IRS tax tip 2010-44

If your mortgage debt is partly or entirely forgiven during tax years 2007 through 2012, you may be able to claim special tax relief and exclude the debt forgiven from your income. Here are 10 facts the IRS wants you to know about Mortgage Debt Forgiveness.

1. Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.
2. The limit is $1 million for a married person filing a separate return.
3. You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.
4. To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.
5. Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.
6. Proceeds of refinanced debt used for other purposes—for example, to pay off credit card debt—do not qualify for the exclusion.
7. If you qualify, claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.
8. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax relief provision. In some cases, however, other tax relief provisions—such as insolvency—may be applicable. IRS Form 982 provides more details about these provisions.
9. If your debt is reduced or eliminated you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed.
10. Examine the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.

For more information about the Mortgage Forgiveness Debt Relief Act of 2007, visit IRS.gov. A good resource is IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments. Taxpayers may obtain a copy of this publication and Form 982 either by downloading them from IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Washington — Unclaimed refunds totaling more than $1.3 billion are awaiting nearly 1.4 million people who did not file a federal income tax return for 2006, the Internal Revenue Service announced today. However, to collect the money, a return for 2006 must be filed with the IRS no later than Thursday, April 15, 2010.

The IRS estimates that the median unclaimed refund for tax-year 2006 is $604.

Some people may not have filed because they had too little income to require filing a tax return even though they had taxes withheld from their wages or made quarterly estimated payments. In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim the refund within three years, the money becomes property of the U.S. Treasury.

For 2006 returns, the window closes on April 15, 2010. The law requires that the return be properly addressed, mailed and postmarked by that date. There is no penalty for filing a late return qualifying for a refund. Though back-year tax returns cannot be filed electronically, taxpayers can still speed up their refunds by choosing to have them deposited directly into a checking or savings account.

The IRS reminds taxpayers seeking a 2006 refund that their checks will be held if they have not filed tax returns for 2007 or 2008. In addition, the refund will be applied to any amounts still owed to the IRS and may be used to satisfy unpaid child support or past due federal debts such as student loans.

By failing to file a return, people stand to lose more than refunds of taxes withheld or paid during 2006. For example, most telephone customers, including most cell-phone users, qualify for the one-time telephone excise tax refund. Available only on the 2006 return, this special payment applies to long-distance excise taxes paid on phone service billed from March 2003 through July 2006. The government offers a standard refund amount of $30 to $60, or taxpayers can base their refund request on the actual amount of tax paid. For details, see the Telephone Excise Tax Refund page on IRS.gov.

In addition, many low-and-moderate income workers may not have claimed the Earned Income Tax Credit (EITC). The EITC helps individuals and families whose incomes are below certain thresholds, which in 2006 were $38,348 for those with two or more children, $34,001 for people with one child and $14,120 for those with no children. For more information, visit the EITC Home Page.

WASHINGTON — Taxpayers wishing to claim their Haiti relief donations on the tax return they are filling out this season must make those donations by the end of this month, according to the Internal Revenue Service.
Individuals and corporations have until midnight on Sunday, Feb. 28, to make cash contributions to charities providing earthquake relief in Haiti. These contributions can be claimed on either a 2009 or 2010 return, but not both. Contributions made after that date but before the end of the year can only be claimed on a 2010 return.
Contributions made by text message, check, credit card or debit card qualify for this special option. Donations charged to a credit card before the end of February count for 2009. This is true even if the credit card bill isn’t paid until after Feb. 28. Also, checks count for 2009 as long as they are mailed by the end of this month and clear your financial institution shortly thereafter.
Taxpayers can benefit from their donations most quickly by filing their 2009 returns early, filing electronically and choosing direct deposit. Refunds take as few as ten days and can be directly deposited into a savings, checking or brokerage account, or used to purchase Series I U.S. savings bonds.
This special provision, enacted Jan. 22, does not apply to contributions of property. Eligible contributions must be made specifically for the relief of victims in areas affected by the Jan. 12 earthquake in Haiti. Gifts made directly to individual victims are not deductible. Notice 1396 a one-page notice describing this provision, is available on IRS.gov and is printed in English, Spanish, French and Haitian Creole.
To get a tax benefit, individuals must itemize their deductions on Schedule A. Those who claim the standard deduction, including all short-form filers, are not eligible.
Taxpayers should be sure their contributions go to qualified charities. Most organizations eligible to receive tax-deductible donations are listed in a searchable online database available on this Web site under Search for Charities. Some organizations, such as churches or governments, may be qualified even though they are not listed on IRS.gov. Donors can find out more about organizations helping Haitian earthquake victims from agencies such as USAID.
The IRS reminds donors that contributions to foreign organizations generally are not deductible. IRS Publication 526, Charitable Contributions, provides information on making contributions to charities.
Federal law requires that taxpayers keep a record of any deductible donations they make. For donations by text message, a telephone bill will meet the recordkeeping requirement if it shows the name of the donee organization, the date of the contribution and the amount of the contribution. In addition, for text message donations of $250 or more, taxpayers must obtain a written acknowledgement from the charity. For cash contributions made by other means, be sure to keep a bank record, such as a cancelled check, or a receipt from the charity showing the name of the charity and the date and amount of the contribution. Publication 526 has further details on the recordkeeping rules for cash contributions.

