Tips on Saver’s Credit with an IRA

Posted on February 25, 2012 by Kursti Nakagawa

IRA owners have until April 17, 2012 to make a 2011 contribution to their IRA. This year, it is not too late to get a Saver’s Credit for IRA contributions. A number of IRA owners may qualify for the Saver’s Credit of up to $1,000 ($2,000 if filing jointly) on their 2011 tax return for 2011 IRA contributions. The Saver’s Credit reduces the amount of income tax that may be owed dollar-for-dollar, but not less than zero.

Who is eligible for the Saver’s Credit?

To qualify for the Saver’s Credit (Retirement Savings Contributions Credit) for eligible IRA contributions, the IRA owner’s 2011 adjusted gross income cannot be more than:

• $56,500 when filing status is married, filing jointly

• $42,375 when filing status is head of household

• $28,250 when filing status is single, married filing separately. or qualifying widow(er)

Additionally, the IRA owner cannot be:

• Younger than age 18

• A full-time student

• Claimed as a dependent

The Saver’s Credit may also be taken for contributions to 401(k), SIMPLE IRA, SARSEP, 403(b), 501(c)(18), and governmental 457(b) plans, as well as voluntary after-tax employee contributions to qualified retirement and 403(b) plans.

If you are in need of any type of tax planning, tax preparation or tax settlement services, our experienced tax professionals can provide you with the tax help you need. Our tax specialists are familiar with all of the current and impending changes to the IRS tax code and can ensure that these changes are used to give you the maximum tax advantage for your specific financial situation. For more information about our tax debt resolution services, visit us today at professionaltaxresolution.com. Contact us by phone at (949)-596-4143 or by email at info@protaxres.com to receive a free, no obligation consultation.

Mortgage Debt Forgiveness Act Set to Expire in 2012

Posted on February 17, 2012 by Kursti Nakagawa

Under ordinary United States tax law, the forgiveness of mortgage debt results in a tax liability for the taxpayer whose debt is either entirely or partially forgiven. When a lender forecloses or agrees to accept a short sale or a loan refinance agreement to a lower loan amount, the amount of mortgage debt forgiven is considered to be income for the borrower and is therefore subject to taxation by the IRS. However, since the passage of the Mortgage Forgiveness Act in 2007, homeowners have been protected from this potential burden to their tax settlement. The Mortgage Debt Forgiveness Act excludes forgiven mortgage debt from becoming a tax liability in the following specific instances:

• Short Sales There is no tax on the difference between the loan balance and the selling price.

• Foreclosures There is no tax on the canceled loan amount.

• Refinancing to a Lower Loan Balance There is no tax on the difference between the original and the new loan amounts.

Although the Mortgage Debt Forgiveness Act protects taxpayers from most tax liabilities incurred from the forgiveness of mortgage debt, it includes the following exclusions and limitations:

• It does not forgive mortgage debt incurred through a home equity loan.
• It applies only to the sale, refinance, or foreclosure of a primary residence, not a rental property or a second home.
• It caps the amount of debt forgiveness it will exclude from taxation at $2 million for a married couple filing jointly or $1 million for a single person or a married individual filing separately.

The Mortgage Debt Forgiveness Act is set to expire at the end of 2012 unless Congress votes to extend it. This means that any amount of mortgage debt that is forgiven after January 1, 2013 will be considered taxable income. With this deadline in mind, a taxpayer who is considering applying for any type of mortgage debt relief should set the process in motion as soon as possible. All lenders take time to process debt forgiveness decisions and the time remaining to take advantage of the tax relief provisions of the Mortgage Debt Forgiveness Act is running out.

