End of Federal Homebuyer Tax Credit

An $8,000 federal homebuyer tax credit ends Friday, after months of helping fuel sales among first-time customers. But despite concerns that the buyer frenzy will diminish as the credit goes away, Realtors and observers say the market will continue strengthening and prices will rise. That increase is partly why the end of the federal tax credit is unlikely to delay home purchases among Americans who feel now is the time to buy, according to Prudential Real Estate and Relocation Services Inc.

According to the survey, low interest rates and the expectation that rates and housing prices will rise were more important than the tax credit in prompting a purchase. Of those surveyed, 61 percent cited low mortgage interest rates as "very important" to their decisions higher than the tax credit or cheap prices. In contrast, 65 percent believe that the end of the tax credits will have little or no effect on their pursuit of a home.

That's not to say the tax credits didn't play a role in reviving a market crushed under the weight of defaulted subprime loans. More than 90 percent of consumers, according to the prudential survey, believe the credits have helped first time homebuyers and the U.S. housing market in general. Many local Realtors said the credits helped move a lot of buyers off the fence to pursue a first home.

The California Association of Realtors has repeatedly pointed to the credits as fuel for the market. And industry lobbyists have pushed leaders on Capitol Hill to extend the credit once again. It was unclear if that would happen, but lawmakers instead seemed to be emphasizing ways to create jobs as a way to drive the home market.

Georgia Chamber Tax Overhaul Plan

The tax overhaul plan is a response to the near universal assessment that the state's tax system is, in the description of the Atlanta Business Chronicle, "out of date, too full of exemptions and discouraging to potential corporate prospects."

It's an overhaul the need for which has been brought into sharp focus by the devastating drop in state revenues during the current economic crisis a mathematical fact that suggests, among other things, a revenue stream based too heavily on sources that are too volatile and too recession vulnerable.

A special committee of economists, the chairman of the Georgia Chamber of Commerce, the state chair of the National Federation of Independent Business and four other members appointed by the lieutenant governor and House speaker would recommend changes to the legislature. A legislative committee would then write a tax revision bill to be submitted to the General Assembly for an up or down vote.

That's the good news: The process seems designed to take pork politics out of the equation as much as possible, and to address chronic flaws in the ways state government in Georgia is paid for. Democrats have objected that they have too little representation on the committee the same complaint that would be, and frequently was, heard from Republicans during the decades of Democratic rule in Atlanta. The more compelling case for diverse representation has less to do with party affiliation than with the demographic and economic realities of Georgia's people.

While business interests, which account for hundreds of millions in taxes, absolutely must have prominent seats at the table, there is reason to ask whether there will be enough chairs left for other important stakeholders in tax policy meaning, of course, every citizen of Georgia, high and humble.

We suggest that the governor, lieutenant governor, the speaker and others responsible for the makeup of this council keep in mind the microeconomics, as well as macroeconomic, consequences of the decisions they make. As too many Georgians already know, bad tax policy crunches more than just numbers.

Replace Corporate and Personal Income Taxes with VAT

President Obama and his advisers are hinting that they may ask Congress to supplement the existing corporate and personal income taxes with a national Value-Added Tax (VAT) a tax on consumption. The reaction has been quick, venomous and misleading.

Missing in that criticism is any recognition that VAT-based tax discrimination in the global trading system is a major cause of our large and expanding trade deficits and is costing the United States millions of jobs as U.S. based corporations shift their production to countries with a VAT.

Eliminate the existing U.S. personal and corporate income tax system altogether and replace it with a VAT a great tax swap of historic proportions. One argument against such a swap is that it would require the repeal of the 16th Amendment, which is wrongheaded since the 16th Amendment gives Congress the power to levy an income tax, but does not mandate that it do so.
Several VAT critics are also arguing that while the VAT is efficient, fair, and effective, it would, however, raise too much money, too easily and thus encourage the purchase of more public services. They seem to like the existing chaos and inefficiency. And indeed, there is already much about the U.S. Tax Code to hate, not the least of which is its complexity and sheer size a 24-megabyte computer download that fills 7,500 letter-size pages at 60 lines per page.