Most Americans will get assistance from a professional tax preparer or tax software when filing their taxes this year. The Better Business Bureau encourages taxpayers to use caution when selecting tax preparation help or they may get hit with headaches and mounting fines and fees if the return isn’t correct or filed late.

According to the IRS, 80 percent of Americans enlist the help of a tax preparer or tax software when filing their taxes. Unfortunately, every year the BBB receives thousands of complaints from consumers against tax preparers. Commonly, complainants state that the tax preparer made errors in their return which resulted in fines and fees.

“Even though the tax preparer completes the return, it’s the taxpayer who is ultimately responsible for the return’s accuracy and whether or not it’s filed on time,” said Ken Vander Meeden, BBB of Western Michigan President. “The fines, fees and hassles can mount if you choose an unreliable tax preparer and that’s why it’s important to do your research.”

The BBB offers the following advice to find a trustworthy tax preparer:

• Ask around. Get referrals from friends and family on who they use and check the BBB Reliability Report on tax preparation services at www.bbb.org.
• Look for credentials. Ideally, your tax preparer should either be a certified public accountant, a tax attorney or an enrolled agent. All three can represent you before the IRS in all matters, including an audit. Also, find out if the preparer is affiliated with a professional organization that holds its members to a code of ethics.
• Don’t fall for the promise of a big refund. Be wary of any tax preparation service that promises larger refunds than the competition, and avoid any tax preparers who base their fee on a percentage of the refund.
• Think about accessibility. Many tax preparation services only set up shop for the months leading up to April 15. In case the IRS find errors, or in case of an audit, you might need to be able to contact your tax preparer throughout the year.
• Read the contract carefully. Read tax preparation service contracts closely to ensure you understand issues such as how much it is going to cost for the service, how the cost will be affected if preparation is more complicated and time consuming than expected and whether the tax preparer will represent you in case of an audit.

For more advice on finding professionals you can trust, visit www.bbb.org.

By Judy Reed

When Dawn Roberts, of Hair Taylors, found out that she would have to move her business out of the building at 12505 Northland Drive in Algoma Township, she felt like she was being punished for something she didn’t do. But now, she thinks it might’ve been a blessing in disguise.

Roberts rented space for her salon in the Northland Drive location 4-1/2 years ago. Ten months ago, the building went into foreclosure. “After all the money I spent on the business ($10,000), I found out that the original landlord didn’t get the right permits,” she explained. “And they gave me three months to leave.”

Algoma Township zoning administrator Don Bates explained that the building was set up with a special use permit for the storage units. “A contractor could rent an office and a storage unit with it,” explained Bates. “It was not for retail, only for offices.” He said that a management company is now overseeing the building and trying to get everything in compliance. “They also couldn’t get health department approval there,” he noted.

Roberts said the problem with the health department was that they said that the septic and drainfield couldn’t support the number of employees and clients they could potentially have in a day. She said they based the number—160—on the number of stylists and them having a client every half hour, though most of the stylists are never there at the same time. “I said that never happens,” remarked Roberts. “I don’t think any salon has that many people in one day.”

