- Effective Mortgage Company
- Northridge, CA, United States
- We are a full service mortgage brokerage with experience in the areas of mortgage lending, real estate and business. Our company has established relationships with many mortgage investors and banks to provide the best programs for your individual circumstances. We specialize in Conventional, Goverment, Investment, and Reverse Mortgage. We are experts regarding any FHA or VA (veteran) questions you may have. Post any questions or feel free to call our office 818-773-0033. If our clients don't fit into one of the many loan programs offered we promise to help them overcome the roadblocks that can stop them from securing a loan. When purchasing we suggest always getting a pre-approval early on to have ease of mind knowing what amount you will qualify for and make the loan process as smooth as possible.
Wednesday, February 9, 2011
1. Taking a refund anticipation loan. A RAL is a short-term predatory loan in the amount of your tax refund, minus any tax preparation fees and interest. The rates, depending on the lender and the amount, are sky-high. According to the Consumer Federation of America, one bank this season will charge $61.22 for a RAL of $1,500, which translates to an APR of 149 percent. RALs are harder to find this year, thanks to action by government agencies, and H&R Block will no longer be offering them. Instead it is marketing a variation called "the refund anticipation check." In this case, a bank opens a temporary account into which the IRS deposits your refund. The bank then either pays you with a check or via a prepaid card. The bank charges $30 for the account, and the tax preparer may lard on more fees.
To avoid: RALs and RACs are not only costly but also totally unnecessary. The IRS these days typically shoots out refunds within two weeks to taxpayers who file electronically and ask for direct deposit. Taxpayers can also save time by having the refund dispatched automatically to a pre-existing payroll card or to a prepaid card they open. (Just watch out for fees!) For advice in choosing a prepaid card, check out the National Consumer Law Center's tip sheet.
2. Getting a big refund. You may think you're hot stuff because the government is going to pay you a big wad of cash. But a fat refund simply says that you are having too much withheld from your paycheck with the result that you are giving the government an interest-free loan. Some people say that they over-withhold because they like the forced savings, but seriously, you're better off contributing any excess tax during the year to a 401(k) — where it will earn interest — or using it to pay off your credit cards — which will save you interest.
To avoid: It may be too late to do anything this year, but to make sure that your withholding is not too big and not too small, use an IRS calculator for 2011.
3. Not paying attention to your 1099s and other proof of income. If you're like me, you toss these things into a file folder and look at them on maybe April 12. Big mistake. I've learned from hard experience that banks, employers and others who provide the forms make errors. The payer has to send you the form no later than January 31 and has until February 28 to file the document with the IRS. That gives you as long as a month to correct any errors.
To avoid: Check right the forms immediately. If you spot errors and the payer hasn't yet sent the form to the IRS, s/he can simply tear up the messed up 1099 and issue a new one.
4. Not itemizing. When calculating your taxes, you can elect to take the standard deduction ($11.400 for married couples filing jointly and $5,700 for single people for 2010) or itemize deductions. An admittedly ancient GAO study found that about 510,000 households overpaid on their taxes by failing to itemize, even though they qualified for the most common deductions, for example, home mortgage interest and property taxes.
To avoid: Using tax prep software programs that query you about deductions should keep you from becoming one of the half million over-payers. Conversely, that generous standard deduction may be large enough so that you won't have to endure the headache of itemizing.
5. Forgetting about the oldster deduction. The federal government gives you a little tax help if you've managed to last beyond your working years and don't itemize. If you're over 65 and single, you can add $1,400 to the standard deduction, or $1,100 each for you and your spouse if you're married filing jointly. A married couple, both over 65, can get a total standard deduction of $13,600: $11,400 plus $1,100 for each spouse.
To avoid: If you're like Nora Ephron, author of "I Remember Nothing," you're in big trouble. Again, tax prep software will prompt you to take the extra deduction.
6. Failing to deduct non-cash donations to charity — even though doing so is a big pain in the neck. This deduction (only available to those who itemize) is close to my heart since I moved this year and wound up donating about 2,500 pounds of clothing and household goods. When you give, you usually get a receipt that says "3 bags full" or somesuch. If you gave more than $500 worth last year, however, that will not be enough documentation to satisfy the IRS. You will have to struggle through Section A of Form 8283 Non Cash Charitable Contributions, which requires you to list every item's fair market value, when you got it and what you paid.
