Here are ten things the IRS wants you to know about the first-time homebuyer credit:

1. To be considered a first-time homebuyer, you – and your spouse if you are married – must not have jointly or separately owned another principal residence during the three years prior to the date of purchase.
2. You cannot claim the credit before there is a completed sale and purchase of the residence. The sale and purchase are generally completed at the time of closing on the purchase.
3. To qualify for the credit, the completed purchase must occur before December 1, 2009.
4. The home must be located in the United States.
5. The credit is either 10 percent of the purchase price of the home or $8,000, whichever is less.
6. The amount of the credit begins to phase out for taxpayers whose modified adjusted gross income is more than $75,000 or $150,000 for joint filers.
7. The credit is fully refundable. A homebuyer with no taxable income, who qualifies for the credit, may file for the sole purpose of claiming the credit and receive a refund. The credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.
8. The credit is claimed on IRS Form 5405, First-Time Homebuyers Credit.
9. Taxpayers can claim the credit for a qualified 2009 purchase on either their 2008 or 2009 tax return. For those who have filed a 2008 return, a Form 1040X, Amended U.S. Individual Income Tax Return can be filed in order to get a refund in 2009.
10. The credit for qualified 2009 purchases does not have to be repaid, as long as the home remains your main home for 36 months after the purchase date.

Qualified taxpayers who have been considering a main home purchase may find extra incentive from this tax credit to buy now so they can complete the purchase before the December 1 deadline.

For more information on this and other key tax provisions of the Recovery Act visit the official IRS Website at IRS.gov/Recovery.

Links:

• First-Time Homebuyer Credit
• YouTube Video – First-Time Homebuyer: English | Spanish | ASL
• Audio File for Podcast – First-Time Homebuyer Credit 2009: English | Spanish
• The American Recovery and Reinvestment Act of 2009: Information Center
• Form 5405, First-Time Homebuyer Credit (PDF)
• Form 1040X, Amended U.S. Individual Income Tax Return (PDF)

1. This credit — available for tax years 2009 and 2010 — equals 6.2 percent of a taxpayer’s earned income. The maximum credit for a married couple filing a joint return is $800 and $400 for other taxpayers. Most wage earners have been enjoying a boost in their paychecks from this credit since April.

2. Eligible self-employed taxpayers can also benefit from the credit by evaluating their expected income tax liability. If eligible, self-employed taxpayers can make the appropriate adjustments to the amounts of their upcoming estimated tax payments in September and January.

3. Taxpayers who fall into any of the following groups should review their tax withholding to ensure enough tax is being withheld.  Those who should pay particular attention to their withholding include:

• Married couples with two incomes
• Individuals with multiple jobs
• Dependents
• Pensioners
• Social Security recipients who also work
• Workers without valid Social Security numbers

Having too little tax withheld could result in potentially smaller refunds or – in limited instances –small balance due rather than an expected refund.

4. The Making Work Pay tax credit is either phased out or unavailable for higher-income taxpayers. The phase out begins at $75,000 for single taxpayers and $150,000 for couples filing a joint return.

5. For those who believe their current withholding is not right for their personal situation, a quick withholding check using the IRS withholding calculator on IRS.gov may be helpful. Taxpayers can also do this by using the worksheets in IRS Publication 919, How Do I Adjust My Withholding? Adjustments can be made by filing a revised Form W-4, Employee’s Withholding Allowance Certificate. Pensioners can adjust their withholding by filing Form W-4P, Withholding Certificate for Pension or Annuity Payments.

For more information on this and other key tax provisions of the Recovery Act, visit the official IRS Website at IRS.gov/Recovery.
Links:

• Publication 919, How Do I Adjust My Withholding?
• IRS withholding calculator

Video:

• Making Work Pay – General – You Tube video
• Making Work Pay – Retirees – You Tube video
• Making Work Pay – Married – You Tube video

Audio:

Making Work Pay – General Credit

The Internal Revenue Service, which is still issuing economic stimulus payments, has been studying trends and common issues in filing errors and questions posed by people calling its customer service telephone lines.

The most common question posed to the IRS is from people wondering when they will receive their stimulus payment. The question can be answered easily by going to IRS.gov and using the “Where’s My Economic Stimulus Payment?” Web tool.

