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Tax Tips Newsletter
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October 2007 - Vol 2, Issue 7
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We're deep into the final stretch of extensions. If you got your information in by the cutoff date, September 15th, you should receive your returns shortly. If you got your information in after that date, we will do our best to get your returns done on time. If we do not have your information yet, we probably can not get it done by the 15th but wil be glad to start working on if after November 1st. (We have a payroll tax deadline on October 31st which we must deal with after the 15th).

We will be out of the office from October 22 - 26. I will be working out of town, but will be checking for emails and phone calls. Sandi and Becky are off to Mexico on a cruise, a well-deserved vacation to celebrate their parents anniversary.

I am happy to announce that I recently qualified for the Cerfified Information Technology Professional (CITP) credential from the American Institute of Certified Public Accountants. This credential is for CPAs who have completed certain criteria in various aspects of technology. It is a great honor to have obtained this goal.

House
Congress is considering tax legislation that would ease the tax burden for taxpayers who are losing their homes to foreclosure. Under current tax law, canceled mortgage debt may generally be treated as income, so the taxpayer not only loses his home, he also faces an unexpected tax bill.

If you're among the thousands who bought a home, refinanced a home mortgage, took out a home-equity loan, or are facing foreclosure this year, here's a quick review of the tax consequences you need to know for planning purposes.

* You may deduct interest on up to $1 million of mortgages on your first and second homes as long as you use the proceeds to buy, build, or substantially improve the homes. You may also deduct interest on up to $100,000 of home-equity debt, regardless of how the money is used.

* Points paid on a mortgage to buy a home are deductible in the year of purchase. Points paid on a refinancing are not currently deductible except to the extent funds are used for home improvements; instead they're deducted pro rata over the life of the loan.

* If you refinance more than once, and in so doing pay off a prior refinancing, the balance of points not yet deducted becomes deductible in the year of the new refinancing.

* If you refinance for more than the balance on the original mortgage (plus $100,000 home-equity debt), your interest deduction is limited unless you use the excess funds for home improvements.

Your home can be a source of significant tax savings, but it can also be the source of tax surprises. Be sure to contact us for guidance before you make important financial decisions involving home ownership.
Men at business lunch
Starting this month, the IRS plans to audit about 13,000 individual tax returns for tax year 2006. These audits are part of a research project to update the IRS's audit selection process.

Although selection for these audits will be random, the IRS has said that the returns will be chosen from "various categories." Groups the IRS is likely to focus on include self-employed individuals, independent contractors whose income isn't separately reported to the IRS, and taxpayers with substantial capital gains and losses.

Thirteen thousand returns is a small proportion for any given year, so your odds of being chosen for one of these random audits are very low. However, if you are selected, contact us immediately. We can provide advice and assistance to expedite the process and achieve the best possible outcome.
Financial Navigation
The Tax Tip of the Week this week has additional information regarding the random tax audits the IRS will be starting.

The Business Tip of the Month deals with how to control costs. A very important topic for any business owner.

The Financial Tip of the Month are tips on how to avoid 401(k) mistakes.

The Fraud Tip of the Month deals with home equity scams.

Photos © Bigstockphotos.com

Sincerely,
Linda Heineman
Linda L. Heineman, CPA, CITP

phone: 626-577-0979
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