Tax Q&A

This article courtesy of Feed the Pig. Copyright 2011 American Institute of Certified Public Accountants.

There’s less than a month until the 2011 tax return deadline, April 17. Last week, in Tax Q&A: Part 1, we covered a few basic tax questions. This week, we continue with questions and answers from the American Institute of CPAs to help make sure you pay no more taxes than you should.

How do I know if I can take special tax breaks? Many taxpayers don’t think about the special tax provisions that may apply to them and often pay more tax than they need to pay as a result. The special provisions include the earned income tax credit, the child tax credit, the American opportunity credit and the adoption credit. Check with your local CPA or the official IRS website to see if you qualify.

What are some deductions I might be able to take? Your 2011 tax return could be your last chance to claim credits for energy-efficient home improvements or other provisions that are set to expire at the end of this year unless Congress extends them.  Expiring provisions include deductions for tuition and fees, educator expenses, mortgage insurance premiums and the option to include your state and local sales taxes paid as an itemized deduction.  Review some tax savings strategies on the AICPA’s 360 Degrees of Taxes website.

Can I deduct my health insurance premiums if I am self-employed? It depends. If you’re self-employed, you may be able to deduct 100 percent of health and long-term medical costs for yourself, your spouse and your dependents. This deduction is taken as an adjustment to income and it can be taken only if the self-employed person or spouse is not covered by an employer health insurance plan.

Visit www.feedthepig.org for more money-saving tips.

 

What Are Some Tips For Renters Before Signing A Lease

A few tips I like to give in this day of renting are:

1. Research the property address to ensure the homeowner is not in any eminent foreclosure danger. You can’t guarantee the homeowner won’t go into default, but if the tax record shows they are behind on their mortgage, or purchased the home with a loan between 2005-2008, that’s certainly a red flag.

2. Check sites such as Craig’s List to see what the “going rates” are so that you know you are looking in an area affordable for you, and you have an idea of what true rent should be– giving you a tool for negotiating.

3. Make sure everything is in writing – If it isn’t written down, it never happened. All of the terms of the lease must be in writing for your protection, your deposit, first and last, walk thru, release of deposit at the end of the lease, etc. Get it all in writing!

4. Maintenance and repairs – Get this in writing as well, showing how your landlord will deal with repairs and what repairs they will/will not make.

A book I love to refer to tenants and tenants to be is California Tenants – A Guide To Residential Tenants’ & Landlords’ Rights & Responsibilities (http://www.dca.ca.gov/publications/landlordbook/catenant.pdf)

What's the typical process when buying a short sale?

Q: What’s the typical process when buying a short sale? How long does it take?  What are some pitfalls?

A: The typical process is the following:

1. Short Sale package sent to the lender/ Acknowledge receipt (one week)
2. BPO ordered (two weeks)
3. Negotiator assigned (one to two weeks)
4. Valuations/Assessment of the offer and short sale documentation (30 to 45 days)
5. Offer counter/denied/approved (one to two weeks)
6. Sent to investor for approval (if approved) (two to four weeks)

The order that the BPO is completed and the negotiator assigned may differ. Some lenders are trying to do as much work up front as possible. Such as completing a BPO (this is often done every three months automatically with some banks and is kept on file), or assigning a file to a specialist who can expedite the transaction.

The timeframes of each above are general timeframes but, because they are in the hand of an individual, can sometimes be faster or take longer. But in gauging transactions with the above timeline, for the most part, I am seeing files close accordingly.

Some of the pitfalls are:
1. Government programs – The Government implemented programs under Making Home Affordable (HAFA, HAMP, HARP, etc), initially intended to assist the market but created huge learning curves in the implementation of the programs. This had previously created many hangups and snags over the past few years. However, more recently, there has been a significant downturn in short sale lender snags and instead an increase in buyer fall-out due to the buyer’s lender or loan.

2. The Buyer’s lender – Tightening lender guidelines have been a cause of major short sale fallout over the past year.

3. Upcoming election – Because many of the candidates will want to be seen as if they are actively doing something for the people, we may actually see false movement (“the market is recovering” type of talk) that may have a backlash after the election is over.

For the most part, making an offer on a short sale can be a great experience if all parties are well-informed and expectations are set up front. The banks are definitely approving more short sales faster, showing that their processes are streamlining and staff turnover has been minimized. Also, many certifications (CDPE, HAFA, etc) are doing more to make certification more affordable and to educate more agents on both sides (buyer and seller). This is very important.

Short sales are here to stay, for a while anyway. We can’t fear them, we must instead embrace them, and if we go in with a mindset of “there is a solution for everything”, we can succeed in the world of short sales.

What’s the typical process when buying a short sale?

Q: What’s the typical process when buying a short sale? How long does it take?  What are some pitfalls?

A: The typical process is the following:

1. Short Sale package sent to the lender/ Acknowledge receipt (one week)
2. BPO ordered (two weeks)
3. Negotiator assigned (one to two weeks)
4. Valuations/Assessment of the offer and short sale documentation (30 to 45 days)
5. Offer counter/denied/approved (one to two weeks)
6. Sent to investor for approval (if approved) (two to four weeks)

The order that the BPO is completed and the negotiator assigned may differ. Some lenders are trying to do as much work up front as possible. Such as completing a BPO (this is often done every three months automatically with some banks and is kept on file), or assigning a file to a specialist who can expedite the transaction.

The timeframes of each above are general timeframes but, because they are in the hand of an individual, can sometimes be faster or take longer. But in gauging transactions with the above timeline, for the most part, I am seeing files close accordingly.

Some of the pitfalls are:
1. Government programs – The Government implemented programs under Making Home Affordable (HAFA, HAMP, HARP, etc), initially intended to assist the market but created huge learning curves in the implementation of the programs. This had previously created many hangups and snags over the past few years. However, more recently, there has been a significant downturn in short sale lender snags and instead an increase in buyer fall-out due to the buyer’s lender or loan.

2. The Buyer’s lender – Tightening lender guidelines have been a cause of major short sale fallout over the past year.

3. Upcoming election – Because many of the candidates will want to be seen as if they are actively doing something for the people, we may actually see false movement (“the market is recovering” type of talk) that may have a backlash after the election is over.

For the most part, making an offer on a short sale can be a great experience if all parties are well-informed and expectations are set up front. The banks are definitely approving more short sales faster, showing that their processes are streamlining and staff turnover has been minimized. Also, many certifications (CDPE, HAFA, etc) are doing more to make certification more affordable and to educate more agents on both sides (buyer and seller). This is very important.

Short sales are here to stay, for a while anyway. We can’t fear them, we must instead embrace them, and if we go in with a mindset of “there is a solution for everything”, we can succeed in the world of short sales.