Diamond Tax Consultants Blog

Do I have to File a Tax Return?

[Diamond Tax Consultants note: ALWAYS file tax return, whether you need to or not. Once you file, you start the clock ticking on the 3 year statute of limitations for audit. If you never file, IRS or the state can come back and ask for a tax return for that year, forever.]

You must file a tax return if your income is above a certain level. The amount varies depending on filing status, age and the type of income you receive.

Even if you don’t have to file, here are eight reasons why you may want to file:

1. Federal Income Tax Withheld If you are not required to file, you should file to get money back if Federal Income Tax was withheld from your pay, you made estimated tax payments, or had a prior year overpayment applied to this year’s tax.
2. Making Work Pay Credit You may be able to take this credit if you have earned income from work. The maximum credit for a married couple filing a joint return is $800 and $400 for other taxpayers.
3. Government Retiree Credit You may be eligible for this credit if you received a government pension or annuity payment in 2009. However, the amount of this credit reduces any making work pay credit you receive.
4. Earned Income Tax Credit You may qualify for EITC if you worked, but did not earn a lot of money. EITC is a refundable tax credit; which means you could qualify for a tax refund.
5. Additional Child Tax Credit This credit may be available to you if you have at least one qualifying child and you did not get the full amount of the Child Tax Credit.
6. Establish an official record of your earnings and taxes paid for Social Security purposes.

There are other cases where you may have to file a 1040 tax return form that don’t necessarily offer any benefit, such as;

•  owing special taxes on tips or self-employment income of more than $400
• Comply with tax laws. In 2008, if you were single, under age 65 and earned at least $8,950, you are required by law to file a tax return. You can view the complete chart of who should file a tax return for 2008 based on age and filing status (e.g. single, married, separated, etc.) on the IRS website.

If you thought this tip was helpful, click this link to share it with a friend!

Did you get a Form 1099-C or Form 1099-A after you’ve renegotiated debt or had a foreclosure, deed-in-lieu of or short sale? Don’t ignore it! It means you owe taxes, but there could be a way out.

o What if you get a Form 1099-A or Form 1099-C for your personal residence
o What if you get a Form 1099-C for credit card debt
o What if you get a Form 1099-A or Form 1099-C for a second home
o What if you get a Form 1099-A or Form 1099-C for an investment property
o What if you get a Form 1099-A or Form 1099-C for a rental property

You’ll probably want to review Publication 4681, available online from irs.gov or from our office, Diamond Tax Consultants.

If the loans were qualified mortgage indebtedness, (which means you haven’t refinanced and pulled out other cash & you lived in the homes for 2 of the previous 5 years) then most likely you will NOT have tax due on this cancellation of debt (COD). 

For others, not all states adopted the 2007 Act that gives the exclusion on COD income for principal residences. The exclusion is only through 2011, but you’re well within that time limit as well.

The one thing you MUST do is include a Form 982 with your tax return in the year that you receive the Form 1099-C. If you don’t, you’re telling the IRS that the COD income will be subject to tax.

If you received this form, contact our office immediately as you may qualify for the exemption.

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Diamond Tax Consultants proudly sponsors “The Bereaved Families Relief Initiative Network” (BFRIN).

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For more tax tips and to receive a FREE report on How To Prepare For The Tax Preparer download it at www.diamondtaxconsultans.com

A lot of people wonder if the home improvements and home repairs they perform on their house over a year are tax deductible or eligible for any money back on income taxes at the end of the year. The short answer is: Maybe.

Generally, there are three ways a home improvement might benefit you financially come tax time. You may be eligible for some sort of income tax relief if:

• Your home improvements are being performed for medical reasons
• Your home improvements include certain energy-efficient upgrades to your home
• You are going to be using a home equity loan or home equity line of credit to actually pay for your home improvements

Before we get into those three scenarios, have you benefited from our affiliate service with I.R.E Repair Services? It was founded to help homeowners find reliable, high-quality home improvement contractors and home service professionals with the convenience of just a phone call or email. Everyone knows that finding reputable, quality contractors can be quite a difficult feat.  Our goal is to save the homeowner time and money, by having a network of pre-screened professionals in a large variety of home improvement specialties so the homeowner can complete their special project confidently and worry-free. 

Now, let’s discuss the basics of how home improvements work with taxes in the United States.

