Claiming A Tax Credit For Contributing To Retirement Accounts

21. March 2010 · Write a comment · Categories: General Tax · Tags: , , , ,

There is much grousing about the fact that the tax code doesn’t offer much financial relief for Americans. While I am right there complaining with you, there are some credits and deductions that people simply fail to take advantage of. One is the tax credit some people can claim for contributing to retirement accounts.

For all the political issues that drive people into a frenzy, the one that is really the most problematic is a simple population problem. The population data of Americans shows we have a bulge issue. There are far more baby boomers than there are any other group. The problem is they are now starting to retire and put a lot of pressure on the entitlement systems offered by the government. Medicare faces a trillion dollar short fall over the next thirty years and 2010 is the first year where Social Security will pay out more than it takes in.

Given all of this, it is little surprise the government promotes voluntary savings in retirement accounts. There are 401(k)s, IRA, Roth IRAs and so on. Most people are smart enough to shove money into these accounts, but not everyone does. To try to provide further motivation, the government actually offers a tax credit for some people if they contribute to retirement accounts.

You can take a tax credit up to ,000 as an individual or ,000 as a married couple for making retirement account contributions. The exact amount is based on a percentage of the contribution you make. To claim it, you must have been born before January 1992, not be claimed as a dependent and not be a full time student. The credit is also capped by income with the figures being ,750 for singles, ,625 for head of household filers and ,500 for married filing jointly. Use Form 8880 to figure the exact amount of your credit.

Tax credits should never be laughed at or overlooked. They are far more valuable than tax deductions. Why? The tax credit is a dollar for dollar deduction from the amount you must pay Uncle Sam. If you owe Uncle Sam ,000 for the year, a ,000 retirement contribution tax credit would mean you only owe ,000. That’s a big difference!

Inmates Cashing In On Home Buyer’s Tax Credits

19. March 2010 · Write a comment · Categories: General Tax · Tags: , , , ,

While the past year saw many potential home buyers struggling to find homes quickly enough to take advantage of the home buyer’s tax credit that was put in place last year, apparently not all of the people who attained these tax credits should actually have received them after all.

Included in the over 14 thousand fraudulent claims that the Treasury Department has discovered are over 9 million dollars in claims that have been handed out to almost 1,300 prison inmates who were incarcerated at the time of their claims.

The Treasury Department reassures taxpayers that only about 0.5% of home buyer’s credits claimed have been discovered to be fraudulent, whereas the majority of claims are from valid qualifying home buyers.

With the change in the home buyer’s credit from a ,500 interest-free loan into an ,000 tax credit, the opportunity for fraudsters to cash in developed. Unfortunately, a variety of people across the nation saw this as an easy way to make ,000.

The Treasury Department’s reports on the frauds that have been discovered related to the home buyer’s tax credit show that not just inmates have been hard at work trying to defraud the government out of funds; a variety of other people have also submitted claims without buying homes, sometimes with multiple people claiming to have all bought the same home or using home sales that happened outside of the time frame that the tax credit was active for. The estimated numbers of people who received money for homes that were bought before the new home buyer’s tax credit went into effect is over 2,500 while there is also an estimated 10,000+ people who have fraudulently received tax credits for homes that were also claimed by other home buyers.

Even with the unfortunate occurrences of fraudulent claims for the home buyer’s tax credit, the fact is that this stimulus has helped to offset the plummeting housing market that the nation has suffered during the current recession. The National Association of Realtors claims that it has, in fact, been instrumental in that process, generating over a million new home sales that home owners would have been unable or unwilling to engage in otherwise. Hopefully critics will remember that any process designed to provide assistance to struggling Americans is liable to attract fraudulent claims and this program has allowed a very small fraction of fraudulent claims to go through, which the IRS is working hard to correct now.

Get Special Financial Aid Under Ontario Disability Tax Credit Scheme

19. March 2010 · Write a comment · Categories: General Tax · Tags: , , , , , ,

To provide the direct financial support to the disabled people, the Canada government has launched several attractive benefits. Those disabled people living in the Ontario province can avail the benefits of Ontario Disability Support Program (ODSR). Here are different kinds of financial and social supports to the disabled people. There are some special aids to such people that include financial assistance and employment. The provision of tax credit is very beneficial that provides direct help.

There are basically two types of disability tax credits such as non-refundable and refundable. Under the non-refundable tax credits one can reduce tax owed to zero and can not get a refund. On the other hand a refundable credit can reduce your tax zero and provide you with a refund. The disability tax credit comes under the non-refundable tax credit that means your credit is transferable. So, your relatives and spouse, or other legal and common law can avail this benefit.

According to the criteria, the condition must exist for more than 12 months and must markedly affect the basic functions of life. The symptoms may be related to the eating, walking, speaking and self-care. Now if you have these disabilities then you can find the benefits of Ontario disability tax credit easily. Your eligibility for the benefit will be ratified by the qualified practitioners that you are suffering from severe and prolonged impairment and it effects on the form T2201. The certified taxpayer does not require the entire credit and adjustments. And they are processed manually by the tax centre of the country.

One can go through the help of some specialized organizations to get the qualification certificate. These authorities are equipped with the legal and experienced counselors who can assist you through proper consultation. Though, there will be no harm if you don’t get an approval but you may fail to put your position strongly before the government. Such laxity would ultimately affect your credibility while going for disability tax credit.

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Housing boom and meltdown – Is tax credit helping the meltdown?

