforts in the House and Senate to extend key expiring provisions in the code.

Max Baucus spent much of the past two years developing comprehensive tax reform legislative proposals with severely negative impacts on real estate. Now he’s gone.”

Among the most important for housing: reauthorization of the mortgage debt forgiveness law that allows financially stressed homeowners to escape federal taxation on the principal balances written off by lenders in connection with short sales, loan modifications and foreclosures; deductions for private and FHA mortgage insurance premiums; and write-offs for certain home energy-saving improvements.

Those three and about 50 other special interest provisions expired Dec. 31, and won’t be available for taxpayers this year unless Congress puts them back into the code retroactive to Jan 1.

But supporters of Baucus and Camp have argued that there shouldn’t be any extensions of special interest tax provisions until Congress takes up a full reform of the tax code. After all, they say, many of the so-called extenders won’t be retained in any major tax reform bill that passes both houses.

Now to the reasons why Wyden taking over as chairman of the Senate Finance Committee is a plus for real estate. No. 1: He is certain to call for a reassessment of Baucus’ reform proposals — a process that could take months.

That will delay consideration of fundamental tax reform in the Senate this year, and would provide fresh pressure to move an extenders bill sooner, not later.

In fact, Wyden has said he intends to take up the extenders issue before proceeding onto major tax reform. That’s welcome news for Wyden’s Democratic colleague from Michigan, Debbie Stabenow, who is sponsoring bipartisan legislation that would reauthorize mortgage debt relief through the end of 2014.

Even better: Wyden has his own ideas about comprehensive tax reform. And based on previous bills he has authored on the subject, they don’t require mangling or killing popular real estate deductions or tax-deferred exchanging a la Baucus.

Wyden’s “Bipartisan Tax Fairness and Simplification Act,” co-sponsored in 2011 with Sen. Dan Coats, R-Ind., would reduce the number of tax brackets for individuals to just three — 15 percent, 25 percent and 35 percent — and eliminate the widely despised Alternative Minimum Tax.

His bill also would seek to simplify the code by encouraging vastly larger numbers of taxpayers to opt for the standard deduction, which would be nearly tripled in size. Though that would encourage some homeowners to stop itemizing, and thus claiming mortgage interest and other real estate write-offs altogether. Wyden estimates that on average, individuals and couples with incomes up to $200,000 “will do as well or better” under his plan than they do today.

Meanwhile in the House, the departure of Baucus increases the pressure on Camp to abandon his plans for comprehensive tax reforms in 2014. With Wyden open to taking up an extenders bill sooner than later, Camp will eventually have to cave and go along.

Bottom line: Baucus heading to China is a great for real estate. Not only are Camp’s and Baucus’ bills essentially knocked off the track, but the popular extenders reauthorization is likely back on track.

Timing is uncertain, but veteran Capitol Hill tax experts say the now-expired housing benefits could be on the president’s desk — retroactive to Jan. 1 — by the summer recess, right before most members of Congress head home to campaign.

Ken Harney writes an award-winning, nationally syndicated column, “The Nation’s Housing,” and is the author of two books on real estate and mortgage finance.

via Expired tax breaks for homeowners could be restored — retroactive to Jan. 1 — by this summer | Inman News.

Start preparing now to file your taxes

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Start preparing now to file your taxes

By Benny L. Kass, Published: February 6 | Updated: Friday, February 7, 7:40 AM

“The only difference between a tax man and a taxidermist is that the taxidermist leaves the skin.” — Mark Twain

It’s tax season, and many Americans are determining whether to file early, file on the April 15 deadline or file late.

If you request an automatic extension, you will have to pay any tax you owe in April, but the final return would not have to be filed until Oct. 15.

Regardless of when you decide to file, you should start preparing now. Every year, the Internal Revenue Service circulates a large publication, entitled “1040 Instructions,” which is available on its Web site. According to the IRS, the average time required to complete and file Form 1040 the most commonly used income tax return form is 15 hours. The bulk of this time — eight hours — involves only record keeping; tax planning accounts for two hours, completion of the form and submission another four hours, and one hour for miscellaneous.

You should have received statements from your employer and lender at the end of January. By law, any lender private or commercial that receives $600 or more in mortgage interest must send the borrower Form 1098. Although in recent years, most consumers were not paying points to buy down a mortgage loan, any points that were paid must also be listed on this form. The form will also include any mortgage insurance premiums that were paid last year.

If you paid such insurance premiums on policies issued on or after Jan. 1, 2007, and if the policy was for “acquisition debt” — which refers to a home that you purchased or substantially improved — those payments may be deductible on your 2013 tax return. Unfortunately, this was one of the many tax benefits that Congress did not extend for this year.

When you get Form 1098, don’t just put it in your tax file. Review it carefully, since the same information has been transmitted to the IRS. Get an amortization table — available on the Internet or in local bookstores — and make sure that all of your payments have been properly credited. This is especially important for those of you who have been making extra principal payments over the years so as to reduce your loan obligation as quickly as possible.

And if you bought or refinanced a house including a condominium or a cooperative apartment last year, there may be real estate tax adjustments or interest payments reflected on the HUD-1 settlement statement that may not be included in the 1098 form.

Every year, there is always something new in the tax law. Sometimes, it will cost you more money. For example, beginning in 2013, a 0.9 percent Medicare tax may be imposed, depending on your income.

But you may also get a tax benefit. If you have a same-sex spouse whom you legally married in a state or even a foreign country that recognizes same-sex marriage, you and your spouse generally can use the married filing jointly or married filing separately on your 2013 return. According to the IRS, this is true even if you and your spouse now live in a state that does not recognize such marriages.

