Selling Your Home Without the Tax
Hit If you sold your main home, you may be
able to exclude up to $250,000 of gain ($500,000 for
married taxpayers filing jointly) from your federal tax
return. This exclusion is allowed each time that you
sell your main home, but generally no more frequently
than once every two years.
To qualify for this
exclusion of gain, you must meet ownership and use
tests.
Ownership
Test: During the 5-year period ending on the date of the
sale, you must have owned the home for at least 2
years.
Use Test:
During the 5-year period ending on the date of the sale,
you must have lived in the home as your main home at
least 2 years. If you and your spouse file a joint
return for the year of the sale, you can exclude the
gain if either of you qualify for the exclusion. But
both of you would have to meet the use test to claim the
$500,000 maximum amount.
If you do not
meet the ownership and use tests, you may be allowed to
exclude a reduced maximum amount of the gain realized on
the sale of your home if you sold your home due to
health, a change in place of employment, or certain
unforeseen circumstances. Unforeseen circumstances
include, for example, divorce or legal separation,
natural or man-made disasters resulting in a casualty to
your home, or an involuntary conversion of your
home.
If you can exclude all the
gain from the sale of your home, you do not report the
gain on your federal tax return. If you cannot exclude
all the gain from the sale of your home, use Schedule D,
Capital Gains and Losses, of the Form 1040 to report
it.
Call us for
more details and information, or see IRS Publication
523, Selling your Home.
IRS Changes Business Tax Filing
Extension Internal Revenue Service announced
a change in the extended due date on certain business
returns to help individuals better meet their filing
obligations. The change, which reduces the extension
period from six to five months, eases the burden on
taxpayers who must report information from Schedules K-1
and similar documents on their individual tax
returns.
Income,
deductions and credits from partnerships, S
corporations, estates and trusts are reported to
partners, investors and beneficiaries on Schedules K-1
and other similar statements. The recipients then use
that information to complete their own tax
returns.
Currently,
the extended due date for both businesses and
individuals often falls on the same date, generally Oct.
15. This creates a burden for individual taxpayers who
rely on the information from Schedule K-1 and other
similar statements to prepare and file their personal
tax returns in a timely manner.
Note: “We are
eliminating the same-day deadline for these returns,
which causes needless hardship and puts the individual
taxpayer in an awkward position,” said IRS Commissioner
Doug Shulman. “We want to correct this timing issue to
ensure that all taxpayers have the information they need
to file timely and stay in compliance with the
law.” The IRS issued temporary and proposed
regulations that will reduce the extension of time to
file tax returns for certain businesses that generate
Schedules K-1 and other similar statements from six
months to five. Requiring these statements to be issued
one month earlier, generally by Sept. 15, will provide
recipients time to prepare and file returns within the
extended time frames.
This change
will be effective for extension requests with respect to
tax returns due on or after Jan. 1, 2009, and applies to
business entities that file the following returns and
forms that have a tax year ending on or after Sept. 30,
2008:
Form 1065,
U.S.Return of Partnership Income Form 1041, U.S.
Income Tax Return for Estates & Trusts Form 8804,
Annual Return for Partnership Withholding Tax (Section
1446) The regulation does not change the process for
requesting an extension of time to file, nor does it
affect extensions of time to file other types of
business returns, such as those used by S
corporations.
The IRS
initiated the proposal to reduce the extension of time
to file, carefully weighing the impact on partnerships
and other affected entities against the burden the
existing deadline puts on individuals, who need this
information to file timely and accurate
returns.
What
to do if You Haven’t Filed Your 2007
Return
The failure
to file a federal tax return can be costly — whether you
end up owing more or missing out on a refund.
Getting it
done for the 2007 tax year is important because in order
to receive your 2008 Economic Stimulus Payment this year
you need to file a 2007 federal tax return by October
15, 2008.
There are
several reasons taxpayers don’t file their taxes.
Perhaps you didn’t know you were required to file.
Maybe, you just kept putting it off and simply forgot.
Whatever the reason, it’s best to file your return as
soon as possible. If you need help, even with a late
return, the IRS is ready to assist you.
Here are some
things to consider:
Failure
to File Penalty. If you owe taxes, a delay in
filing may result in a “failure to file” penalty, also
known as the “late filing” penalty, and interest
charges. The longer you delay, the larger these
charges grow.
Losing
Your Refund. There is no penalty for failure
to file if you are due a refund. However, you cannot
obtain a refund without filing a tax return. If you
wait too long to file, you may risk losing the refund
altogether. The deadline for claiming refunds is three
years after the return due date. Further, this year to
receive the Economic Stimulus Payment, you must file a
2007 federal tax return by October 15, 2008.
EITC. Individuals who
are entitled to the Earned Income Tax Credit must file
their return to claim the credit even if they are not
otherwise required to file.
Whether or
not you must file a tax return will depend upon a number
of factors, including your filing status, age, and gross
income.
Please call
us for more information on how to file a tax return for
a prior year.
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