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Updates to Home Buyer Credit – Tax tip of the week January 27, 2010

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Back in November, we discussed the First-time Home Buyer Credit and the Long-time Resident Credits in detail. house_money

The IRS recently published some updates that you will need to know to qualify for either of these credits.

  1. First and most importantly, don’t miss the deadlines! You must have a contract on the new home in place by April 30, 2010 and the property must close by June 30, 2010.
  2. The IRS recently released a revised Form 5405 which is needed to claim the credit.
  3. If a return contains Form 5405, it cannot be e-filed (filed electronically.)  You must mail the completed tax return to the IRS.
  4. If you are claiming the First-time Home Buyer Credit, you must attach the closing statement (HUD-1) to the return.
  5. If you are claiming the Long-time Resident Credit, you must attach evidence that you lived in your old home for a five-year consecutive period during the eight-year period ending on the purchase date of the new home.  This evidence could be:  mortgage interest statements (Form 1098), property tax records or homeowner’s insurance records.
  6. For those filing their 2009 tax returns early, the IRS does not anticipate issuing any refunds until the end of March.

The added documentation is designed to deter fraudulent claims. We’ll keep you posted on any other changes and announcements on this topic.

As always, give us a call if you have any questions. In Dayton, call 937-436-3133 and in Xenia, call 937-372-3504. Or visit http://www.bradstreetcpas.com.

Rick Prewitt – the guy behind TTW

…until next week.

Elderly parents and tax issues – Tax Tip of the Week January 20, 2010

Posted by bradstreetblogger in : Tax Tip , 1 comment so far

Last month, two clients came to us with the same problem.

elderlyOne client had just admitted their remaining parent to a nursing home.  The other client’s last parent had just passed away.  In both cases, these adult children realized their parents had not been filing tax returns for the last several years—in one case, it had been 10 years since a return had been filed!

When a tax return is not filed, the IRS assesses a tax liability based upon a Substitute For Return (SFR).  These SFRs are based simply on the reported income on W-2s, 1009s, etc. without any regard to possible deductions or cost basis issues.  In one of these cases, the IRS was assessing a tax liability on the estate of over $100,000—when the actual liability should have only been about $2,000.

If you suspect your elderly parents might no longer be able to handle their financial affairs properly, you should have an attorney execute a Power of Attorney (POA) naming you or another trusted individual Attorney-in-Fact (“Agent”).  The powers granted by the POA discontinue at the time of death.  After death, an Executor must be appointed.

Once you have the attorney prepared POA, you can then file for a special POA with the IRS on Form 2848.  After death, a Form 56 will need to be filed with the IRS to be recognized as the Executor.   After filing Form 2848, you can then request transcripts from the IRS to ensure tax returns have been filed correctly, if at all.  Transcripts can be ordered by filing Form 4506-T; it will take about two to three weeks for delivery.  If you go to a tax practitioner who is a certified IRS e-services provider, you can get these transcripts in a manner of minutes.

No one likes to watch their parents lose their independence, but monitoring their tax returns is one way to prevent surprises and costly mistakes.

As always, give us a call if you have any questions. In Dayton, call 937-436-3133 and in Xenia, call 937-372-3504. Or visit http://www.bradstreetcpas.com.

Rick Prewitt – the guy behind TTW

…until next week.

50 Tax Breaks in Limbo – Tax Tip of the Week January 13, 2010

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capitalWhen the U.S. Senate adjourned for 2009, they left in limbo the future of more than 50 individual and business tax breaks which expired at the end of 2009.  Most notably, the expiration of the estate tax laws was not addressed.

In a letter to Senate Majority Leader Harry Reid, Senate Finance Committee Chairman Max Baucus “vowed to pass legislation to extend the expiring tax breaks early next year.”

And so we wait and watch Washington. We’ll keep you posted on progress and how it might affect your tax position. It’s looking like another interesting year in the tax world!

As always, give us a call if you have any questions. In Dayton, call 937-436-3133 and in Xenia, call 937-372-3504. Or visit http://www.bradstreetcpas.com.

Rick Prewitt – the guy behind TTW

…until next week.

Getting Organized Part II… Accounting software a MUST for small business – Tax Tip of the Week January 6, 2010

Posted by bradstreetblogger in : Tax Tip , 2comments

quickbooksLast week we talked about organizing your personal records.  This week we will talk about organizing records for business owners.

If you own your own business, it is imperative that you have a solid bookkeeping/accounting system in place.  Not only will you need these records to complete your tax return, but you need the information available to you to make management decisions throughout the year.

You probably already have some type of system in place.  But is it adequate and are you taking advantage of its features?   Can you print, for example, an Aged Receivables Report?  Is everything organized for closing out your 2009 books?

If you are not currently using accounting software in your business, the beginning of the year is the time to start.  If you are currently trying to use QuickBooks or another software solution, this is also the time of year to clean-up your books. Don’t let the first few weeks of new year slip by… now is the time to get your accounting system organized. This is a New Year’s Resolution you’ll appreciate all year long!

As always, give us a call if you have any questions.

Rick Prewitt – the guy behind TTW

PS – Looking for help with QuickBooks? We have a person on our staff who is a Certified QuickBooks ProAdvisor.  She has assisted many business owners in using this software efficiently so that they can concentrate on their business instead of the bookkeeping.  It is well worth your time and money to invest in getting some help as you start your 2010 tax year.

Give us a call. In Dayton, call 937-436-3133 and in Xenia, call 937-372-3504. Or visit http://www.bradstreetcpas.com.

…until next week.