The administrative compliance costs to the U.S. economy, moreover, are enormous, with the General Accountability Office (GAO) estimating that it consumes approximately one percent of the gross domestic product annually ($145 billion in 2009). The Cato Institute, a Washington-based think tank, estimates that the U.S. "tax army" of accountants, lawyers, and computer experts includes more than 1.2 million tax preparers and processors.

The present system also has vast non-compliance. The IRS estimates that the difference between what taxpayers paid and what they should have paid in 2001 was $345 billion, which was 17 percent of federal revenue that year. Put another way, cheaters evade paying about one of every six dollars of taxes due the federal government.

For many VAT critics, their goal is not to define the method by which the U.S. government raises taxes or to improve its efficiency but to slash revenues as a means of cutting government, or "starve the beast."

Amazon Tax Ignited a Tax War with Huge Online Retailer

Every consumer knows that shopping online can be a handy way to avoid paying sales tax on books, CDs and electronics. But not nearly as many know that they're still supposed to pay tax on these purchases. That's something Colorado, North Carolina and other states, desperate for revenue, want to change.

But by taking steps to collect what many have simply begun calling the “Amazon tax,” the states have ignited a tax war with the huge online retailer that is the primary target of their efforts. Colorado passed a law requiring Amazon.com and other Internet retailers to mail notices to customers reminding them of their tax liabilities. Amazon responded by shutting down its affiliate program in Colorado, effectively closing thousands of small businesses that were marketing Amazon's products over the Web.

Amazon sued North Carolina after the state's department of revenue asked the company to turn over the names and addresses of its North Carolina customer’s information the state would need if it were to try to collect unpaid taxes. With as many as 15 more cash-strapped states weighing whether to pass Amazon taxes of their own, there's a lot of interest in seeing how that case, as well as a related case in New York State, turn out.

The disputes in Colorado and North Carolina are only the latest twists in the fight over Internet sales taxes. Opponents of taxing the sales of Amazon and other Web-based retailers say such measures are a misguided attempt at recouping additional revenue without having to raise taxes. Further, a Tax Foundation report released last month questioned how much money it would actually bring in. Still, the states say it's not just money they're after but fairness: Main Street retailers have to collect sales taxes, and leaving the Internet as a tax-free shopping zone puts them at a disadvantage.

Repeated New Home Buyer Tax Credit

The first-time homebuyer and repeat buyer tax credits expire on April 30. As of this moment, there doesn’t seem to be a movement to extend these credits again in California.

Common myths related to the tax credits are,

If deals haven’t completely closed by April 30 as long as you sign a binding sales contract by April 30, you have until June 30 to complete the transaction and qualify for either the $8,000 first-time homebuyer or $6,500 repeat buyer tax credits.

Receiving new home buyer tax credit check is even if you buy a home in 2010, you can claim the first-time homebuyer or repeat buyer credit on your 2009 return. If you haven’t yet filed your 2009 return, great. If you did, you’ll need to file an amended return. Otherwise, you can wait until you file your 2010 taxes.

In most cases, the government doesn’t issue you a check. Instead, every dollar of the tax credit reduces your income taxes by a dollar. So if your total tax liability was $10,000, the $8,000 tax credit would bring your total tax liability down to $2,000.

So when does someone receive a check? If your total tax liability was $5,000, the IRS would send a qualifying first-time homebuyer a check for $3,000 the difference between the $8,000 tax credit and the buyer’s $5,000 tax liability.

Eligible for the tax credits is for the home you buy has to be your principal residence. And it has to have cost no more than $800,000. There are also exclusions based on your modified adjusted gross income. For example: If your modified adjusted gross income is $145,000 or more, or $245,000 and up if married and filing jointly, and you bought your home after Nov. 6, 2009, you can’t claim either the first-time homebuyer or the repeat buyer tax credit.

Spend Time to Review Your Tax Return

Most of us would like an answer to this question: Am I on the royal highway toward realizing my long-term financial goals building up savings for the children’s education and for retirement.

Your tax return can provide clues for answering that question. So, before filing away a copy of your 2009 return, spend some time reviewing it. Even if you want professional advice, review the return first. For the tax return the topics to consider and the questions to ask are,

INVESTMENTS
If you have more than $1,500 of either, at the attached Schedule B, it will show net capital gains or losses, with the details of your trades on Schedule D.

