Delaware Valley Homes

The Internal Revenue Service has some important information to share with individuals who have sold or are about to sell their home. If you have a gain from the sale of your main home, you may qualify to exclude all or part of that gain from your income. Here are ten tips from the IRS to keep in mind when selling your home.

1. In general, you are eligible to exclude the gain from income if you have owned and used your home as your main home for two years out of the five years prior to the date of its sale.
   
2. If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases).
   
3. You are not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.
   
4. If you can exclude all of the gain, you do not need to report the sale on your tax return.
   
5. If you have a gain that cannot be excluded, it is taxable. You must report it on Form 1040, Schedule D, Capital Gains and Losses.
   You cannot deduct a loss from the sale of your main home.
   
6. Worksheets are included in Publication 523, Selling Your Home, to help you figure the adjusted basis of the home you sold, the gain (or loss) on the sale, and the gain that you can exclude.
   
7. If you have more than one home, you can exclude a gain only from the sale of your main home. You must pay tax on the gain from selling any other home.
8.  If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.
   
9. If you received the first-time homebuyer credit and within 36 months of the date of purchase, the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full credit is due with the income tax return for the year the home ceased to be your principal residence, using Form 5405, First-Time Homebuyer Credit and Repayment of the Credit. The full amount of the credit is reflected as additional tax on that year™s tax return.
   
10. When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive refunds or correspondence from the IRS. Use Form 8822, Change of Address, to notify the IRS of your address change.
    

For more information about selling your home, see IRS Publication 523, Selling Your Home. This publication is available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

source: IRS Summertime Tax Tip 2011-15

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If you earned income in the last few years but you didn™t file a tax return because your wages were below the filing requirement, the Internal Revenue Service may have some money for you. The IRS also has millions of dollars in checks that are returned each year as undeliverable.
Here™s what you need to know about these two types of œmissing money and how to claim it:
Unclaimed Refunds
Some people earn income and may have taxes withheld from their wages but are not required to file a tax return because they have too little income. In this case, you can claim a refund for the tax that was withheld from your pay. Other workers may not have had any tax withheld but would be eligible for the refundable Earned Income Tax Credit, but must file a return to claim it.
To collect this money a return must be filed with the IRS no later than three years from the due date of the return.
If no return is filed to claim the refund within three years, the money becomes the property of the U.S. Treasury.
There is no penalty assessed by the IRS for filing a late return qualifying for a refund.
Current and prior year tax forms and instructions are available on the Forms and Publications page of www.irs.gov or by calling 800-TAX-FORM (800-829-3676).
Information about the Earned Income Tax Credit and how to claim it is also available on www.irs.gov.
Undeliverable Refunds
Were you expecting a refund check but didn’t get it?
Refund checks are mailed to your last known address. Checks are returned to the IRS if you move without notifying the IRS or the U.S. Postal Service.
You may be able to update your address with the IRS on the œWhere™s My Refund? feature available on IRS.gov. You will be prompted to provide an updated address if there is an undeliverable check outstanding within the last 12 months.
You can also ensure the IRS has your correct address by filing Form 8822, Change of Address, which is available on www.irs.gov or can be ordered by calling 800-TAX-FORM (800-829-3676).
If you do not have access to the Internet and think you may be missing a refund, you should first check your records or contact your tax preparer. If your refund information appears correct, call the IRS toll-free assistance line at 800-829-1040 to check the status of your refund and confirm your address.

source: IRS Summertime Tax Tip 2011-13

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Buying your first home can be a difficult process – especially if you don’t ask the right questions ahead of time. According to Kimberly Palmer, key contributor to U.S. News & World Report, a critical mistake first-time buyers make is overlooking hidden costs that could have been revealed prior to making a purchase decision. Determining these and other critical factors can have a huge impact on your ability to find the right property for your needs.When it comes to purchasing your first home, buyers need to remember that their realtor is there to help ease the process and should take advantage of each opportunity to learn from them. Similar to a lawyer or any other consultant, a realtor is your advocate and counsel for the duration of the home buying life cycle, from the home search to close of escrow.

My Favorite Mortgage Rep, Linda Povey, Waterstone Mortgage Corp sent the following article to me.     I think you are crazy…if you don’t buy NOW!

Mortgage rates plunge, flirting with new lows
 
By Les Christie August 3, 2011

NEW YORK (CNNMoney) — As Congress and President Obama hammered out a debt deal over the past week, mortgage rates plunged — hitting new lows in some instances.

The 30-year fixed rate, usually the most popular choice for homebuyers, fell to 4.45% from 4.57% last week — its lowest point since last November, according to the Mortgage Bankers Association.

Meanwhile, the rate on the less popular 15-year fixed plunged to a new record low of 3.52%, down from 3.67% a week earlier.

The up-front points lenders charged dropped as well, to 0.78 from 1.14 for 20%-down loans, according to the industry group. A homebuyer financing a $200,000 mortgage could save $14 a month and pay $720 less at closing based on the current points.

The rock-bottom interest rates drove up total mortgage applications — both for purchases and refinancings — by about 7%, compared with a week earlier, said Michael Fratantoni, the Mortgage Bankers Association’s vice president of research and economics. While the increase may seem substantial, he noted that applications are still well below last year’s level.

“Refinance application volume increased, but even though 30-year mortgage rates are back below 4.5 percent, the refinance index is still almost 30 percent below last year’s level. Factors such as negative equity and a weak job market continue to constrain borrowers,” he said.

On Bankrate.com Wednesday, a 30-year fixed was available that carried an annual percentage rate of just 4.03%. The overnight average was 4.37%, the site reported.