There are many factors to consider before making a decision to seek relief from mortgage debt. Foreclosures, short sales, and certain loan restructuring agreements have a negative impact on a taxpayer’s credit score. The lower credit score will then affect the taxpayer’s ability to purchase another home at any time in the near future. In addition, any income realized from one of the mortgage debt relief alternatives could push a taxpayer into a higher tax bracket which carries with it other tax implications. Probably the best approach to take when considering any type of mortgage debt forgiveness is to enlist the services of a qualified tax professional. Such an individual will be able to accurately weigh the effects of all of the factors affected by the decision and make a recommendation that will best fit with the taxpayer’s specific set of circumstances. The tax relief provision provided by the Mortgage Debt Forgiveness Act that is set to expire at the end of 2012 is certainly not the only point to consider.

If you have experienced a foreclosure, sold your home in a short sale, or refinanced your mortgage for less than the balance on the original loan, our experienced tax professionals can ensure that you receive the tax relief benefits you deserve. If you are considering one of these mortgage debt relief alternatives, our professionals can advise you of the potential advantages and disadvantages. Visit www.professionaltaxresolution.com for more information about debt forgiveness and other tax settlement services. Contact us by phone at (877)-889-6527 or by email at info@protaxres.com to receive a free, no obligation consultation.

Tax Settlement Advantages Set to Expire in 2012

Posted on February 9, 2012 by Kursti Nakagawa

The Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010 was designed to provide temporary stability and continuity to the economy by extending tax rates, estate tax laws and certain tax credits, tax deductions, and business tax incentives that had been put in place under the Bush Administration. Some of the provisions of the Tax Relief Act expired at the end of 2011, while others will run out on December 31, 2012. This gives accountants and tax professionals less than a year to make use of the tax planning and tax settlement advantages this legislation provides.

The following tax advantages provided by the Tax Relief Act will expire or revert to previous levels at the end of 2012:

Tax Rates

Personal tax rates will increase from a range of 10% to 35% to a levels ranging from 15% to 39.6%.
Long term capital gains tax rates will increase from 0% and 15 % to 10% and 20%.
Dividends will be taxes at ordinary tax rates instead of 15 %.

Tax Credits

The American Opportunity Tax Credit, which provides a credit of up to $2500 for each of the first four years of undergraduate education, will expire.
The Child Tax Credit, which provides up to $1000 in tax credits for minor children, will revert to the previous $500 maximum.
The Earned Income Tax Credit will revert to allowing a maximum of two dependents, rather than three.
The Adoption Tax Credit will revert from a limit of $12,650 back to its previous maximum of $5000.
The Dependent and Child Care Tax Credit will revert from a maximum of $3000 for one child and $6000 for two or more children to maximums of $2400 and $4800 respectively.

Tax Deductions

The limit on itemized deductions for higher income earners will be reinstated.
The phase out for personal tax exemptions will be reinstated.
The tax deduction for student loan interest will revert to the previous tax law that only allows it as a deduction for the first 60 months of repayment.

Estate Tax Provisions

The estate tax exemption will revert from $5 million back to 1 million.
The gift tax exemption will revert from $5 million back to 1 million.
Certain provisions that allow more assets from family owned businesses to pass along to beneficiaries will expire.

Business Tax Incentives

The 50-percent bonus depreciation allowance for property placed in service will expire.
The expensing limit will revert from $125,000 to $25,000.
The expensing limit will revert $500,000 to $200,000.

The provisions of The Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010 that are still in effect for 2012 provide significant tax saving and tax settlement opportunities. Experienced tax professionals understand the ramifications of this important piece of legislation and are focused on taking advantage of the remaining tax credits, tax deductions, tax exemptions, and tax incentives for their clients before the window of opportunity closes at the end of 2012. (Clonazepam)

If you are in need of any type of tax planning, tax preparation or tax settlement services, our experienced tax professionals can provide you with the tax help you need. Our tax specialists are familiar with all of the current and impending changes to the IRS tax code and can ensure that these changes are used to give you the maximum tax advantage for your specific financial situation. For more information about our tax debt resolution services, visit us today at www.professionaltaxresolution.com. Contact us by phone at (949)-596-4143 or by email at info@protaxres.com to receive a free, no obligation consultation.