To avoid: You can't really sidestep this form, but does the IRS really want to know that you bought one dress at Nordstrom's, one at Macy's and another at JC Penney? I plan to write in "department stores" and guess the approximate dates. The Salvation Army provides a valuation guide to help determine the market value of most items you're likely to give. BTW, you may not deduct more than 50 percent of your adjusted gross income in any one year — but you can carry over any excess to the following year.
7. Forgetting to deduct old refinancing points. If you refinanced your mortgage this year, you can deduct the points over the lifetime of the loan. If you have a 30-year mortgage and you paid $3,000 in points, you can write off one-thirtieth or $100 this year. Of course, if you refinanced in June, you only get six months' worth or $50. That's nothing to celebrate, but if you refinanced previously, let's say on January 1, 2008 (just to keep things simple), you can deduct the value of the points you hadn't yet taken — about 28 years' worth — in the year of a new refinancing.
To avoid: Put aside the papers documenting your old points in the front of your tax file.
8. Being too chicken to take the home office deduction. For years, you've been hearing warnings that this is a red flag for auditors. Not so. If you qualify, you can subtract a significant chunk from your tax bill. If you don't qualify, you'll get in trouble.
To avoid: Follow the rules. First, the office has to be your principal place of business, and it must be used exclusively for that purpose, not for playing video games, watching reruns of "I Love Lucy" on Hulu or doing homework. And, you cannot deduct more than your business income. Let's say your office is 100 square feet and your house is 2000 square feet. You can then deduct as business expenses 5 percent of your utilities, insurance, homeowner association fees, repairs, cleaning and maintenance. On top of all that, you can take off 5 percent of your mortgage interest and property taxes. (Using those deductions as business expenses rather than as personal itemized deductions reduces self-employment income, which in turn lowers your Social Security taxes.) You also get a depreciation deduction, for the wear and tear on your office over a set time, usually 39 years. It's a complicated calculation so you'll have to consult IRS Publication 534, but here's a rough idea of how it works: You take the fair market value of your home minus the land. Say it's $250,000; then figure out the amount of the property used for business, in this case 5 percent or $12,500. Divide that by 39, and you get a depreciation deduction of $320. Deductions for depreciation do come back to bite you when you sell your house, however. You will have to pay a capital gains tax on the total amount of depreciation deductions you took, assuming you sold at a profit. Right now, you wouldn't pay much — 15 percent — but capital gains tax rates are due to sunset in two years.
9. Throwing yourself into the arms of a "professional." Just over half of all taxpayers have their returns prepared by a supposed professional preparer. But commercial services, whether provided by Uncle Morty, H&R Block or a high-powered CPA, are often less than fabulous. When GAO investigators went undercover to have returns done by commercial preparers, they found that the results were often incorrect. And IRS data show that 56 percent of professionally prepared returns showed significant errors, compared with 47 percent of those done by the taxpayer. You have no guarantee of quality, because only California and Oregon require tax preparers to take a test. What's more, once you are a customer of a big-chain preparer or even a neighborhood accountant, you become a target for sales pitches — for RALs and RACs as well as fee-laden insurance policies and retirement plans.
To avoid: If you are a wage earner who takes the most common deductions (home mortgage interest, property taxes, charitable donations and state taxes) and credits (child care, for example), you probably will do better simply to buy a software program to help you complete your return.
- By Marlys Harris Thursday, February 3, 2011
Failing to quickly get a Social Security number for a new child:
Mark Luscombe, principal federal tax analyst for the tax firm CCH, says that even newborns need Social Security numbers right away. Hospitals make it easier by helping new parents with the paperwork, but parents are still responsible for making sure they get the number and use it correctly when filing taxes. Otherwise, Luscombe says, the IRS could disallow some of the tax benefits.
Luscombe adds that parents themselves need to make sure they have their correct Social Security number on their tax forms. This can be especially challenging for people who recently got married, changed their names, and requested a new number. "If the name on the tax return and the Social Security number don't match up, the IRS gets concerned," he says.
