Short Sales - What you need to know about mortgage debt forgiveness.
With the value of properties dropping over the last couple of years many people have been forced to sell their homes for less than they owe on the property. When this happens, the bank can require that the people who owe the mortgage still owe the outstanding balance or it can forgive the outstanding amount, called mortgage debt forgiveness. While having the bank forgive the outstanding mortgage balance sounds great, there are other considerations that you need to think about first.
Generally, any debt that has been forgiven is considered taxable income by the IRS. However, Congress passed the Mortgage Forgiveness Debt Relief Act of 2007 which forgives taxes on the amount of mortgage forgiveness if a few conditions are met. First, the property sold on which mortgage forgiveness was given must have been the taxpayers primary residence. Second, if the debt forgiven was for a refinance, the income from the debt forgiveness can only be forgiven if the refinance was used to improve or repair the primary residence. Thus, if you refinanced and used the money to pay off credit cards or other debt, the debt forgiven would still be taxable as income for IRS purposes.
Free Income Tax Preparation
Did you make less than $49,000 last year? Are you 60 years or older? If so, you qualify for free income tax preparation from the Internal Revenue Service.
VITA and TCE are two programs implemented by the Internal Revenue Service to help low income and elderly taxpayers file their income taxes for free. There are thousands of sites throughout the United States where taxpayers can come and get their taxes prepared.
To see a place near you, stop by www.irs.gov and search for VITA or TCE to see where the closest tax preparation location is.
If you decide to get your taxes done at one of these places, you need to gather together your documents for the preparers. So what do you need to bring with you? First, you need to bring your social security card and the social security card for all your dependents and your spouse. You also need to bring your W-2, 1099s, and any other statements you received that show the income you earned last year. If you have a mortgage and paid interest last year, you also need to bring in the year end statement your mortgage company mailed you. This will show the interest you paid on your mortgage, your property taxes, and also the insurance you paid on the property last year.
If you don’t qualify for having your taxes prepared by one of these programs, check out www.irs.gov/freefile to see if you qualify to file your taxes for free using online software.
Saving your business money
Money is tight for everyone now, but this is especially true for small businesses. Because of the economy, banks are not lending or make it extremely difficult to get a loan. In order to succeed, small businesses need to find ways to stretch their dollars. Check out these great ways to make your dollar stretch a bit further.
1. Shop around to ensure you get the best price.
I like to use http://riveroffers.com/?cogid=frend&refid= to check out prices for internet and phone service. They have great offers for cellphones, calling cards, and credit cards as well. Shopzilla is also a great site for comparison pricing.
2. Check to see if your bank offers additional savings programs.
Many banks offer savings programs or cash back options when you use your business card to purchase items online. When ordering Christmas gifts for your top customers, you can get a nice gift and cash back for your company by ordering with your business card or through your banking website.
3. Company Loyalty Programs
These can also provide additional savings for small businesses. Staples and Office Depot are great examples of companies with loyalty programs that can help your business save.
There are many ways to save money and stretch your dollar further. Take a few minutes and let me know how you save your business money.
Where are your records?
Tax time is rolling around again so what can you do now to ensure a less painful tax preparation this year? The easiest thing to do is keep a record of your transactions. Sounds easy but we all forget to save those receipts or print out those statements.
What records and receipts should you be keeping? Well, did you purchase a car in 2009? If so, keep that receipt as you may be able to deduct the sales tax you paid. Did you buy or sell stocks? You need to know what your basis was in those stocks, which again means that you need to know what you paid for the stock, the commission you paid to purchase the stocks, and any stock dividends you received that were reinvested in stocks. This might not be too bad if you only make one or two stock purchases a year, however, once you reach the level where you buy and sell stocks several times a month, this can be a nightmare.
Other receipts that you might want to save are your medical receipts. For example, you need evidence to show how much you paid for the year in after tax dollars for your medical premiums. You also want to save receipts for copays, prescriptions, and other medical expenses. Many stores make this easier now by showing you at the bottom of the receipt the amount that qualifies as a medical expense.
Do yourself and your tax preparer a favor and keep your receipts and print out and save your monthly statements. You can make life even easier by sorting the receipts and statements out by category, at least you can do that if your New Year’s resolution was to get organized.
Gambling Gets Expensive
The Internal Revenue Service issued a decision this week that casual gamblers recognize wins or losses when they redeem their tokens. This means that if you go gambling for the weekend and have a win on the first day and then lose money on the second day, each time you cash in your tokens is a separate recognition event for income tax purposes. Thus, if you turn in $200 for chips and then walk out with $800, the $600 is your win and must be added as income when you complete your taxes, even if you gamble other times throughout the year for a loss.