17. March 2010 · Write a comment · Categories: General Tax · Tags: , , , ,

During the housing boom, I was living in California and working in a software firm. I used to wonder how people that have similar income like me could afford half a million dollar house but I never investigated. I had a brief consulting work with countrywide in developing and testing mortgage software where I learned about subprime loan and how new homeowner applicant could get massive mortgage without a down payment. I have also heard Bush saying “Everyone in America should be able to afford a home”.

As I research more on the housing boom, every article depicts that the federal government began a regulatory push to create affordable housing program. Republican and democratic as well as president pressured lending institution to lower new home owner applicant credit rating standards and accept minimal or no down payment requirement and introduce ARM (adjustable rate mortgage) and ARM with balloon payment. The unsustainable housing bubble created by major semi government firm Fannie Mae and Freddie Mac by their irresponsibility and uncontrollable spending on flawed mortgages.

Fannie Mae and Freddie Mac spend trillions of dollars in housing mortgage which is more than any countries in this world except 4 countries and the return from the 50 -75% of the mortgage was close to null.

Housing experts and leaders view the government decision on affordable housing was a big mistake that caused big roiling in the US economy. The negligence on borrowers’ affordability on housing loans that was classified as affordable loan by Freddie Mac and Fannie Mae has cost US taxpayer huge amount and to compensate this, generations of tax payers will have to pay to recover what was lost.

Bank started issuing mortgage loans to those applicants with poor credit ratings. Mortgage brokers enticed by big commission accepted poor credit applicants with little or no down payment and this was the root cause of mortgage meltdown.  Approximately 80% of US mortgage issued in recent years to subprime borrowers were ARM loans. The housing market peaked in mid 2006 and then began bursting due to subprime loans. The subprime loan with balloon payment in few years made homeowner financially not able to handle balloon payments hence triggering foreclosures and there begins the ripple effect of mortgage meltdown all across the coast. Homeowners are unable to pay the huge monthly mortgage hence default the loan on home where the home value is less than the loan amount they owed. The fall out of subprime loans due to default have tremendous effect in housing market, financial market and the entire US economy.

To save the US economy, government has provided tax rebate to improve American economy by mailing checks to pay bills and to buy something new.  It was just a temporary patch and not a permanent fix. Also, to promote foreclosed and new home sales, government provided tax credit to the new homeowners but if the homebuyers are unemployed then tax rebate is useless. It seemed like every problem stricken at once to United States such as housing crisis, stock market, and unemployment but it is definitely ripple effect of bad loans except GM and Ford bankruptcies.

Is the government tax rebate on new home buyers working? The tax credit was initially originated in 2008 and this initiative gave a hope to the nation that housing crisis will end or minimize with this but the housing tax rebate is again extended to 2010. Housing crisis triggered recession and even though government claims that US recession is over but I think we have a long way to go (4 to 5) years to bring everything back to normal. All the empty houses are to be filled with homebuyers and need to reduce 10% unemployment rate to 2 to 0 percent. This definitely takes time, although stock market has recovered a little but it is still in vulnerable state. Any bad or good news is shaking stock prices and shaken stock price means stock holders low confidence on US economy.

Currently, 2 to 3 million families are expected to lose their homes to foreclosure as they cannot afford the balloon payment. Most of the loan was originated with 5 to 10 year ARM balloon payment and in my opinion, to get to the end of housing crisis; we need government to create jobs so that homeowners can pay the big mortgage payments that is coming to their way.

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Basic Information On The Federal Homebuyer Tax Credit

15. March 2010 · Write a comment · Categories: General Tax · Tags: , , , ,

With April coming to an end soon, so follows the expected expiration of the Homebuyer Tax Credit offered by the federal government for first-time homebuyers and existing homeowners. The last iteration of the tax credit was set to expire on November 30, 2009. On November 6, 2009 the tax credit was extended and expanded through spring of 2010. Presently, the tax credit is available for first-time homebuyers and existing homeowners who sign the purchase contract on a primary residence by April 30, 2010 with the closing completed by June 30, 2010.

For in depth information on the federal tax credit for homeowners view the site at IRS.gov. As far as basic information goes, the federal government is offering a tax credit for first-time homebuyers and existing homeowners who enter into a binding contract to purchase a new home by April 30, 2010 with the closing completed by June 30, 2010.

A first-time homebuyer is defined as a buyer who has not owned a home during the last three years up to the date of the purchase of the residence. First-time homebuyers are able to claim a tax credit for 10% of the purchase price of a home up to a maximum of ,000. The home purchased cannot exceed the 0,000 price cap. The full credit will be available if taxpayer has a modified adjusted gross income up to 5,000 if filing as single and up to 5,000 if filing jointly. A partial credit will still be available if a single filers MAGI exceeds the 5,000 as long as it stays between 5,000.01 and 5,000. Joint filers can receive a partial credit if their MAGI are between 5,000.01 and 5,000.

An existing homeowner is defined as someone who has lived in a home for a period of 5 consecutive years out of an S year period ending on the purchase date of the home. Existing homeowners purchasing a new primary residence may claim 10% of the purchase price of the residence up to a maximum of ,500. The home purchased must not exceed the 0,000 price cap. As with the first-time buyer credit, the full credit will be available for existing homeowners if the taxpayer has a modified adjusted gross income up to 5,000 if filing as single and up to 5,000 if filing jointly. A partial credit will still be available if a single filers MAGI exceeds the 5,000 as long as it stays between 5,000.01 and 5,000. Joint filers can receive a partial credit if their MAGI are between 5,000.01 and 5,000.

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