Home Repair vs. Home Improvement

First, it’s important to remember that there is a difference between home repair and home improvements, especially from an income tax perspective. Simply fixing things that are broken or worn out around your home are generally considered “home repairs” and generally do not count towards any sort of tax deduction or tax credit. However, if you replace something that is worn or broken with something new (such as more energy efficient windows or doors), then that may be seen as a home upgrade or home improvement and contribute to your tax refund.

The good news is that if you need to perform a home repair at the same time or in the same area of your home as the home improvement, then you may be able deduction the cost of the home repair on your taxes. The difference between a repair and an improvement on your home is not always cut and dry so your specific situation may dictate exactly how you can count certain home projects on your taxes.

Home Improvement Tax Deduction vs. Home Improvement Tax Credit

It’s also important to remember that there are different ways to increase your income tax refund with home improvement projects. In some cases you may be eligible for a tax deduction and in other cases you may be eligible for a tax credit. The difference could be substantial.

A tax deduction lowers your “taxable income” amount while a tax credit takes a set amount right off the taxes you owe. So If you make $30,000 per year and you get a $1,000 tax deduction then the government is really only taxing you on $29,000. The amount you get back from a tax deduction depends on your income tax bracket. If you’re in the 30% income tax bracket then a $1,000 tax deduction means you’d “get back” about 30% of that money in a tax refund. In this case it would be about $300.

If you get a $1,000 tax credit then are are still being taxed on $30,000 but you get to take $1,000 off the amount you owe the government (if you are getting a tax refund then you might get an extra $1,000 back!).

If you have an account or use any sort of income tax software to do your taxes, you shouldn’t have to worry too much. They can take care of the math and some of the tax software programs will even look at a couple different scenarios and pick out the one that is most beneficial to you.

Home Improvements for Medical Reasons

If you or someone living in your home has a medical condition that warrants a home remodelling or home improvement, then the cost of that project may be able to count towards a tax deduction. You will most likely need a doctor to write a letter stating what improvements are needed to your home for medical conditions and why, you will need to itemize the your deductions and keep track of the work being done with a breakdown of costs and the project will have to be 7.5% or more than your annual adjusted gross earnings for that year.

Here are some of the medical conditions that often require home improvements or upgrades to a home that could be tax deductible:

Home Improvements for Wheelchairs: People suddenly needing a wheelchair must often perform extensive work on their home to make it more livable. Some home improvement projects that could qualify for tax deductions in this case are adding elevators, widening doorways, adding wheelchair ramps, lowering kitchen cabinets, installing bathroom handrails and even lowering light switches.

Home Improvements for Allergies or Breathing Problems: People with breathing issues are often told by doctors to improve their home’s air filtration system, install central air-conditioning and remove and replace any drywall that may be damp and moldy.

Home Improvements for Other Physical Ailments: Other ailments or injuries requiring physical rehabilitation could also warrant specific tax deductible home improvements such as hot water spas, therapeutic swimming pools or other additions to a home to accommodate special medical equipment.

IRS Publication 502 has more detailed information about exactly what may and may not qualify for a medical home improvement tax deduction.

Home Improvements to Increase Energy Efficiency

Home improvements and upgrades to increase your home’s energy efficiency are numerous and constantly changing. It’s actually difficult to keep track of all the rebates and tax incentives you may be eligible for because there are federal regulations, state regulations and even separate utility rebates available in some cases.

In 2008 there were a number of energy efficient upgrades that were no longer eligible for tax credits or deductions (they were part of the 2005 Energy Policy Act), but many of those items are once again eligible for tax credits in 2009 and 2010 due to the new American Recovery and Reinvestment Tax Act of 2009. There are lots of different options, but now tax credits are available for 30% of the cost of certain energy efficient upgrades, up to $1,500! That means that if you spend $3,000 in qualified energy efficient home improvements, you get a tax credit of about $1,000 (30% of $3,000). This is a big improvement over the previous energy efficient home improvement tax credits available in the past.

Some examples of energy efficient home improvements for existing homes that could impact your 2009 and 2010 income taxes:

• New energy-efficient windows and doors
• Adding new insulation
• Upgrading to a metal or asphalt roof (Metal and Asphalt)
• Upgrading to a more energy efficient air conditioning or heating system
• Newer non-solar water heaters
• Purchasing a biomass stove

Other home improvements that are eligible for tax credits for new and existing homes that extend into 2016 are:

• Geothermal heat pumps
• Installing solar water heaters
• Installing solar panels
• Installing wind energy systems or fuel cells

There are, of course, some restrictions on exactly what is eligible for the home improvement tax credit and what isn’t. Before you purchase any new items or upgrade your home you may want to read all the details of the recently updated . 

