Sunday, March 22, 2009

Irony: IRS hand-holding helps homeowners pay fewer taxes

We've gone offbeat!
Quick! Click my head!
OMG! The Internal Revenue Service is reaching out to tell you how to pay fewer taxes through a new home buyer tax credit that you can get a lot faster than you might think. It's the brave new world of economic stimulus.

Golden State homebuyers hit tax credit mother lode

by Broderick Perkins
© 2008 DeadlineNews.Com
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Deadline Newsroom - The federal agency charged with collecting dues in Club America -- the Internal Revenue Service -- is advising first-time homeowners how to cash in on a new $8,000 tax credit that could also amount to a sizable refund.

Among other provisions available in the American Recovery and Reinvestment Act of 2009 (ARRA), qualifying taxpayers -- first time home buyers -- who purchase a new or resale home this year can receive up to $8,000 (singles, married filing jointly), or $4,000 (married individuals filing separately).

But first-timers don't have to wait until they file their 2009 tax returns next year. People can claim the credit much sooner and keep much needed cash in their purses.

A tax credit, by the way, reduces your tax due on a dollar-for-dollar basis. If you owe $10,000 in taxes one year and get an $8,000 tax credit, your tax due bill is only $2,000. If you don't own any taxes, the tax credit can come to you as a tax refund.

The IRS has taken on the role of tax saving advocate because ARRA's provisions are designed to stimulate the economy -- especially the housing component, which is considered an economic cornerstone. Putting more money in the hands of consumers, faster, gives them quick spending power. Consumer spending is the real force that fuels the economy and more spending ultimately means more jobs, more workers and, inevitably, more incomes to tax.

It sounds like a dirty job, but the IRS would be remiss not to do it.

"The new credit can get money in the pockets of first-time homebuyers quickly," said IRS Commissioner Doug Shulman in the federal tax agency's prepared statement.

"For people who recently purchased a home or are considering buying in the next few months, there are several different ways that they can get this tax credit -- even if they’ve already filed their tax return," he added.

Here are the options.

  • Get a filing extension. If you haven't filed your 2008 return, but plan to buy a home, you can request a six-month extension to October 15. File then and you'll get the credit faster than waiting until next year to file your 2009 tax return. File the extension electronically and the refund could be in your hands in 10 days, via direct deposit.
  • File now, amend later. If you are already due a hefty refund from your 2008 tax return and plan to buy a home soon, file your tax return on time for your refund due, but claim the credit later with an amended tax return.
  • Amend now. If you've already filed your tax return, but plan to buy a home, after the purchase file an amended tax return.
  • Wait. It may make sense to wait to claim the homebuyer credit next year on your 2009 return, say if you've got less income in 2009 than in 2008. However, you may want to grab the cash now if you have a good investment vehicle or say, want to make some improvements on your home.

Whatever decision you make, make it with the input of a tax professional to help you sort through the options.

• More details about the evolving tax credit are available on the IRS's "First-Time Homebuyer Credit" page.
• Learn more about ARRA tax benefits.
• For more tax breaks news that really hits home, read "New tax breaks on the house."
• For still more tax shelter news that hits home, visit the "Tax Shelter, On The House" section.

© 2008 DeadlineNews.Com

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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop. Perkins is also a National Real Estate Examiner. All the news that really hits home from three locations -- that's location, location, location!

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