Mortgage rates are following bond yields lower, explained Greg McBride, Bankrate’s chief economist. The yield on 10-year Treasury notes hit 2.6% on Wednesday down from 3.03% the last week of July.

“The plunge in Treasury yields is because we’ve been hit with a string of poor economic readings,” said McBride.

Those include a weak GDP report and slowdowns in manufacturing, consumer spending and hiring.

With rates so low and home prices down more than 30% from peak, there has probably never been a more affordable time to buy a home.

For some buyers though, “Time is of the essence.,” said McBride. “The loan limits (for Fannie/Freddie mortgages) drop on October 1 so acting now for closing by Sept. 30 is important for buyers in the upper price levels.”

source: e-mail from Linda Povey, Waterstone Mortgage Corp

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Get a list of Boothwyn Foreclosures and Short Sales.     FREE!     Click here for a list of Boothwyn Foreclosures and Short Sales.

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1. Home affordability is at an all-time high. The median mortgage payment on the median priced home as a percentage of the median household income is lower than it’s been in a generation.
2. Mortgage rates have reached rock bottom. As interest rates start to inch back upwards, monthly payments and total loan costs will spike upwards.
3. Buy Now; Buy Low! After declining nearly three years, home prices are stabilizing.
4. Sellers are motivated. This means that buyers have the upper hand! From banks looking to dispose of foreclosed properties to homeowners who are fiercely competing among an excess of housing inventory, buyers have untold choices and negotiating power.
5. Financing is readily available for qualified buyers! Banks are getting back in the game and ready to lend to well-qualified buyers.
6. Owning vs. renting is increasingly favorable. Since 2009, the average principal and interest payment has fallen below the average rental rates, and the gap is now wider than it’s been in the past 22 years.
7. Homeownership is at the core of the American Dream! Owning a home is critical to financial stability and wealth building. It’s a forced savings account, a place to live and a fabulous tax deduction.

Buy now before the interest rates go up!     Each 1% increase in the rate decreases your buying power by 10%.      Click here to start your home search.

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Gov. Tom Corbett recently signed into law changes to Act 1 that will limit school districts™ ability to raise property taxes.

When enacted in 2006, Act 1 restricted a school district™s ability to raise taxes above an index that is determined each year by the state Department of Education. To go above the index, a district would either need to seek voter approval or use one of 10 exceptions that were allowed by the state.

The new law will restrict school districts to only four exceptions: increased special education costs; pension liabilities; outstanding debt; or electoral debt already approved by voters. School districts will still need to seek voter approval to raise taxes above the Act 1 index for reasons other than the acceptable exceptions.

Source: Pottstown Mercury; 7/8/2011

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If you use your smartphone to work smarter or you prefer social media resources over hard copy documents, check out the ways the Internal Revenue Service delivers the latest information on tax changes, initiatives, products and services through social media.

Hiding income offshore, identity theft and return preparer fraud topped the IRS™s list of tax scams in 2011. The Internal Revenue Service issues an annual list of the top 12 tax scams, known as the œDirty Dozen. These scams are illegal and can lead to significant penalties and interest and possible criminal prosecution.
Here are five year-round scams every taxpayer should know about.

1. Hiding Income Offshore     The IRS aggressively pursues taxpayers involved in abusive offshore transactions and the promoters who facilitate or enable these schemes. Taxpayers have tried to avoid or evade U.S. income tax by hiding income in offshore banks and brokerage accounts, or by using offshore debit cards, credit cards, wire transfers, foreign trusts, employee-leasing schemes, private annuities or life insurance plans.
In February, the IRS announced a second voluntary disclosure initiative to bring offshore money back into the U.S. tax system. The new voluntary disclosure initiative will be available through Aug. 31, 2011.

2. Phishing Scam     Artists use phishing to trick unsuspecting victims into revealing personal or financial information. Scams take the form of e-mails, phony websites or phone calls that offer a fictitious refund or threaten an audit or investigation to lure victims into revealing personal information. The IRS never initiates unsolicited e-mail contact with taxpayers about their tax issues. Phishers use the information to steal the victim™s identity, access their bank accounts and credit cards or apply for loans. Please forward suspicious scams to the IRS at phishing@irs.gov. You can also visit www.irs.gov, keyword phishing, for additional information.

3. Return Preparer Fraud     Dishonest tax return preparers cause trouble for taxpayers by skimming a portion of the client™s refund or charging inflated fees for tax preparation. They attract new clients by promising refunds that are too good to be true. To increase confidence in the tax system, the IRS now requires all paid return preparers to register with the IRS, pass competency tests and attend continuing education. Taxpayers can report suspected return preparer fraud to the IRS on Form 3949-A, Information Referral.

4. Filing False or Misleading Forms     The IRS continues to see false or fraudulent tax returns filed to obtain improper tax refunds.
Scammers often use information from family or friends to file false or fraudulent returns, so beware of requests for such data. Don™t claim deductions or credits you are not entitled to and never willingly allow others to use your information to file false returns. If you participate in such schemes, you could be liable for financial penalties or even face criminal prosecution. The IRS takes refund fraud seriously, has programs to aggressively combat it and stops the vast majority of incorrect refunds.

5. Frivolous Arguments     Promoters of frivolous schemes encourage people to make unreasonable and outlandish claims to avoid paying the taxes they owe. If a scheme seems too good to be true, it probably is. The IRS has a list of frivolous legal positions that taxpayers should avoid on www.irs.gov. These arguments are false and have been thrown out of court repeatedly.

For the full list of 2011 Dirty Dozen tax scams or to find out how to report suspected tax fraud, visit www.irs.gov.

source:IRS Summertime Tax Tip 2011-08

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