If Schedule D showed only gains, take it as a warning sign. “Harvesting losses is an important part of good planning.” Often investors do not want to sell losers, feeling a stock will surely bounce back. But a capital loss could offset a capital gain, making the gain tax-free, and the money that was recognized in selling losers could be reinvested, perhaps more productively. Net losses of up to $3,000 can offset ordinary income with any excess carried forward to future years.

Many tax professionals expect tax rates to rise, and if they do, harvesting losses can become even more valuable. President Obama has proposed raising the rate on long-term gains those held more than a year to 20 percent for most taxpayers, and under present law the top rate for ordinary income next year is to rise to the 2001 top of 39.6 percent.

A nonprofit that encourages teaching personal finance to students, warned against two extremes. Short-term gains are taxed as ordinary income, not at lower capital gains rates, so frequent trading can result in a high tax bill. But if Schedule B shows dividends but there is no Schedule D, you may not be re-balancing your portfolio to keep the right mix of stocks and bonds to meet your long-term goals within your personal risk tolerance.

RETIREMENT SAVINGS
“You always want to put away as much as you can on a tax-deferred basis.” If you are an employee, look at your Form W-2 to see if you have made the maximum contribution to a 401(k), 403(b) or other employer-sponsored plan. The income from wages and salaries reported after the retirement contribution.

Self-employed people can set up several different types of tax-deferred retirement plans, including the Simplified Employee Pension, known as SEP, and Simple and qualified plans, such as solo 401(k) plans. And they can take a deduction for their contributions. People whose retirement accounts have eroded in recent years may want to generate some self-employment income and contribute as much as possible to one of these plans to rebuild retirement savings.

People whose employers do not sponsor retirement plans or whose income is below certain limits can put $5,000, or $6,000 if age 50 or older, into a deductible I.R.A. To encourage lower-paid workers to save for retirement, Congress has authorized a tax credit, which offsets taxes dollar for dollar, of up to $1,000 for single filers or $2,000 for married filers.

DEDUCTIONS
Schedule A, which lists itemized deductions, gives rise to several planning issues. For people who are not liable for the alternative minimum tax, state income taxes are deductible. Some people are liable for taxes in two states because they maintain two homes. With state taxes generally rising, people thinking of buying a second home or of eventually retiring to a different state may want to check the state and local tax rates first.

If you take a deduction for mortgage interest expense, consider the rate on your mortgage, he said. With today’s low interest rates, it may make sense to refinance, though the rules are tricky and careful study is needed.

Many people write checks to favorite charities and claim a tax deduction. But the tax savings can be far larger if they give appreciated securities, which are deductible at market value with no capital gains tax due. Affluent people may “discover the enjoyment of lifetime charitable giving,” as distinct from bequests. If so, they may want to set up charitable trusts, donor-advised funds or private foundations for tax-efficient giving.

SELF-EMPLOYMENT
If you are filing Schedule C as a sole practitioner, ask your adviser if you would be better off with a limited liability company. Other tax-saving moves for self-employed people, include hiring family members to do legitimate work. That will shift income to them and may make them eligible for retirement and health plans.

No Gas Tax Hike Announced by Senators

In US Senators John Kerry (D-MA), Lindsey Graham (R-SC) and Joe Lieberman (I-CT) have been discussing the idea of establishing a “linked fee” on oil and gas companies. This potential fee would be related to the carbon market price for other industrial sectors rather than putting oil companies directly into an economy-wide cap-and-trade program.

Kerry, Graham, and Lieberman struggle with how their climate and energy bill will affect oil companies under a carbon control plan, though all reject the prospect of a gas tax hike. There is no gas tax; however, the notion of putting a fee on oil and gas companies, a measure which could in turn raise prices at the pump, in the current political and economic climate is cause for alarm in some quarters.

The senators have floated the concept of a “linked fee” on oil and gas companies, which would tie to the carbon market price for other industries instead of grouping oil companies directly into a cap-and-trade program. ConocoPhillips, BP and ExxonMobil Corp. have expressed support for the idea.

The Congressional Budget Office (CBO) has come out with numbers on the cap-and-trade legislation passed by the House in June. The CBO said the legislation would raise the cost of electricity and other goods produced through the use of fossil fuels, costing the average household $160 a year in 2020 and $930 a year by 2050.

