As we look around and see vacant buildings, empty parking lots, and for sale signs on every street,  you may think that now is the time to take advantage of the “real estate fire sale” and hope to make a killing in the next year or two.  You better think again.

From where I sit, I see a whole lot of scrambling going on.  Homes are under water, financial institutions are playing hard ball, apartment buildings are struggling, small businesses are walking away from their leases, and rent payments remain difficult to collect!  So, although there are definitely great real estate deals out there, you need to have staying power, and a lot of it, in order to turn any real estate investment into a cash bonanza any time soon.

Some of our clients have been talking about getting in to the landlord business …buying  foreclosures for investment, fixing them up and renting them out until the market picks up and they can be sold.  BUYER BEWARE!  It takes a lot of work, it takes a lot of money, and it takes a lot of patience to pull the rental real estate game off successfully.  And just in case you were wondering, flip sales have become almost impossible…so try not to go there.

Although the real estate investment picture is pretty bleak, there are some great opportunities for those looking to buy a personal residence…either for the first time or as a replacement  for one you currently own…thanks to new tax credit that just go extended to any binding contract made by April 30 and closed  by June 30, 2010.

If you are young, never owned a house before, and are collecting rent receipts every month …now is the time to look for that first house (or condo) you will qualify to get an $8,000 first homebuyer’s credit.

What is kind of special regarding this credit is that mortgage companies are allowing you to use it towards your down payment so it gives you immediate benefit.

For those who have owned a house before, and want to buy a new personal residence, there is $6,500 tax credit available to you… and a perfect reason to sell what you have and buy something larger for a growing family or smaller to prepare for retirement.

Caution is the word for the entire investment arena these days …and real estate is certainly no exception.  If you are thinking of buying something and need a professional ear, give us a call …no charge for asking!

2008 extension requests are over, tax time 2009 has not yet begun, there’s a short lull of work on their plate, so now Is the time that you may hear from the IRS.  But have no fear, most letters are just those general inquiries that are looking for a copy of your return, a small calculation change, or a request for    money due if you have not previously set up a payment arrangement.

Most IRS correspondence is computer generated and is sent as a result of a matching error …an expected tax return was not received, 1099 income is overlooked, estimates or payments reported are missing …and easily resolved with a quick phone call or short letter. 

If the letter is a “return request” …mail in another signed copy…somehow your first return was either never received or missed in keypunching…no big deal.

If the letter notifies you of a “calculation error or change” …check your information very closely…the IRS is usually wrong and a letter, providing the necessary documentation, does the trick.

If the letter “selects your return for examination” the IRS may request documentation of deductions taken on your return…which means you may mail in the information, or they may ask you to bring the information to their office so they have the opportunity to meet and interview you and, of course, examine the return a little closer.  Whichever the case, get all of your information together and immediately contact the professional who did your return and ask them review your situation.  If you did your return yourself, it may behoove you to go get a professional opinion before you contact the IRS yourself.

If the letter says “Urgent” …this is usually a request for payment and it is the not the first one you received.  RESPOND IMMEDIATELY BY TELEPHONE and request more time, a payment plan, or a detailed explanation.

What ever the case may be:

1.        RESPOND TO THE REQUEST …in this case, ignorance is not bliss and no good can come from it.

You are much better off handling the situation immediately and getting on with your tax life.

2.        DON’T ASSUME THAT YOUR RETURN IS WRONG…computers make mistakes…especially if your return is not straightforward.

3.       HAVE NO FEAR…as a taxpayer you have rights, so don’t let any intimidation tactics get to you.

4.        HIRE A PROFESSIONAL if you are expecting a face-to-face audit situation.  You will usually get more time, more cooperation, and a better all-around deal if you don’t represent yourself.

No matter what ,negotiation when it comes to tax and penalties, is certainly not out of the question depending upon your personal financial situation.  The government, probably more than any other creditor: is aware of the current economic situation, wants to help you solve your tax problem and willing to give you the time necessary to get there!

Last month, if you recall, we got a glimpse of the 2009/2010 tax law changes that would put a little money in your pocket through tax reductions and credits.  This month the “stimulus” discussion continues with some special provisions.

In answer to the unemployed health insurance issue the Stimulus Act provides for a 65% premium subsidy to assist eligible individuals with COBRA coverage.  The way it works is that that the qualifying individual pays 35% of the amount needed for COBRA continuation and the employer pays 65% who is reimbursed by the way of a federal payroll tax credit for advancing the continuation premium.  The subsidy applies to periods of coverage beginning after February 16, 2009, for individuals who elect COBRA coverage as a result of an involuntary termination between September, 2008 and December 31, 2009.  Assistance is limited to a nine month window…so if you qualify, act soon.

Recent tax law changes have also enhanced the energy property credit and residential energy efficient property credits.  This “30% of actual expenses” credit applies to qualified energy efficient furnaces, hot water heaters, and advanced main air circulating fans including materials and labor costs up to $5,000   installed in the taxpayer’s personal residence.  There are some special calculations involved, so you may need some help with the reporting requirements.

For those who try their skills with lady luck, there has also been a “clarification”, if you will, of how your gambling gains and losses are calculated.  A recent Chief Counsel Advice (the “rule gurus”) explains how a casual gambler determines wagering gains and losses from slot machine play for tax purposes.  Essentially, the CCA allows the taxpayer to net out their gains and losses during a given day of gambling. 

So, basically, if you start out with $100 at the beginning of the day…and you end up with $0 at the end of the day, you have a net loss for tax purposes of $100, even though you may have won at times during that specific day.   So, now the net gain from wagering from each day is reported as income, and net loss from each day is reported as a miscellaneous itemized deduction. 

For those of us who have IRA’s, 401K’s, Profit Sharing Plans and other retirement accounts things are changing and each year seems to be offering new distribution opportunities that may or may not be in your best interest.

         .  For 2009, the required IRA minimum distribution for those over 70 ½ was waived…if you were   

            In a low tax bracket and could use the money, it didn’t make sense to put it off.

         .  For 2010, all taxpayers, at any income level, will be able to convert their traditional IRA to a

            ROTH, unless otherwise elected,  with ½ the income included in income in 2011 and the other

            ½ in 2012.  This is a huge financial decision:  to convert?   how much?  tax consequences?                                                                                                                                           

             …many, many questions for a qualified tax professional.  Make sure you have all the answers

             before doing anything!

As you can tell, this whole tax thing is getting more and more complicated so the days of doing your own return are over!