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Top 10 First-Time Homebuyer Credit Tax Tips

There is still time to claim the First-Time Homebuyer Tax Credit on your 2009 tax return.

If you purchased or entered into a binding contract to purchase a home in 2009 or early 2010, you may be eligible to claim the First-Time Homebuyer Credit. Claiming this credit might mean a larger refund.

 

Top 10 First-Time Homebuyer Credit Tax Tips

Here are 10 things you should know about the First-Time Homebuyer Credit and how to claim it.

  1. You must buy – or enter into a binding contract to buy – a principal residence located in the United States on or before April 30, 2010. If you enter into a binding contract by April 30, 2010, you must close on the home on or before June 30, 2010.
  2. To be considered a first-time homebuyer, you and your spouse – if you are married – must not have jointly or separately owned another principal residence during the three years prior to the date of purchase.
  3. To be considered a long-time resident homebuyer, you and your spouse – if you are married – must have lived in the same principal residence for any consecutive five-year period during the eight-year period that ended on the date the new home is purchased. Additionally, your settlement date must be after November 6, 2009.
  4. The maximum credit for a first-time homebuyer is $8,000. The maximum credit for a long-time resident homebuyer is $6,500.
  5. You must file a paper return and attach Form 5405, First-Time Homebuyer Credit and Repayment of the Credit with additional documents to verify the purchase. Though you cannot file electronically, you can still use Free File or tax-preparation software to prepare your return. The return must then be printed out and sent to the IRS, along with all required documentation.
  6. If before May 1, 2010, you enter into a binding contract to purchase a home before July 1, 2010, and you are claiming the credit, attach a copy of the pages from the signed binding contract to make a purchase showing all parties’ names and signatures, the property address, the purchase price and the date of the contract.
  7. New homebuyers must attach a copy of a properly executed settlement statement used to complete such purchase. Generally, a properly executed settlement statement shows all parties’ names and signatures, property address, sales price and date of purchase. However, settlement documents, including the Form HUD-1, can vary from one location to another and may not include the signatures of both the buyer and seller. In areas where signatures are not required on the settlement document, the IRS encourages buyers to sign the settlement statement when they file their tax return — even in cases where the settlement form does not include a signature line.
  8. Buyers of a newly constructed home, where a settlement statement is not available, must attach a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.
  9. Purchasers of mobile homes who are unable to get a settlement statement must attach a copy of the executed retail sales contract showing all parties’ names and signatures, property address, purchase price and date of purchase.
  10. If you are a long-time resident claiming the credit, the IRS recommends that you also attach documentation covering the five-consecutive-year period such as Form 1098, Mortgage Interest Statement or substitute mortgage interest statements, property tax records or homeowner’s insurance records.

For more information about the First-Time Homebuyer Tax Credit and the documentation requirements, visit IRS.gov/recovery.

How to Get Credit for Retirement Savings Contributions

If you make eligible contributions to an employer-sponsored retirement plan or to an individual retirement arrangement, you may be eligible for a tax credit.

 

Here are six things you need to know about the Retirement Savings Contributions Credit:

1. Income Limits The Savers Credit, formally known as the Retirement Savings Contributions Credit, applies to individuals with a filing status and income of:

  • Single, married filing separately, or qualifying widow(er), with  income up to $27,750
  • Head of Household, with income up to $41,625
  • Married Filing Jointly, with income up to $55,500

2. Eligibility requirements To be eligible for the credit you must have been born before January 2, 1992, you cannot have been a full-time student during the calendar year and cannot be claimed as a dependent on another person’s return.

3. Credit amount If you make eligible contributions to a qualified IRA, 401(k) and certain other retirement plans, you may be able to take a credit of up to $1,000 or up to $2,000 if filing jointly. The credit is a percentage of the qualifying contribution amount, with the highest rate for taxpayers with the least income.

4. Distributions When figuring this credit, you generally must subtract the amount of distributions you have received from your retirement plans from the contributions you have made. This rule applies to distributions received in the two years before the year the credit is claimed, the year the credit is claimed, and the period after the end of the credit year but before the due date – including extensions – for filing the return for the credit year.

5. Other tax benefits The Retirement Savings Contributions Credit is in addition to other tax benefits which may result from the retirement contributions. For example, most workers at these income levels may deduct all or part of their contributions to a traditional IRA. Contributions to a regular 401(k) plan are not subject to income tax until withdrawn from the plan.

6. Forms to use To claim the credit use Form 8880, Credit for Qualified Retirement Savings Contributions.

 

How to Get Credit for Retirement Savings Contributions

For more information, review IRS Publication 590, Individual Retirement Arrangements (IRAs), Publication 4703, Retirement Savings Contributions Credit, and Form 8880. Publications and forms can be downloaded below or ordered by calling 800-TAX-FORM (800-829-3676).

 

IRS Information about Retirement Savings Contributions

  • Form 8880, Credit for Qualified Retirement Savings Contributions (PDF 46K)
  • Publication 590, Individual Retirement Arrangements (IRAs) (PDF 449K)
  • Tax Topic 610
moving

Did You Move or About To Move?

Five Tips for Taxpayers Making a Move

If you’ve changed your home or business address, make sure you update that information with the IRS to ensure you receive any refunds or correspondence from the IRS.