Michigan state approved tax breaks for 10 projects

The Michigan state approved tax breaks for 10 projects, including a business support company's proposal to create more than 1,900 jobs in Southfield and a health care company's plans to hire about 1,000 in Flint.

The Michigan Economic Development Growth Authority (MEGA) board approved $4.6 million in tax breaks over five years for a New Jersey firm putting up its facility in downtown Detroit. GalaxE Solutions promised to investing $4.2 million and to provide 500 jobs in return.

The Michigan Economic Growth Authority board approved a $9.1 million tax break over four years for Farmington Hills-based Minacs Group USA to invest $11 million in expanding at a new facility in Southfield. The project would include call centers and other services.

The board also approved a $61.5-million tax credit over 18 years for Flint Township-based Diplomat Specialty Pharmacy. The company plans to spend $12 million to move its headquarters to nearby Flint and expand in part of the Great Lakes Technology Centre, a former manufacturing and office complex.

Among other projects, PSCU Financial Services was granted a $3.5 million tax break over five years to encourage the financial service provider to invest up to $12 million to expand in Auburn Hills, creating more than 830 jobs.

The board also backed manufacturers, including a $5.6 million credit over seven years for auto parts maker Magna International Inc. to spend $49.2 million and create about 500 jobs, and a $1.8 million break over seven years for auto parts maker Tenneco to invest up to $15.6 million to create about 185 jobs.

Small businesses benefited from Healthcare Tax in Iowa

Small businesses in Iowa could benefit from a new health care tax credit.

The IRS is mailing out information to more than 57,000 Iowa employers about possibly expanding health care coverage. Last week, the agency began mailing postcards to employers and tax-exempt organizations.

The credit is available to small employers that pay at least half the cost of single coverage for their employees in 2010. In order for businesses to apply for the credit the information needs to be available.

Right now the emphasis is on making sure people have the information; there will be plenty of time for businesses to be able to make a decision because it applies to tax year 2010. Iowa isn’t the only state that will be receiving postcards. Information is being mailed out nationwide.

"The postcard the IRS is sending out to alert a small business of this new healthcare tax credit is being sent to approximately 4 million small businesses and tax exempt organizations across the country."

The provision is one of the first from the health care reform law signed last month.

Cinnabon Tax day with Free Food

As a reward for dealing with the tension of Tax Day on April 15, tax payers could visit various quick-service locations around the country and receive a few stress-relieving food items.

Cinnabon customers who visited between 6 p.m. and 8 p.m. for the company's "Tax Day Bites!" campaign sampled two free bite-sized portions of Cinnabon's new line of cupcakes.

"We think it's just a fun way to have a great experience for the guests to come in and get a little bit of a break on a day that bites," says Cinnabon president Gary Bales. "We all have to write checks, but in the same sense, it's a great opportunity for us to use the event this year to launch the new product."

Customers could choose from four flavors: Cinnicake Classic, Chocolate Passion, Vanilla Bliss, and 24-Carrot Cake. The promotion benefited both consumers and the company.

Like Cinnabon, bd's Mongolian Grill felt the need to give customers some stress relief on Tax Day.

Tax Cuts are Beginning to Strategize

Democrats for years have vowed to let the Bush administration’s tax cuts for the wealthiest taxpayers expire as scheduled after this year, but election-year politics and the economy’s fragility could complicate matters in Congress.

One thing seems certain, both parties agree: The 2001 income tax cuts will be extended for everyone else that is, for the roughly 98 percent of households in which couples have less than $250,000 in annual income or individuals earn less than $200,000.

Even so, the White House and Democrats in Congress have given some thought to limiting an extension of the popular middle-class tax cuts to a year or two in the hope that they can overhaul the tax code in the meantime. That also would have the effect, at least on paper, of making projected big deficits look smaller over the long run than if the tax cuts for the vast middle class were continued indefinitely an important political consideration when the nation’s debt is building to what many economists consider dangerous levels.

For all of the talk from President Obama and his party of ending the Bush tax cuts, letting that happen could be harder for some Democratic lawmakers from Republican-leaning districts or states. Republicans already are reviving what has sometimes proven an effective, if disputed, argument in the past: that rich taxpayers include many small businesses whose owners pay income taxes as individuals.

