How To Deal With The IRS When You Have Real Estate Problems
Online, on the radio, and on the television, we’re all exposed to headlines expressing today’s depressed real estate market, as foreclosure rates grow sharply. Aside from a failing economy, there are two tax trends that have come to light:
1. Even for those who are going through foreclosure or those who have filed for foreclosure years ago, lenders are still foolishly sending out Form 1099As as well as Form 1099-Cs. In fact, if a homeowner fails to file the papers, a penalty is to be expected.
Form 1099-A is used for homeowners to report a foreclosure or repossession. If your house is taken by a lender, the lender is to report the fair market value of the property as well as the amount of debt left. The lender too has the ability to check a box which determines whether or not you are personally liable for said debt.
Form 1099-C, or a Cancellation of Debt income form, is used in the event that a lender forecloses on your house and then resells the home but at a value that does not cover the existing debt. In this case the lender has the option of expecting debt payment from you or forgiving the debt. If the debt is forgiven, it is considered COD income, which is, surprise, taxable. While it seems pretty simple to comprehend, there are a lot of problems that come with these two forms. Typical problems include:
· Form 1099-A is received late or not at all
· The form claims you are responsible for foreclosure debt when you’re technically not, or vice versa
· The listed fair market value is extremely high or low
How To Minimize Your Property Tax Bill
Many people are aware of the numerous ways that exist to cut down the amount of income and sales tax you pay each year. However, less is known about property taxes. Based on the assessed value of your home, property taxes are typically paid to fund the local government. They can also pay for general services in the area such as schools, the police force, garbage collection or, unfortunately, a public deficit.
What many people do not realize is that, like with income and sales tax, there are a number of ways to reduce the amount of property tax you pay. Here are just a few ways to consider:
Make certain that the assessment on your property is accurate.
Your property’s assessment value is typically determined by the state or local municipality and usually reflects a value lower than the home’s actual market value. Double check the assessment to ensure that it is accurate and up-to-date, since mistakes can be made.
You can usually do this by comparing the assessed value of your home to those of other comparable properties in the area. Also, keep abreast of changing values; some cities are quick to adjust assessments when property values are increasing, but less punctual when values are declining.
Appeal the assessment on your home.
In most towns, over 20 percent of those who appeal their home assessment get a reduction.
If considering an appeal, be sure to first learn how the system works in your area. Call your town assessor to find out what the protocol is in such a case. Also, pull together any documents that show the age and condition of your home. This can include taking pictures of the house, floor plans, and gathering any records of home renovations.
Property Tax Protest – How to Wage A Winning Battle
Fighting an effective property tax protest is probably of more than academic interest if you’ve found yourself the victim of an overly high property tax bill. In this article I’d like to offer five tips on how you can successfully fight and win the real estate tax revaluation battle.
With wildly fluctuating property values in many parts of the United States and Canada, it is becoming more and more common for property owners to discover that their property’s assessed value has been overstated by the taxing authorities.
Why is this so?
Well for one thing, assessing offices are typically understaffed and in many cases simply can’t keep up with the workload involved with adjusting the values of hundreds or thousands of properties.
For another the taxing authorities often are slow to lower the valuation of a property, because it means the taxing authority collects less in taxes if they do. While this is not fair or otherwise justified, it is the reality. The fact is it is human nature for many career government workers to exercise this protective herd mentality in the name of job preservation.
With that said, here are the basic steps you need to take when mounting a property tax protest, i.e. a real estate tax abatement filing.
1. Go to your local tax assessor’s office and find out what the local tax calendar sets as the deadline for filing a property tax appeal.
2. Request the property tax cards for other homes that you know are fairly similar to yours in terms of construction style, total square footage of living area, age, location and quality. Create a small spreadsheet to help you organize and compare these factors.
Learn About the Mortgage Tax Deduction
Many people today take advantage of the mortgage tax deduction on their federal income taxes. This deduction is used when a family itemizes their deductions rather than using the standard set amount. This line item can save you quite a bit in the long run. You will usually receive a statement from your financing company letting you know the amount that you paid to them throughout the year.
When you think about this, in essence those people paying interest on their home loan end up getting a good portion of that back through this line item on the returns. This means that when you pay off your home loan, you have in actuality received the money interest free. While you have to pay the amount throughout the year, you can use it to reduce your income at the end of the year, thereby saving you money in the long run.
There is much debate today about whether this should continue to be allowed. However, there is no actual reason that it should be removed as a line item for people paying on their home loans. It is only a discussion to try to improve the cash flow of the government. In today’s economy, this is a goal that many people have for themselves as well.
In order to take these types of deductions however, you must itemize your expenses. Many homeowners have other expenses that can also be deducted and therefore it makes sense to use this itemization rather than the standard deduction. The standard amount is set for single, married, head of household and so on.
When you itemize, you will have the option to use medical expenses that you have paid out of pocket as well within the guidelines. There are several other deductions that can be taken as well. Your accountant or tax preparer can help you decide which method will work best for you.
Property Tax Appeals – How to Save A Bundle In Overpaid Taxes
Property tax appeals represent a huge opportunity for many homeowners and other property owners to save substantial amounts of money each year. But despite the chance for property owners to put hundreds and even thousands of dollars of their own money back in their pockets each year, very few actually pursue this opportunity.
It’s a strange thing actually. Why would even the most penny-pinching, financially savvy persons among us often miss the chance to pocket some serious money each year? It may seem more abstract than cash in the bank, but money in the form of property tax abatements and overall lower real estate tax bills is nevertheless just as real.
Even more odd is that these savings can carry forward for years to come. This means the true value of a well executed property tax appeal could easily range into the tens of thousands of dollars over time.
So why do some people stress out about earning a measly extra half percent interest on their certificate of deposit account, yet willingly step over the pile of real cash that a real estate tax appeal could represent to them?
The reasons for this seeming indifference to a financial bonanza vary from one individual to another, but it’s a safe bet that many are stopped by the belief that such appeals are a complicated, difficult business.
Nothing however could be further from the truth. In fact, despite the growing number of real estate consultants taking advantage of the turmoil in real estate markets to earn record numbers of easy commissions on these tax appeals, almost anyone could handle their own very easily.
All it takes is the right blueprint to follow, and such blueprints are readily available to anyone who decides to look for them.