Archive for January, 2010

IRS Provides Guidance & Procedures for New Homebuyer Credit

Friday, January 15th, 2010

The requirements to qualify for and receive the new homebuyer credit has been a “work-in-progress” provision of the Federal tax regulations for many months.  Initially promulgated via the  Housing and Economic Recovery Act of 2008 the law provided for a new refundable tax credit for individuals who were qualified first-time homebuyers of a principal residence in the United States. For 2008, the credit applied to the purchase of a principal residence which was purchased after April 8, 2008, and on or before December 31, 2008.  It provided qualified taxpayers with a one-time tax credit in the year of purchase.   However, the law required that the credit be repaid over a 15-year period.  It was in essence an interest free loan.

In 2009 the law was changed to provide for the tax credit with no re-payment requirement.  However, it was still limited to first time homebuyers.  It was due to expire on November 30, 2009.  Then on November 6th Congress and the President extended the provisions of the law  in to 2010 to include a home purchased after November 6th and on contract on or before April 30, 2010.  The actual closing must occur on or before June 30, 2010.  The credit is claimed using Form 5405 which is filed along with the individual tax return.  That form was recently revised by the Internal Revenue Service but the documentation requirements are significantly more stringent.  However, several written documents must be included with the tax return and the Form 5405. Taxpayers also can not file their tax returns electronically, and must paper file.  This requirement not only extends the time frame for the receipt of a tax refund, it also increases the risk that an administration processing error may occur or that tax returns may be questioned by the IRS.  Instructions for the completion of the Form 5405 and the associated required supporting documentation can be found on the IRS website (   Here is the information that was provided by the IRS today:


Eight Tips to Help You Choose a Tax Preparer

Monday, January 11th, 2010

The selection of a tax preparer is probably one of the most important decisions that any tax payer will make.  I recently read an article that stated that over 80% of Americans will obtain some level of  tax return preparation assistance.  As I review the plethora of tax law changes that have emerged in 2008-2009  from both the U.S. Congress and President Obama’s administration it is obvious to me that the comprehension and interpretation of all of these changes is a monumental, formidable task not just for tax payers, but also for tax preparers.  Remaining abreast of all of these changes/updates has become a full-time task for me.  In a nutshell, unless you have a very simple, uncomplicated tax return, I  recommend that you do not prepare your own tax return without some level of assistance from a professional tax preparer.

Your tax preparer is also just as important as the person whom you select for your legal affairs (attorney) and your investments (financial advisor).  I continue to believe  that the choice is equally as important as choosing  your family physician.  Additionally, the Internal Revenue Service is now implementing new, higher standards for  anyone who prepares a tax return for someone else.  These policies  will mandate that any tax preparer must first attain, and then continue to maintain, his or her compliance with many stringent professional standards.

The IRS has just recently provided eight tips that are beneficial in the decision-making process.  I would like to add a very important  ninth tip – do not allow any one to prepare your tax return unless they provide you with a formal, written “engagement letter” that has been signed by everyone.  This document will include many very important aspects of your relationship (the “engagement”), especially all of the separate, specific reponsibilities for you and the tax preparer.  Even though you have someone else prepare your tax return, you remain fully liable for the accruracy, completeness, and timely filing  of your tax return.   Here are the the IRS recommendations: (more…)