The news this week that an influential group of economists is split over whether the recession actually is over also provides ammunition to Republicans who say that letting the tax rates for wealthy Americans revert to their pre-2001 levels would amount to a big tax increase that could endanger the recovery.

In the 2008 campaign, Mr. Obama called for repealing the tax cuts for the rich in 2010, a year before they would otherwise expire. But once in office, he quietly set aside that promise because of the recession, proposing to let them lapse in 2011 as the original law provided. Now, administration officials say, the economy is recovering enough that by next year higher taxes for the wealthiest households will not be an economic risk.

The revenue stakes are huge, so huge that some economists and analysts have called for letting all the tax cuts expire after this year. Ending the tax cuts for the rich would bring additional revenues to the government of more than $678 billion through 2020, the administration has projected, while keeping in place the tax cuts for everyone else would mean forgoing more than $2 trillion in revenues during that time.

This month’s income tax filing deadline has drawn politicians attention to the issue, which probably would have gotten much more of it before now but for the preoccupation in Congress and the White House with health insurance. Both parties acknowledge they are only now beginning to strategize.

Cigarette Tax Increase Reduce Teen Smoking

South Carolina Senate could give final approval to a plan to raise our state's cigarette tax from the lowest in the nation, at a cancer-inducing 7 cents per pack, to the ninth lowest, at 57 cents. If senators don't change the way the revenue is spent, the entire effort will be a colossal waste of time.

Gov. Mark Sanford has promised to veto a cigarette tax increase that is not offset by equal tax cuts elsewhere, and it takes 31 votes in the Senate to override a gubernatorial veto - two more than supporters ever were able to muster for the bill.

It has been clearly documented that raising the tax on cigarettes prices kids out of the market. And if they can't afford to start when they're still adolescents, chances are excellent that by the time they can afford to, they'll have sense enough not to. Raise the cost of cigarettes 10 percent, and you reduce teen smoking by 7 percent; overall smoking drops by 4 percent. So if we raised our cigarette tax by 50 cents, more than 23,000 kids alive today who would have become smokers would not. More than 400 kids saved every year.

The life-saving effect is so dramatic and so certain that our state would be better off with a higher cigarette tax even if we burned the money.

Though the bill the House passed last year used the money to provide tax credits to small businesses that provide health insurance to their employees, representatives might be willing to go along with a Medicaid-only bill this year: The budget they passed last month included a smaller cigarette tax increase that directs nearly all the money to Medicaid.

Time for Filing a Tax before Deadline

April 15th is quickly approaching. Do you have your taxes done? Nearly half of all tax returns are filed after April 1st. If you are one of the last-minute filers, here are five tips to maximize refunds, avoid errors and get a little something extra backing.

Review tax changes. There were plenty, especially for homeowners. If you made energy-efficient upgrades to your home, check to see if you qualify for a tax credit of up to $1,500. Non-itemizing homeowners are allowed to deduct an extra $1,000 in property taxes, and anyone who bought a car after February 16th of 2009 can deduct sales tax paid up to a certain extent.

Individuals who bought a home for the first time can take advantage of a tax credit for as much as $8,000. Homeowners who made energy-efficiency improvements can get a tax credit worth as much as $1,500. And individuals who collected unemployment benefits last year can exclude the first $2,400 of the benefits from their 2009 federal taxes.

Be sure to e-file. If you're owed a refund, filing electronically can get you your check up to a week sooner. Many taxpayers can also e-file for free. The Internal Revenue Service Web site, www.irs.gov, is a trove of tax help, tax forms and tax information for do-it-yourselfers. The site's Free File tax preparation software actually is free to those with an adjusted gross income of $57,000 or less.

The federal government doesn't tax the first $2,400 in unemployment benefits, but the state of Illinois does. Take advantage of the earned income tax credit and more new tax credits and deductions.

Californians Tax Relief

Thousands of Californians whose homes were foreclosed on or sold at a loss would get tax relief under a measure approved Thursday by the state Legislature.

The bill would waive state taxes on mortgage debt that has been forgiven in a foreclosure or short sale. It is expected to affect about 34,000 taxpayers.