Here’s how to avoid common mistakes:

• File only one tax return – People should file only one 2007 tax return. It takes the IRS up to 12 weeks to process paper returns and issue the stimulus payments. However, some people are filing more than one tax return in an effort to receive a stimulus payment, which could further delay their stimulus payment. The IRS is concerned there will be more multiple filings as the October 15 deadline approaches for filing a return in 2008.
• List qualifying income – Some people are listing their monthly income instead of annual income.  People must list their annual amount of qualifying income to be eligible for the minimum payment of $300 ($600 married filing jointly.) The qualifying income required by law is at least $3,000 in benefits from Social Security, Veterans Affairs and Railroad Retirement, earned income and/or combat pay.
• Review Your Tax Liability – Some people who have either small amounts of tax liability or no tax liability are getting smaller stimulus payments than they expected or none at all. Generally, the law provided for a maximum stimulus payment of $600 ($1,200 for married couples) or an amount equal to a taxpayer’s tax liability, whichever was less. Tax liability is the net amount of federal income taxes paid after deductions and credits. If people had no tax liability but had at least $3,000 of “qualifying income” from specific sources, they would be eligible for $300 ($600 for married couples.) There also is a $300 payment for each qualifying child.
• Amended return – Generally, people cannot file an amended return solely to get an economic stimulus payment unless they are a retiree, veteran or have other  “qualifying income.” While amended returns will be processed to correct the income, deductions and income tax as appropriate, the economic stimulus payment amount will not be adjusted based on an amended return. If people do not receive a payment this year, they can claim it when they file their tax return in 2009.
• Use Most Current Address – People must use their most current address in order to receive a timely payment. People who change addresses after filing should complete Form 8822 and a change of address card with the U.S. Postal Service. If the postal service is unable to deliver the payment, it is returned to the IRS.

People must file a 2007 tax return by October 15 in order to receive the economic stimulus payment this year, even if they normally do not have a filing requirement because their income is too low or not taxable. The IRS already has issued 90 percent of the economic stimulus payments but will continue to issue payments through December.

For people who filed a 2007 tax return eight to 12 weeks ago but who have not received a payment, the quickest and easiest way to track the status of the payment is to go to “Where’s My Economic Stimulus Payment?” on IRS.gov. The online tool will report when the payment has been issued. People will need their Social Security Number, their filing status and the number of exemptions claimed on their tax return to use this tool.

The IRS online tool also can report other issues, such as ineligibility because income was too high or the returning of an undeliverable payment to the IRS.

The economic stimulus payment begins to phase out for individuals whose income is $75,000 or more and for joint returns with income of $150,000 or more. To be eligible, a person cannot be a dependent or eligible to be a dependent of another person.  To be eligible, an individual must have a valid Social Security Number unless his or her spouse serves in the military. Supplemental Security Income (SSI) does not count as “qualifying income” for stimulus payment purposes.

The biggest mistake of all would be failing to file a 2007 return in order to receive the stimulus payment, especially for people who are eligible but who do not normally file a tax return because their income is low or nontaxable. People in this category can use a Form 1040A, provide a little information to complete the return and send it to the IRS by October 15. People also are urged to help friends, family or neighbors who may be in this category and unaware of their eligibility.

People who do not file a tax return by October 15 can still obtain their economic stimulus payments when they file their 2008 tax return. If they wait until next year to file, their payments will be based on their 2008 income and personal situations rather than on 2007 information.

Source: IRS.GOV

1. Use coupons
2. Buy in bulk (Costco)
3. Cut back on eating out
4. Plan ahead, cook ahead and freeze
5. Bring lunch to work
6. Buy cheaper or knock-off brand.

1. Increase your deductible – While this may save you money per month, you need to make sure that you have the money for the deductible should you have an accident.
2. Drive safely – Taking extra precautions while driving, staying under the speed limit and avoiding sudden stops and starts can help save on gas. Most insurance companies give discounts if you are accident-free for X amount of years.
3. See if you qualify for discounts – You may qualify for discounts by purchasing home and business insurance policies from within the same company.  Additionally, there are also discounts if you drive low miles, have multiple vehicles or your kids get good grades in school.
4. Reduce Coverage – Consider reducing your coverage if you are driving an older vehicle.  According to the Insurance Information Institute, it may not be cost effective to carry comp and collision on cars worth less than 10 times the amount you would pay for that portion of your coverage.  Try keeping the coverage, but raising your deductible.
5. Shop for a new provider – It’s always good to shop around every couple years.  In today’s world, there is usually a competitor out there that may give you a better deal.  Never hurts to look!

Available for a limited time only, the credit:

• Applies to home purchases after April 8, 2008, and before July 1, 2009.
• Reduces a taxpayer’s tax bill or increases his or her refund, dollar for dollar.
• Is fully refundable, meaning that the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax that they owe.

However, the credit operates much like an interest-free loan, because it must be repaid over a 15-year period. So, for example, an eligible taxpayer who buys a home today and properly claims the maximum available credit of $7,500 on his or her 2008 federal income tax return must begin repaying the credit by including one-fifteenth of this amount, or $500, as an additional tax on his or her 2010 return.

