Month: July 2022

New Home Buyer Tax Credit: What Every Enrolled Agent Should Know

The 2007 mortgage meltdown and subsequent collapse of the financial system brought about significant change on practically every front. The impact of these events on the tax system was both far-reaching and substantial, as most any enrolled agent or registered tax return preparer can testify. One aspect of this change included an at-times dizzying number of new tax breaks in the form of credits and deductions designed to help both alleviate the financial strain on average Americans and stimulate the economy in the process. One such credit, the Home Buyer Tax Credit, is so popular that it occupies a focal point in tax CPE and EA CPE, enrolled agent continuing education courses that enrolled agents take to maintain certification.

Below is a summary of what enrolled agents need to know about this credit to ensure their clients receive the full tax credit offered by the government.

Qualifying for the home buyer tax credit

Contrary to popular opinion, both first-time homebuyers and long-time owners are able to apply for a credit. If the house was purchased on November 30, 2009, to qualify taxpayers must not have owned their homes since December 1, 2006. The earliest date to qualify for this credit is January 1, 2009.

To qualify for the credit as long-time homeowners, taxpayers must have owned their existing home for any five-year period during the eight-year period ending on the date of purchase of the new home. The earliest date of purchase to qualify for this credit is November 8, 2009.

For either credit, if the date of purchase is in May or June 2010, taxpayers are required to verify that they entered into a contract to buy the house before May 2010. Below is a summation of the required documentation.

Restrictions

Even when taxpayers qualify as first-time homebuyers, or as long-time homeowners, and you have purchased a home within the permitted time frame, they still may not qualify for the credit. Taxpayers will not qualify if any of the following scenarios apply:

Purchased the house after November 6, 2009, and the price of the house is more than $800,000.

Modified adjusted gross income is $95,000 or more ($170,000 if married filing jointly) and the home was purchased before November 7, 2009. A phase-out of the credit begins with a MAGI of $75,000 (or $150,000).

Modified adjusted gross income is $145,00 or more ($245,000 if married filing jointly) and the home was purchased after November 6, 2009. A phase-out of the credit begins with a MAGI of $125,000 (or $225,000).

Another individual claims the applicant as a dependent on their tax return.

Purchased the house after November 6, 2009, and the buyer was under the age of 18 on the date of purchase.

Is a nonresident alien.

The house is located outside the US.

The house is sold or ceases to be the main residence before the end of the year in which it was purchased.

The house is a gift or is acquired through inheritance.

The house is acquired from a relative or a related corporation or partnership.

The amount of the credit.

First-time homebuyers qualify for a credit of 10% of the purchase price up to a maximum of $8,000 ($4,000 if married filing separately). Long-time residents qualify for a credit of 10% of the purchase price up to a maximum of $6,500 ($3,250 if married filing separately). Again, when the modified adjusted gross income exceeds a certain level, the credit will be phased out until it is eliminated entirely.

Claiming the credit

Since the IRS requires a slew of documentation, taxpayers hoping to claim the homebuyer tax credit must file federal tax returns on paper through the mail need to print the paperwork and send it in.

Below is a step-by-step guide for claiming the credit for clients:

1. Complete the revised Form 5405. First confirm the taxpayer qualifies for the credit, and determine the amount of the credit.

2. Collect required documentation. Gather Form HUD-1 Settlement Statement or other settlement statement outlining the names and signatures of all parties to the sale, the property address, the price, and the date of purchase. If the taxpayer does not have a settlement statement (as in the case of a newly-constructed home), collect the certificate of occupancy and attach it.

If a taxpayer is under contract but has not taken occupancy of the house by the time their taxes are filed, include pages from the signed contract, including the signatures and names of all parties, the property price, the address, and the contract date.

If a taxpayer qualifies as a long-time homeowner, include Form 1098 (Mortgage Interest Statement), property tax records, or the homeowners’ insurance records. Remember, the forms must cover a full consecutive five-year period within the …

Simple Steps to Making a Sale

The sales process is not brain surgery, but everyone cannot master it. Some individuals are just good at sales while others are not. Some are born with skills to be an effective sales representative, but many are trained. Sales training is one of the leading tools companies invest in. Whether they hire an outside sales trainer or promote someone from within they have no problem investing into their future sales leaders. Sales are typically the primary way a company generates revenue. So, the better the sales team the more money the company makes. In this article we are going to discuss some of the simplest steps a sales representative should take while trying to close a deal.

The first step is easy, but not everyone thinks of it. No matter what you are selling you must qualify the prospect. For instance, if you are selling an online MBA program does the prospect have a bachelor’s degree? Or if you are selling a timeshare unit does the applicant have the funds or credit to finance the property? Whatever you do don’t assume the person you are speaking with is automatically qualified. You must ask them specific qualifying questions to find out.

Second, what is the prospect’s motivation for requesting more information on your product or service? In the example above, why are they looking to go back to school? Do they want a promotion or a new job? Figuring out the motivation is very important early in the sales process. If the prospect gets cold feet later on you may be able to close the sale by reminding them why they were interested in the product or service in the first place.

The third step after the discovery phase is selling the benefits of your product or service. Why is yours better than your competitors? How will the benefits help accomplish the prospect’s goals? For instance, will your MBA program help the applicant get the job he/she wants? Talk about the flexibility, networking capabilities, career services department, and everything you can to convince them this is the perfect program for them. This is a very important step because many individuals do a lot of research before making any decisions. The internet allows them to find information very quickly.

Now that you have sold the product or service you always want to follow-up and ask for a referral. Make sure they are satisfied with their purchase and see if there is anyone else they know in the market for the same.…