But Roberts couldn’t be happier now that she is in her new digs at 4633 14 Mile Road, next to Dee’s Family Restaurant. She said it was fortunate that she has a husband skilled in carpentry. “He had to take walls down, pull up the flooring, and dig up cement to get to the water lines,” she said.

The new location is up and running, and Roberts is offering 50 percent off to any new clients. But she’d still like to see her old clients, too, and that might have turned into a problem if she’d been allowed to stay in her old location.

“Northland Drive is going to be torn up this summer, so this may be a blessing in the long run,” she said. (Northland Drive will undergo construction from M-57 to 15 Mile Road this summer, according to the Kent County Road Commission website.)

Give Dawn a call at 696-2096, or stop in and see her today!

By Sue Wolfe

Durst Drywall Inc., as we have known it for over five decades, will no longer exist as the Durst father-and-son duo detour to new locations and a new phase of their life journey. Russ Durst, born and raised in Nelson Township and a 1953 graduate of Cedar Springs High School started out plastering (there was no drywall back then) with his brother-in-law Gene Ball.

Russ’s son Doug decided to join forces with his father upon his graduation from Cedar Springs High School in 1978. Russ also has one daughter and son-in-law Deb and Tony Paskewicz and a son Michael who passed away in 1987. Doug and his wife Cheri raised their two daughters, Heather and Brooke, in Nelson Township, next door to the original Durst Homestead.

When Doug came on board, they were primarily doing only drywall. They could hang, tape, mud, and sand a house quicker and better than many others in the trade and soon became highly sought after. Many of the homes and businesses in our community have had the professional drywall touch of the Durst men.

Russ will be retiring (except for a few small jobs and volunteer work with the 4-H Club). He plans to spend more time at his winter home in New Mexico while Doug will join his wife and two daughters in Rock Spring, Georgia.

Aaron Gauger, president of the Cedar Springs Rotary Club, recently presented Russ and Doug with a Certificate of Appreciation for their continued support and contributions to the Cedar Springs Community. Gauger sited the men for having exemplified the Rotary motto of “Service Above Self.” Many Rotarians reflected on experiences with Russ, noting his 12 years on the Cedar Springs School Board as well as being a generous donor to every community organization and special event within our community over the years. Russ has been a faithful servant to the Cedar Springs Lions, an international service organization for over 50 years.

When asked how a father and son can work and play together most every day over the past 35-plus years, Russ simply said, “You just respect each other for who they are and what they can do. You treat each other as equals and there is no ‘boss,’” replied the elder Durst. “I have really enjoyed working with Doug and for the people in this community. I will always have many good memories of Cedar Springs.”

Rotarians expressed great respect and appreciation to both Russ and Doug for being honorable and humble men. They also wished them well as they transition into new adventures and a new way of life, perhaps now as simply “best friends.”

Have you ever heard of a water company doing a radio show? Neither had Ray Leonard, of Culligan Grand Rapids, but now he and co-host Tavis Polinskey air two segments each Saturday on two radio stations in Michigan and one in Wisconsin.

Leonard said he was looking for some radio advertising, and pitched the idea of a half hour radio show to Les Lanser, owner of AM 1260 and JQ 99. “He responded with a great and exciting opportunity for me, a person with no previous radio experience, of doing two 2-minute segments instead.” The catch was that there would be no in-studio air-time to record, and he had to find a way to do all the recording, editing and packaging on his own. Lanser proposed that the segments run during the nationally syndicated home improvement show “The Money Pit.” “Les felt it would be a good fit, since Culligan is all about improving your two biggest investments, your health and your home,” explained Leonard.

Culligan went on the air last July. Leonard and Polinskey started with a walk-in closet for their studio, and a $23.00 microphone. They now have a converted studio at Culligan, professional microphones, a corporate sponsor, and recently had their first celebrity interview when Bill Steffen, Chief Meteorologist for WOODTV-8 appeared on the show on February 6. But what do they talk about? “Our segments are topical. We address water issues, how to do it yourself water treatment, and we discuss such topics as environmental and health and wellness,” explained Leonard. “It really is quite an undertaking.”