Additional Home Improvement Tax Savings

There are other ways home improvements can save you money when you file your income taxes. Firstly, if you borrow money from a home equity loan or a home equity line of credit then you may very well be able to use the interest you paid on the loan as a tax deduction. This is just like using the interest you pay on a mortgage loan as a tax deduction, and obviously the larger the home improvement loan, the more money you’ll pay in interest (and the more you’ll be able to deduct at the end of the year).

The other way to use a home improvement to your advantage is to donate any extra materials or supplies at the end of your project to a registered non-profit. If, for example, you’re installing new hardwood floors you probably would not be able to deduct the cost of the wood because it isn’t an energy savings, but if you had several hundred dollars worth of wood left over (which is quite possible) then you could donate that to a non-profit school or church that could use it for a project. Be sure to keep receipts and give the wood a real market value when you use your donation as a tax deduction.

And, of course, most larger home improvements impact the value of your home positively, so if you’re trying to sell your home any home improvement could affect the selling price and appraisal value, though some home improvement projects do affect the value of your home more than others.

Summary

Overall, you can count some home improvements as a tax credit or tax deduction if they are for medical reasons or if they fall into one of the many energy-savings home improvement categories. You may also be able to use your home improvement project to deduct additional interest or donated amounts from your taxable income at the end of the year. Everything above is included for informational purposes, but obviously your tax and financial information may affect how much of these credits and deductions you can really use. Before you do any home improvement you will definitely want to speak to a qualified tax accountant to see exactly how certain projects will impact your income tax payments.

It really can pay to start that home improvement project this year! Under the right conditions a home improvement project completed this year could lead to big home improvement tax credits and deductions when you file your taxes next year!

We are exciting to announce our newest service for businesses! 

For the past several years, we have helped a number of our clients to start, grow, and manage their business venture. Our efforts have been so successful that we have decided to open up our business coaching services to others.

Why consider our business coaching services? Here are the top 7 reasons why small businesses fail:

• 1. You start your business for the wrong reasons.
• 2. Poor Management
• 3. Insufficient Capital
• 4. Location, Location, Location
• 5. Lack of Planning
• 6. Overexpansion
• 7. No Website

Getting Started                          

Are you a new business owner or investor? Then the Getting Started program is just right for you.

The Getting Started program starts off with review of your current tax situation. You’ll get an email from your personal tax specialist and some initial steps.
You have unlimited email access to your specialist. You’ll never have to worry about the cost of asking your accountant a quick question. It’s all covered as part of the program.

The Getting Started program includes the preparation of a federal and state individual income tax return and a federal and state business tax return.
AND you are automatically enrolled in the coaching program as soon as you start in the Getting Started program.

The Getting Started program is very affordable at just $350 to start and then $50 per month therafter.

Grow Your Business with Diamond Tax Consultants Tax Strategy, Marketing & Unlimited Consulting

If you’ve been in business for awhile and are having problems growing your business, utilizing marketing technicques, and know you’re paying too much in taxes because you do not have a tax strategy in place, then this is the program for you. Or, if you’ve hit a tough spot in this recession and are considering closing your business, then this is the program for you.

Will you be one of those happy clients that Diamond Tax Consultants saves thousands of dollars each and every year? Find out FREE with a tax review.
The Tax Strategy process starts off with a review of your current tax and business situation, a phone call with Shawn and other experts as he suggests for your particular case.
You’ll receive a write-up of the strategy along with action steps for you to take to get the tax savings and growth your business needs.

You’ll have your own tax professional consultant who will be available for consultation.

And you’ll get your federal and state individual income tax return and one federal and state business tax return provided as part of the course.

Plus you are automatically enrolled in the coaching program!

The Tax Strategy with Diamond Tax Consultants is just $500 for the strategy process and then $100 per month therafter.

Diamond Tax Consultant’s Private Clients

As one of our Private Clients you will receive an

1. Updated comprehensive strategy each year,
2. Unlimited email and phone consultation (subject to scheduling),
3. Invitation for you and a guest to our network marketing events and personal tax and business education seminars,
4. Bookkeeping
5. Invitation to our personal mastermind sessions, and
6. Automatic enrollment in the coaching program.

The Private Coaching with Diamond Tax Consultants is just $1000 for the coaching process and then $200 per month therafter.