Gov. Arnold Schwarzenegger said he would sign the measure, which would also provide about $60 million in tax credits to green-energy companies, when it reached his desk. Californians can already claim the tax breaks on federal returns. Lawmakers passed the measure in time for people to take advantage of it by the April 15 deadline for filing tax returns.

"The mortgage-debt tax relief provision in this bill will provide financial shelter for tens of thousands of Californians who have lost their hopes and dreams in the housing market crash, and it's about time we gave these folks a helping hand."

The short-sale provision would mean about $34 million less in tax revenue for the state over three years, according to the Franchise Tax Board. The "green" credits are a response to the federal American Recovery and Reinvestment Act, which provides grants to firms for power plants that produce renewable energy. The federal government does not tax the grant money. Under the bill approved Thursday, California would provide similar relief.

Estimate Your Tax with Proper Planning

Estimated taxes, something most working Americans don't have to deal with or may not even is aware of, can be a hidden cost when converting traditional IRAs to Roth IRAs. With proper planning, however, this potential trap can be easily avoided.

Estimated taxes are payments we must make four times a year to the Internet Revenue Service if the amount withheld for taxes at work or elsewhere does not meet certain minimums. If we fail to make the required estimated payments due April 15, June 15, Sept. 15 and the following Jan. 15 for each tax year we will owe a penalty for underpayments. The penalty, a variable interest rate set by the IRS, stood at 4 percent for the first quarter of 2010.

This is not a problem for the majority of American workers, who tend to have too much money withheld from their paychecks and get large refunds. But the income from a large Roth IRA conversion is likely to create a tax liability that may trigger the need to increase withholding and/or to pay estimated taxes.

Starting in 2011, income from a conversion must be reported for the year the conversion is made. But for conversions made this year, taxpayers can report either the entire conversion income for 2010, or half of it for 2011 and the other half for 2012. This latter income split is the default option, or what will happen if the taxpayer does not choose otherwise.

The decision of when to report the income is not made until the taxpayer files the 2010 tax return in 2011. Therefore, taxpayers choosing to report the Roth IRA conversion income for 2010 may discover after the fact that they owe a penalty for not having enough withholding and/or not paying enough estimated taxes in 2010.

But a penalty can be avoided by using any of three "safe harbor" methods. The easiest to implement it's foolproof and you don't have to make any estimates is to have your withholding and any estimated tax payments add up to 100 percent of your total tax liability for the previous year, or 110 percent if your adjusted gross income was higher than $150,000 ($75,000 for married taxpayers filing separately).

April 15 Deadline for Filing Tax Returns

As the April 15 deadline for filing tax returns approaches, authorities are reminding people to steer clear of scams that could land them in jail.

Just because someone else prepares your tax return and, for example, lists fake deductions or hides income doesn't mean you are off the hook, said Internal Revenue Service. If the return has your name on it, you are ultimately responsible for what it contains.

One of the most common scams involves tax preparers who promise return checks to their customers that are too good to be true. The problem in these cases is that preparers may make false deductions or use other illegal practices to push up the amount the customer will get back from the government. The preparers make their money by charging exorbitant fees or skimming money from the refund.

"Taxpayers should be wary of anyone peddling scams that seem too good to be true."

People should also be aware of phishing scams. In these cases crooks use e-mail, Tweets or realistic-looking but fake Web sites. Scammers will try to mislead people by telling them they are entitled to a tax refund and that they must reveal personal information to claim it. Crooks then use that information to set up bank accounts, get credit cards or take out loans.
Some of the other scams that surface around tax time are:

• Zero wages: In this scam a person files a Form 4852 in order to reduce his taxable income to zero. Filing this kind of return could mean a fine of up to $5,000.
• Filing misleading forms: This fraud involves claiming a tax credit or asking for a refund on taxes someone hasn't paid. The Form 1099 Original Issue Discount is sometimes used in this scheme.
• Retirement plans: People should be wary of advisers who encourage them to put assets into individual retirement accounts at an amount less than fair market value. This is a way to get around yearly contribution limits and is illegal.

Beer Tax Hike to Balance the Budget

Some Democratic state lawmakers want to raise taxes on beer to help solve the state's budget woes. The tax on beer would hit the so-called “Joe Six-Pack” consumer, but shelter products from small, in-state breweries that sell a higher-priced brew to a more well-heeled clientele.