Tis the Season to Save . . . On Taxes!
Everyone hates paying taxes. We all accept it as inevitable but look for ways to reduce our tax liability. Luckily for us, the IRS offers incentives in the form of tax deductions. Some common deductions include charitable contributions, interest on your home mortgage, and interest on your student loans. While you may have no control on when you pay your mortgage and interest, you do have control on when you make charitable contributions.
Basically we are talking about the time value of money. You get the same tax deduction for your charitable donations whether you make them all in January, throughout the year, or all on December 31. This allows you to use your money throughout the year instead of letting someone else use it.
Some people might want to make charitable deductions but are afraid that if they don’t make them in little contributions throughout the year, the money will be spent come December and they will lose out on the deductions. If you are really serious about making charitable contributions but also not wasting your money, put aside the money you want for charitable contributions each month in a savings account. This allows the money to collect interest, which you can use for yourself, or you can add it to your charitable contributions at the end of the year and get even more tax deductions. Either way, you have the money to make your charitable contributions, you got the value of having the money for the entire year, and you still get your tax deductions.
Financial Fortunes
Understanding finances and how to keep track of your finances can make or break your business. Keeping track of your finances is especially important for small cash based businesses. It is very easy to forget or lose track of what you make, the taxes you need to pay on your sales, and what was sold if you don’t develop a system to keep track of everything. This can land you in hot water not only with the IRS and your state, it will also make it hard when you need investors or try to get a loan from a bank.
Many small businesses don’t realize the importance of keeping good records. They want to try and hide some of their income in order to keep taxes down. However, while this might save them a few dollars in the short term, this gamble could really hurt in the long run. If the IRS finds out that you are not properly reporting all your income, including any cash tips or sales from other items that are not the main part of your business, they will not only collect the back taxes for that income, they will also impose fines and charge interest on the back taxes owed.
There are plenty of good accounting systems available that will help you keep track of your inventory, sales, invoices, expenses and income. I frequently use Quickbooks. Ask your accountant or other business owners for what they recommend.
What is a short sale?
While the housing market and economy are gradually showing signs of improvement, there are still many people who are behind on their mortgage payments and unsure of how to proceed. One option is a short sale.
Short sales are when the owners sell the mortgaged property, with the banks approval, knowing that the house will likely sell for less than the outstanding mortgage amount. Some banks will then write off the difference between the outstanding mortgage amount and the selling price of the home. However, that is not a guarantee so you should talk with your mortgagor to understand exactly what they will allow and get their approval before listing your house for sale.
If you are facing the possibility of losing your home, talk to your bank and a local real estate agent about the options. Having a portion of your loan written off through a short sale will hurt your credit much less than going through a foreclosure.
Secrets from a Hiring Manager
There is plenty of competition in the job market, so how can you get ahead? Surprisingly, it may take something as simple as common sense and respect for the people who are interviewing you.
1. When an ad states Do Not Call, don’t call.
Surprise. It is so simple, but it can mean the difference between the hiring manager looking at your resume or promptly dumping it in the trash. When the ads state don’t call, there is usually a reason, and when you ignore that statement, you are showing the hiring manager that you don’t respect his/her authority or ability to make decisions. Not a good move.
2. Dress for Success.
When you get that interview, you need to make a great first impression. If you don’t have a suit, check into getting one. If you can’t afford one, stop by your local Goodwill, Salvation Army, or contact local charities that provide suits to people unable to afford them. Whatever you do, do not look like you bought the suit at Goodwill though. Get the suit early enough that you can take it to the dry cleaners and get it cleaned and pressed in time for your interview. Having a suit is not enough, you also have to show good personal hygiene by wearing clean clothes and trying to look your best. In addition, make sure that the suit actually fits properly.
3. Bring copies of your resume to the interview.
Bring several copies of your resume with you so that you can pass them around to the different people in the company that you are interviewing with in case they did not print one out for the interview. In addition, review the resume just before the interview so that everything on it is fresh in your mind and you can answer their questions without that awkward pause.
New Roth IRA Rules Postpone Income Reporting
On January 1, 2010 the rules for converting a retirement account to a Roth IRA are changing. Currently, people can only convert their accounts to a Roth IRA if they have a modified adjusted gross income of $100,000 or less and must not be filing their taxes as married filing separately. Under the new rules, people will be able to convert their other IRAs to a Roth regardless of their income levels. In addition, their is an option that allows report half the income from your conversion in 2011 and the other half in 2012 rather than reporting all of it in the year of conversion as required under the current rules.