1. How to Change Your Address You can change your address on file with the IRS in several ways:

  • Correct the address legibly on the mailing label that comes with your tax package;
  • Write the new address in the appropriate boxes on your tax return;
  • Use Form 8822, Change of Address, to submit an address or name change any time during the year;
  • Give the IRS written notification of your new address by writing to the IRS center where you file your return. Include your full name, old and new addresses, Social Security Number or Employer Identification Number and signature. If you filed a joint return, be sure to include the information for both taxpayers. If you filed a joint return and have since established separate residences, both taxpayers should notify the IRS of your new addresses; and
  • Should an IRS employee contact you about your account, you may be able to verbally provide a change of address.

2. Notify Your Employer Be sure to also notify your employer of your new address so you get your W-2 forms on time.

3. Notify the Post Office If you change your address after you’ve filed your return, don’t forget to notify the post office at your old address so your mail can be forwarded.

4. Estimated Tax Payments If you make estimated tax payments throughout the year, you should mail a completed Form 8822, Change of Address, or write the IRS campus where you file your return. You may continue to use your old pre-printed payment vouchers until the IRS sends you new ones with your new address. However, do not correct the address on the old voucher.

5. Postal Service The IRS does use the Postal Service’s change of address files to update taxpayer addresses, but it’s still a good idea to notify the IRS directly.

Visit IRS.gov for more information about changing your address. At IRS.gov, you can also find the address of the IRS center where you file your tax return or download Form 8822, Change of Address. The form is also available by calling 800-TAX-FORM (800-829-3676).

 

IRS Links on Moving Expenses:

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Ten Facts about Mortgage Debt Forgiveness

If your mortgage debt is partly or entirely forgiven during tax years 2007 through 2012, you may be able to claim special tax relief and exclude the debt forgiven from your income. Here are 10 facts the IRS wants you to know about Mortgage Debt Forgiveness.

 

Ten Facts about Mortgage Debt Forgiveness

  1. Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.
  2. The limit is $1 million for a married person filing a separate return.
  3. You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.
  4. To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.
  5. Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.
  6. Proceeds of refinanced debt used for other purposes – for example, to pay off credit card debt – do not qualify for the exclusion.
  7. If you qualify, claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.
  8. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax relief provision. In some cases, however, other tax relief provisions – such as insolvency – may be applicable. IRS Form 982 provides more details about these provisions.
  9. If your debt is reduced or eliminated you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed.
  10. Examine the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.

 

Mortgage Forgiveness Debt Relief Act of 2007

For more information about the Mortgage Forgiveness Debt Relief Act of 2007, visit IRS.gov. A good resource is IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments. Taxpayers may obtain a copy of this publication and Form 982 either by downloading them from IRS.gov or by calling 800-TAX-FORM (800-829-3676).

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Top Ten Tips for Last Minute Filers

With the tax filing deadline close at hand, here are the top 10 tips the IRS wants you to know if you are still working on your federal tax return.

  1. E-file your return Don’t miss out on the benefits of e-file. Your tax return will get processed quickly if you use e-file.  If there is an error on your return, it will typically be identified and can be corrected right away.  E-file is available 24 hours a day, seven days a week, from the convenience of your own home. If you file electronically and choose to have your tax refund deposited directly into your bank account, you will have your money in as few as 10 days. Two out of three taxpayers, 95 million, already get the benefits of e-file.
  2. Review tax ID numbers Remember to carefully check all identification numbers on your return. Incorrect or illegible Social Security Numbers can delay or reduce a tax refund.
  3. Double-check your figures Whether you are filing electronically or by paper, review all the amounts you transferred over from your Forms W-2 or 1099.
  4. Review your math Taxpayers filing paper returns should also double-check that they have correctly figured the refund or balance due and have used the right figure from the tax table.
  5. Sign and date your return Both spouses must sign a joint return, even if only one had income. Anyone paid to prepare a return must also sign it.
  6. Choose Direct Deposit To receive your refund quicker, select Direct Deposit and the IRS will deposit your refund directly into your bank account.
  7. How to make a payment People sending a payment should make the check out to “United States Treasury” and should enclose it with, but not attach it to, the tax return or the Form 1040-V, Payment Voucher, if used. Write your name, address, SSN, telephone number, tax year and form number on the check or money order. If you file electronically, you can file and pay in a single step by authorizing an electronic funds withdrawal. Whether you file a paper return or file electronically, you can pay by phone or online using a credit or debit card. Visit IRS.gov for more information on payment options.
  8. File an extension Taxpayers who will not be able to file a return by the April 15 deadline should request an extension of time to file. Remember, the extension of time to file is not an extension of time to pay.
  9. Visit the IRS Web site anytime of the day or night IRS.gov has forms, publications and helpful information on a variety of tax subjects.
  10. Review your return…one more time Before you seal the envelope or hit send, go over all the information on your return again. Errors may delay the processing of your return, so it’s best for you to make sure everything on your return is correct.

 

Top Ten Tips for Last Minute Tax Filers

  • Form 9465, Installment Agreement Request (PDF 100K)
  • Form 1040-V, Payment Voucher (PDF 47K)
  • Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return (PDF 50K)