That's the highlight of a new tax proposal from the Senate, which has been negotiating a state tax package with the House and Governor. The newest Senate idea would increase state taxes by 50 cents per gallon on mass-market beers. Microbrews would be exempt.

Their plan would hike existing state taxes by 50 cents per gallon on mass-market beers. With existing taxes, that would mean people will pay 43 cents in taxes per six packs, Senate Democrats said.

It also would extend the sales tax to candy, gum and bottled water, and raise the state sales tax by one-tenth of a penny. That would raise about $200 million - the final disputed piece of a roughly $800 million tax package that Democratic leaders want to help patch the state budget. Lawmakers are in a special session to bridge a $2.8 billion budget deficit through June 2011.

Reducing Tax Burden for Homebuyers

As if the allure of spring weren't inspiration enough to make hopeful shoppers start searching in earnest, this year potential home buyers has the prospect of a nice tax credit to help with the purchase. You'll need to get to work fast, though, and acquire the house by the end of April if you want take advantage of what is often called the homebuyer tax credit.

The Worker, Homeownership and Business Assistance Act of 2009 are the formal name for the law that is often abbreviated on for sale signs simply as "$8,000 available." That amount is a reference to the maximum federal income tax credit available to first- time home buyers under the law.

The Louisiana Society of Certified Public Accountants helped taxpayers with their personal and corporate tax questions last month during its annual telephone Tax Hotline. During the three-hour public service event most of the questions posed to the 17 volunteer CPAs were related to claiming the New Homebuyer Credit. While the new act brought extra benefits to help the nation's economy recover, it also raised more questions about who qualifies and how to claim it.

There are some nuances that should be noted, and when it comes to income taxes, the details can never be examined too closely. If you're thinking of claiming the tax credit and are accustomed to preparing your own return, this could be the year to consult a tax professional. The definition of "first-time home buyer" under the act means someone who hasn't owned a primary residence in the past three years. For them, the law gives a tax credit of $8,000 for single taxpayers with modified adjusted gross income of $125,000, and married couples with income up to $225,000.

Single taxpayers with income between $125,000 and $145,000 are eligible for a reduced tax credit. The credit phases out for married couples with annual income of $225,000 to $245,000. Anyone with income over those limits doesn't qualify for the home buyer tax credit. To qualify for the tax credit, buyers must enter into a binding contract to buy a principal residence by April 10, and go to closing by June 30, 2010.

Finally, the act also tightened up on documentation needed to claim the tax credit. Taxpayers who want to claim the credit will have to prove they actually bought a house, not difficult considering all the paperwork involved in a home purchase. Taxpayers will also have to file a paper return and include Form 5405 and a copy of the settlement statement used to complete the purchase, the CPA Society said.

For those homeowners who want to claim the tax credit for buying another home, the best way to prove their longtime ownership will be to submit either property tax records, homeowners insurance records or the Form 1098, the Mortgage Interest Statement from their lender for the property they owned during the five-year period claimed.

As with most things tax-related, be prepared to document, document, document. If the IRS suspects fraud, the act gives the agency authority to automatically assess taxes and start collection proceedings. Members of the military have an additional year to buy a home and take advantage of the tax credit. They have until April 30, 2011, to enter a binding contract to buy, and until June 30, 2011, to close the deal.

Of course, the old benefits of owning your home remain. You'll also get to deduct the home mortgage interest on your federal income tax return and reduce your tax burden.

911 System For Phone Tax

Washington residents are likely to pay an extra 25 cents a month next year for every phone line they have, whether it’s a land line, a cell phone or an Internet-connected system.

The House of Representatives passed an increase in phone taxes Friday to pay for enhanced 911 equipment for state and local agencies, following action taken Thursday by the Senate.

Enhanced 911 allows a dispatcher to see the caller’s number and location when a call comes in. The state already allows local systems to charge a 50 cent fee for every land line and cell phone to help pay for the enhanced system, and the state charges 20 cents. The proposal raises local fees to 70 cents and the state fee to 25 cents.

House Republicans denounced the bill as another tax, even if it was for a good cause.