There is a qualification process to go through to be part of Diamond Tax Consultant’s Private Clients and it is limited to just 10 clients per year.

Customized Business Coaching Plans are also available which includes the option of simply registering for the monthly coaching subscription for either $50, $100 or $200 a month which provides unlimited coaching support and an a la carte services plan. Find out more by giving us a call at 888.456.0800 or use the PAY NOW function of our website and choose anyone of our business coaching offers (Getting Started, Grow Your Business, or Private Coaching) www.diamondtaxconsultants.com/services.htm

During the first round of the government’s homebuyer tax-credit program, only first-time purchasers could qualify for up to $8,000 in tax credits. But this time, many current homeowners could get in on the deal, too.

The credit is renewed to home purchases under contract as of April 30th, as long as the purchase closes within 60 days. (That means you don’t have to rush to close escrow by the end of this month. Whew!)

On Thursday, the House and Senate passed an extension of the popular homebuyer program that would allow people who have owned their homes for at least five years to buy a new home and get up to $6,500 off their tax bill. Why the switch?

The move may be aimed at luring higher-end buyers into the real estate market, says Kevin Cottrell, a principal and cofounder of Kelsey Cottrell Realty in St. Louis. During the initial incentive program, which ends Nov. 30, over 70 percent of the contracts his firm inked were under $300,000, and 90 percent were under $400,000, the lower end of the real-estate spectrum. By extending the credit to current homeowners, the federal government is aiming to move a more upscale segment of the market into “a more normal cycle of buying and selling,” where people might move to a better home every seven or eight years, Mr. Cottrell says. The five-year ownership requirement discourages people from flipping houses the way they did during the real estate bubble.

President Obama is expected to sign the bill quickly. Here’s what it means for you:

– First-time homebuyers still qualify for up to $8,000 in tax credits; those who have owned their homes at least five years qualify for up to $6,500 in credits.

– Purchases must be secured by April 30, 2010 and closings finalized by June 30.

– Single taxpayers with an adjusted gross income under $125,000 (under $225,000 for joint filers) are eligible for the credit’s full benefits. Those with incomes up to $145,000 (single) or $245,000 (joint) may receive partial credits.

– Homes worth $800,000 and under are eligible for the program.

– Members of the military serving outside the United States for more than 90 days will have until June 30, 2011, to qualify for he incentive.

– The program is expected to cost the federal government $10.8 billion in lost taxes

Due to the economic conditions, all we have been hearing is words like bailout, economic relief, and stimulus plans. Folks are still being laid off, down sized, right sized, or what ever the politically correct terminology is these days. Bottom line, everyone in some way has been affected from these recessionary times and can use some extra cash in their pocket.

 In view of the foregoing, we have decided to use our resources to help bail you out!  

There are 3 ways we can help you put cash in your pocket today. They are:

• A Free Tax Return Review
• Home Based Business
• Free Tax Return Preparation

We consistently find errors and overlooked deductions when we review tax returns. If Diamond Tax Consultants has not prepared your tax return, we will for a limited time review your tax return free of charge. 

If we learn about tax deductions you could have qualified for in any (or all) of the past three years, you can file Amended Returns (Form 1040X) and not only get a second refund on tax returns you’ve already filed, but also collect 4% interest on the amount of time the IRS held your money.  Follow the link to our website to find out what you need to do to take advantage of this limited time FREE offer. REVIEW MY TAX RETURN

 Do you have a home-based business? If so, congressional law now gives home-business owners — and only home-based business owners — between $300 and $600 cash every month, all year long, just for running an active part time business from home. Why? Because it’s good for the economy and will help in a big way to bring America back to prosperity. Do you know anyone who has a part time home-based business? If so, this information is for them. If they are currently working and have a home-based business, we can help them receive these bailout funds on a weekly basis without the need to file a tax return to receive it. Contact our office by visiting our website or call us directly at 888-456-0800

As a final bail out incentive, we are conducting the FREE tax return turn drawing in the month of November.  This will allow the winners to claim their FREE tax return services at the beginning of the tax season vs. our annual February drawing.

 To participate, all you need to do is submit your name in the drawing. A winner will be selected on each Friday of November, beginning November 6, 2009. This could be your winning notification! SUBMIT your name now and suggest your friends, relatives, or work mates do the same. 

 As many of you probably know, both my business and my passion is all about helping average hard-working tax payers qualify for these benefits and how to claim them.