Eligible taxpayers will claim the credit on new IRS Form 5405. This form, along with further instructions on claiming the first-time homebuyer credit, will be included in 2008 tax forms and instructions and be available later this year on IRS.gov, the IRS Web site.

If you bought a home recently, or are considering buying one, the following questions and answers may help you determine whether you qualify for the credit.

Q. Which home purchases qualify for the first-time homebuyer credit?

A. Only the purchase of a main home located in the United States qualifies and only for a limited time. Vacation homes and rental property are not eligible. You must buy the home after April 8, 2008, and before July 1, 2009. For a home that you construct, the purchase date is the first date you occupy the home.

Taxpayers who owned a main home at any time during the three years prior to the date of purchase are not eligible for the credit. This means that first-time homebuyers and those who have not owned a home in the three years prior to a purchase can qualify for the credit.

If you make an eligible purchase in 2008, you claim the first-time homebuyer credit on your 2008 tax return. For an eligible purchase in 2009, you can choose to claim the credit on either your 2008 (or amended 2008 return) or 2009 return.

Q. How much is the credit?

A. The credit is 10 percent of the purchase price of the home, with a maximum available credit of $7,500 for either a single taxpayer or a married couple filing jointly. The limit is $3,750 for a married person filing a separate return. In most cases, the full credit will be available for homes costing $75,000 or more. Whatever the size of the credit a taxpayer receives, the credit must be repaid over a 15-year period.

Q. Are there income limits?

A. Yes. The credit is reduced or eliminated for higher-income taxpayers.

The credit is phased out based on your modified adjusted gross income (MAGI). MAGI is your adjusted gross income plus various amounts excluded from income-for example, certain foreign income. For a married couple filing a joint return, the phase-out range is $150,000 to $170,000. For other taxpayers, the phase-out range is $75,000 to $95,000.

This means the full credit is available for married couples filing a joint return whose MAGI is $150,000 or less and for other taxpayers whose MAGI is $75,000 or less.

Q. Who cannot take the credit?

A. If any of the following describe you, you cannot take the credit, even if you buy a main home:

• Your income exceeds the phase-out range. This means joint filers with MAGI of $170,000 and above and other taxpayers with MAGI of $95,000 and above.
• You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild.
• You stop using your home as your main home.
• You sell your home before the end of the year.
• You are a nonresident alien.
• You are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year.
• Your home financing comes from tax-exempt mortgage revenue bonds.
• You owned another main home at any time during the three years prior to the date of purchase. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another main home at any time from July 2, 2005, through July 1, 2008.

Q. How and when is the credit repaid?

A. The first-time homebuyer credit is similar to a 15-year interest-free loan.  Normally, it is repaid in 15 equal annual installments beginning with the second tax year after the year the credit is claimed. The repayment amount is included as an additional tax on the taxpayer’s income tax return for that year.  For example, if you properly claim a $7,500 first-time homebuyer credit on your 2008 return, you will begin paying it back on your 2010 tax return. Normally, $500 will be due each year from 2010 to 2024.

You may need to adjust your withholding or make quarterly estimated tax payments to ensure you are not under-withheld.

However, some exceptions apply to the repayment rule. They include:

• If you die, any remaining annual installments are not due. If you filed a joint return and then you die, your surviving spouse would be required to repay his or her half of the remaining repayment amount.
• If you stop using the home as your main home, all remaining annual installments become due on the return for the year that happens. This includes situations where the main home becomes a vacation home or is converted to business or rental property. There are special rules for involuntary conversions.  Taxpayers are urged to consult a professional to determine the tax consequences of an involuntary conversion.
• If you sell your home, all remaining annual installments become due on the return for the year of sale. The repayment is limited to the amount of gain on the sale, if the home is sold to an unrelated taxpayer. If there is no gain or if there is a loss on the sale, the remaining annual installments may be reduced or even eliminated. Taxpayers are urged to consult a professional to determine the tax consequences of a sale.

If you transfer your home to your spouse, or, as part of a divorce settlement, to your former spouse, that person is responsible for making all subsequent installment payments.

Source

• five (5) percent for overpayments [four (4) percent in the case of a corporation];
• five (5) percent for underpayments;
• seven (7) percent for large corporate underpayments; and
• two and one-half (2.5) percent for the portion of a corporate overpayment exceeding $10,000.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The interest rates announced today are computed from the federal short-term rate based on daily compounding determined during April 2008.

Source

To view the payment dates, go to the IRS website. You can also check the status if you like here.

I called the IRS about a tax related question and they said that paper checks are delayed, so if you ar going that route, be patient, it’s coming.