I am always asked — especially by homeowners who for the first time will be able to itemize their tax deductions — what’s the best way to start. My suggestion: Go to the IRS Web site, and download a number of its helpful publications.

Recently, the IRS announced that it has significantly updated “Your Federal Income Tax” forms. According to the IRS, Publication 17 includes important changes to help taxpayers “get the most out of various tax benefits and get a jump on preparing their 2013 federal income tax returns.” This 292-page guide contains thousands of interactive links to help taxpayers quickly get answers to their questions.

Other publications that may assist you include: No. 1, “Your Rights as a Taxpayer”; No. 502, “Medical and Dental Expenses”; No. 504, “Divorced or Separated Individuals”; No. 523, “Selling Your Home”; and No. 530, “Tax Information for First Time Homebuyers.” A complete list can be found at www.irs.gov; click on Forms and Publications.

Additionally, you can obtain free help with problems you cannot resolve on your own by contacting the IRS Taxpayer Advocate Service. According to the IRS, there are offices in every state as well as in the District. For more information, go to www.taxpayeradvocate.irs.gov/
individuals/get-tax-help
 
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Finally, beware of scam e-mails or phone calls. The IRS periodically issues a warning not to provide any personal and financial information — such as name, Social Security number, bank account and credit card or even PIN numbers — to anyone calling or e-mailing claiming to represent the IRS.

The IRS makes it very clear: It does not send taxpayers e-mails about their accounts. And the only way to get a tax refund or to arrange for a direct deposit is to file a tax return. For more information, see “Suspicious e-mails and identity theft” on the IRS Web site.

Benny L. Kass is a Washington and Maryland lawyer. This column is not legal advice and should not be acted upon without obtaining legal counsel. For a free copy of the booklet “A Guide to Settlement on Your New Home,” send a self-addressed stamped envelope to Benny L. Kass, 1050 17th St. NW, Suite 1100, Washington, D.C. 20036.

 

via Start preparing now to file your taxes – The Washington Post.

The 8 most common tax filing errors, and how to avoid them

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The 8 most common tax filing errors, and how to avoid them
Real Estate Tax Talk
Stephen Fishman, Contributor
Feb 3, 2014

It’s tax time! The IRS started accepting individual returns for processing on Jan. 31 — later than usual, but better late than never.

Last year, the IRS issued a useful list of the eight most common filing errors made by individual taxpayers. Many of the mistakes people make are incredibly easy to avoid — it just takes a little care and attention.

If the IRS owes you a refund, it could be delayed if your return contains an error like one of these:

1. Wrong or missing Social Security numbers: Your refund could be delayed simply because you made a mistake listing your Social Security number. The number on your return must match the number on your Social Security cards.

2. Names wrong or misspelled: You’ve got to spell your own name right, or the IRS will get confused. Again, your name on your return should match the name on your Social Security card.

If you’ve changed your name since you filed your last return, you need to notify the Social Security Administration (SSA) and obtain a new Social Security card before you file your taxes. The SSA will issue a new Social Security card with your new name, but will keep your old Social Security number. This way, the name on your tax return will match Social Security records.

If your name and Social Security number don’t match, the IRS will flag your return and require that the error be corrected. It’s easy to let the SSA know about your name change and get a new Social Security card. All you need to do is file Form SS-5, Application for a Social Security Card, at your local SSA office or by mail with proof of your legal name change. You can get Form SS-5 from the SSA’s website at www.ssa.gov

“The IRS says that an unsigned tax return is like an unsigned check — it’s invalid.”

3. Math mistakes: Your math needs to add up. This ordinarily isn’t a problem if you file electronically, since the software does the math for you. Because most people file electronically, math errors have gone down. Such errors were found in 2 percent of returns filed in 2012, less than one-fifth the rate for 2002. Still, if you file on paper, be sure to double-check your math.

4. Wrong bank account numbers: The IRS will direct-deposit your refund directly into your bank account. But you have to give the correct account number.

5. Forms not signed, dated: The IRS says that an unsigned tax return is like an unsigned check — it’s invalid. Also, remember both spouses must sign a joint return.

6. Electronic signature errors: If you e-file your tax return, you sign the return electronically by using a Personal Identification Number (PIN). For security purposes, the IRS software will ask you to enter the Adjusted Gross Income (AGI) from your return for last year. This should be the AGI from the return you originally filed. If you later amended your return, or the IRS provided you with a different AGI after correct your return, don’t use those numbers. You may also use last year’s PIN if you e-filed last year and remember your PIN.

7. Filing status errors: Your filing status means whether you file your return as single, married filing jointly, married filing separately, head of household, or qualifying widow(er) with dependent child. Usually, it is pretty obvious what your status should be, but there can be complications. If you e-file your return, the software will help you choose the right filing status.

8. Errors in figuring credits, deductions: This is where taxes can get complicated. Moreover, a mistake here can cost you extra taxes or prevent your from getting a refund. For example, if you are age 65 or older, you’re entitled to a larger-than-normal standard deduction. But you must claim the deduction on your return. The same goes for common deductions such as charitable deductions.

Stephen Fishman is a tax expert, attorney and author who has published 20 books, including “The Real Estate Agent’s Tax Deduction Guide,” “Working for Yourself,” “Deduct It!” and “Working with Independent Contractors.” His website can be found at fishmanlawandtaxfiles.com.

via The 8 most common tax filing errors, and how to avoid them | Inman News.