Omitting the dependent exemption for babies born at the end of the year:
Even babies born on December 31 provide their parents an entire year's worth of exemption status. "You don't have to apportion it to the time the baby was alive," explains Barbara Weltman, attorney and author of J.K. Lasser's 1001 Deductions and Tax Breaks 2011. She adds that even high-income tax payers get the full value of the exemption this year.
Overlooking the adoption credit:
This credit, which can be worth about $13,000, is designed to alleviate some of the expenses associated with adopting a child. But because adoption often takes more than one year and involves many types of expenses, parents can get overwhelmed with the paperwork. Bob Meighan, vice president of TurboTax, recommends keeping careful track of receipts, then filing for the credit the year of the adoption.
Forgetting to keep careful records of care providers:
Many working parents are eligible for the child and dependent tax credit, which can help ease some of the costs of daycare, babysitters, and after-school programs for children younger than 13. What often trips parents up, says Luscombe, is that they forget to record the tax ID or Social Security numbers of the care providers throughout the year. Without that information, they can't file for the tax credit. "If you've had a succession of babysitters and have no Social Security numbers, then you could lose out on part of the credit for not doing your homework," he says.
Stacey Bradford, author of The Wall Street Journal's Financial Guidebook for New Parents, adds that summer day camp fees also count if both parents are working, looking for work, or studying, as long as the child is under age 13.
Claiming something other than head of household status:
Single parents in particular often forget to claim head of household status, which provides certain tax advantages, including the ability to claim dependents. "There's a lot of confusion about the head of household filing status and a lot of people don't seem to understand what that means," says Luscombe. Single parents could be eligible for this status if they paid more than half the cost of maintaining their household throughout the year and live with their children for more than half the year.
Ignoring the child tax credit:
The child tax credit, which is worth up to $1,000, phases out for higher earners, but most taxpayers qualify for it, says Meighan. It applies to children under age 17 who live with the parent claiming the credit for more than half the year.
Not filing taxes for an older child with a part-time job:
"Parents forget that an older child might have a tax filing requirement," says Meighan, even if that child is still a dependent. And failing to file that older child's taxes could mean losing out on a refund, because teens often don't earn enough to have any tax liability, even though their employers have withheld taxes. "To get that money back, they have to file a return," adds Meighan.
Failing to take advantage of tax-advantaged savings plans:
Most adults have never heard of 529 college savings accounts, which allow parents to invest after-tax money and grow it tax-free as long as they use it to pay for tuition. Coverdell education savings accounts, which come with strict contribution limits ($2,000 a year) as well as income limits, also offer tax advantages. Similarly, many parents forget to put pre-tax money aside (up to $5,000) into flexible spending accounts offered through their employer to pay for childcare expenses.
Skipping education write-offs:
From the American Opportunity Credit to the Lifetime Learning Credit, there are many tax benefits that help alleviate some of the cost of paying for college. Parents often forget that they can claim student loan interest on their own taxes if the college student is still a dependent--even if the college student is the one paying the loan interest, says Meighan.
Bradford adds that many parents don't realize that a number of states allow deductions for contributions to college savings plans. In New York, she says, residents can write off $5,000 for single filers and $10,000 for married joint filers. She suggests checking savingforcollege.com to see if you qualify.
Repeating classic errors that all taxpayers make:
Eric Smith, IRS spokesman, says the most common errors include forgetting to sign returns, just one spouse signing it, forgetting to attach a W-2 form, failing to use enough postage, and writing the name and address on the mailing envelope illegibly. "Take advantage of computer technology, and most of those mistakes go away," he says.
-By Kimberly Palmer Kimberly Palmer – Mon Feb 7, 4:46 pm ET
Monday, February 7, 2011
Effective Mortgage Company along with Industry experts will be a guest speaker at the workshop "The Truth Behind the American Dream." The information gained is invaluable for homeowners in trouble, sellers, buyers and investors. You will not be hearing the standard, predictable, corporate all leveling whitewash in any area. "The Truth Behind the American Dream" will provide you with the nuts and bolts infrastructure to create Your Own American Dream.
- Reclaim the American Dream
- Learn to improve your financial road map
- Life after The American Nightmare- Foreclosure and Short Sale
- Learn to move beyond your fears and accomplish your DREAM
Effective Mortgage Co. will be giving out a limited amount of seats for free so please call our office today!!! 818-773-0033 firstname.lastname@example.org