Listeners in the Cedar Springs area can tune into AM 1260 out of Zeeland on Saturdays at 8:28 a.m. and 9:28 a.m. to hear Culligan’s broadcast.

White Creek Lumber is now one of only a few STIHL Certified Service providers in our area. Aaron Gauger, co-owner of White Creek Lumber and Charlie Dubridge, equipment and service manager, both attended an intense 2-day training session recently held in Virginia Beach, Virginia. Following the required training session was a 7-hour exam, of which an 80 percent or better score is necessary to achieve Gold Level Certification from the Waiblingen-based ANDREAS STIHL AG & Co. The exam included both a written section as well as a hands-on segment. STIHL is the world’s leading manufacturer of chain saws and also produces many other outdoor power tools, including trimmers, brush cutters, cut-off machines as we well as blowers and sprayers. Gauger and Dubridge began studying several weeks prior to the exam.
“I was thrilled to receive notification that all the requirements had successfully been met for both Charlie and me,” explained Gauger. “We learned a great deal and can now pass that knowledge and experience on to our customers.”

The Internal Revenue Service is sponsoring a public outreach event from 9 a.m. to 3 p.m. on Feb. 19 at the Radisson Hotel Grand Rapids Riverfront to assist taxpayers who may be eligible for the Health Coverage Tax Credit.

This credit makes health coverage more affordable by allowing eligible individuals to pay only 20 percent of their health insurance premiums each month.

Nationwide, thousands of people are potentially eligible to receive the HCTC. Some of them are displaced workers who are certified by the Department of Labor as eligible to receive Trade Readjustment Allowances under the Trade Adjustment Assistance Act (TAA). Others qualify because they receive benefits from the Pension Benefit Guaranty Corporation (PBGC) and are between 55 and 65 years of age.

The HCTC Program partners with various federal and state agencies and Health Plan Administrators (HPAs) to deliver the tax credit to eligible individuals.

The HCTC is available on a monthly basis to help individuals pay their health insurance costs as they become due or on a yearly basis when they file their federal tax return. It is a refundable tax credit and is paid in full no matter how much federal income tax an eligible individual owes.

The HCTC began as a ground-breaking tax credit program in 2002 and was expanded in 2009 as a result of the American Recovery and Reinvestment Act.

For more information, call 1-866-628-HCTC or visit http://www.irs.gov/individuals/article/0,,id=109915,00.html

Qualifying state residents can get help with heating costs; information provided with Consumers Energy February bills

Jackson, Mich., February 2, 2010 – As Michigan shivers through an arctic blast, Consumers Energy is alerting qualifying residents that state and federal programs are available to help pay heating bills.

“Qualifying Michigan residents can get help paying their heating bills through a Michigan Home Heating Credit and a federal Earned Income Credit,” said Debra Harmon, Consumers Energy’s customer assistance coordinator.

Information on how to apply for both credits is being provided with bills that Consumers Energy customeres receive in February. Information is also available at Consumers Energy’s “Energy Answers” section on its website: www.consumersenergy.com/energyanswers.

“There is money available in the Michigan Home Heating Credit program that may assist low-income residents with their energy bills. Unfortunately, many of those eligible do not take advantage of this program.” said Harmon. Eligible applications can get up to $200 or more for their winter energy bills through the Home Heating Credit program. You do not need to file a state tax return to apply for this credit.

Home Heating Credit forms (MI-1040CR-7) are available at the following locations, most public libraries, Secretary of State branch offices, Department of Human Services branch offices, or by calling Consumer’s Energy’s toll-free number (800) 477-5050. Forms are also available from the Michigan Department of Treasury by calling (800) 827-4000, or at: www.michigan.gov/taxes.

Last year more than 450,000 Michigan residents received over $103 million in aid through the Home Credit program, which is funded by the federal Low-Income Home Energy Assistance Program. The Home Heating Credit can be applied to all heating costs, including propane and purchased firewood. The deadline to file is Sept. 30, 2010, but residents are encouraged to file now for the credit.

The federal Earned Income Credit is a refundable federal income tax credit available to qualifying low-income workers. For income guidelines, contact your employer, call the IRS at (800) 829-3676 or visit www.irs.gov.