Loan Modification Basics, Part I

Has your home lost 30 to 50% of its value in the last four years?   Did the mortgage company re-set your payments higher beyond your ability to afford the payments?  Do you want to remain in your home and not lose it in a foreclosure or short sale?  If you answered yes to the above questions, you may qualify for a Loan Modification or Loan Mod.

A Mortgage Loan Modification is a modification agreement that the bank makes with the borrower to adjust the loan payments down to an affordable amount that the borrower can afford on a monthly basis. The program keeps the borrower in the house, thus eliminating the need for foreclosure thereby reducing the amount of money the bank needs to write down on the loan. 

“Loan Modification Basics” is a two-part series that will attempt to explain what the banks are looking for when they approve a borrower for a loan modification and what steps the borrower must take to get the Loan Mod done.  The first posting in the series will explain scenarios that are likely to be approved, while part two will detail what it takes to get the modification approved.

I first heard about loan modifications in the fall of 2008.  The numbers of foreclosures were jumping dramatically.  Banks were losing hundreds of thousands of dollars as real estate values dropped and more homeowners were underwater. 

The problem was that the banks had not established a program for handling the Loan Mod requests and wound up declining or stringing along borrowers who would be ideal for a Loan Mod program.  The banking industry found itself in a public relations nightmare.  Foreclosures were rising and losses were mounting at a furious pace while the sentiment in the media was that the banks were getting exactly what they deserved.  President Obama was urging banks to work with borrowers to keep them in the house, but they appeared to be dragging their feet.

Compounding the problem was a lending culture that believed, maybe rightly so, “Why should I reward a borrower who is 90 days past due with principal balance reduction, lower interest rates and payments?”  The banking industry, realizing the quandary it was in, began working with more borrowers by the Summer of 2009.  A $200K loss in a foreclosure or short sale might be a write-down of a $100K for the right borrower in a loan modification program. 

A couple weeks ago, I noticed a surprisingly high number of tax clients who paid 30 to 40 percent less mortgage interest in 2009 when compared to 2008.  Upon questioning the clients as to the difference, all but one said that they had successfully modified their mortgage loan.  It seemed like the mortgage holders were finally coming to grips with the reality of the market.

The most common question is, “How can I find out if I might qualify for a loan modification on my home?”  The bank that holds the deed to your property will make the decision regarding your loan modification.  Fortunately, for “Credit This!” readers, I will attempt to illuminate the factors banks consider when making a Loan Modification decision.

To determine if you can qualify for a Loan Mod, you need to identify the situations and circumstances that have little or no chance of being approved for a Loan Modification.

• If you can afford your mortgage payment, and your income has remained steady or increased, you probably will not be approved for a Loan Mod.

The bank and government programs designed to assist borrowers with loan modifications will require you to provide proof of financial hardship.

Other factors to consider before applying for a loan modification:

Do you have lots of equity in your home?  Don’t waste your time or the bank’s time by applying for a Loan Mod.  If the bank can pay off your mortgage through a foreclosure sale, it will sell your house and move on.  Banks are much more likely to work with you if you owe more on the loan than what the property is worth.

• If you have little or no income, you will not be approved for a Loan Mod. 
• Lets’ say you are paying $2,500/mo on your 1^st mortgage with a loan balance of $450,000 and the bank is willing to forgive $100k in principal and lower your monthly payment to $1500/mo.  If you are making $2,000 per month on unemployment, don’t expect to be approved for a Loan Mod.  You still cannot afford a $1500 per month mortgage payment along with all the other expenses one incurs.
• Do you have a rental or investment property going bad? You probably will not find much sympathy for your plight.  Expect the bank to foreclose on your home.

The one grey area is the status of your loan payment.  A year ago, a borrower had to be 90 days past due before the mortgage holder would consider a Loan Mod.  Today, banks are entertaining modifying loans of borrowers who may be 30 or fewer days past due if the circumstances of the situation make sense.

Now that we highlighted the factors that will disqualify you for a Loan Modification, we will touch on some of the criteria necessary to be approved for a Loan Mod. 

• Most banks will look for borrowers who have all-inclusive debt ratios between 38 and 45 percent.  This means that the monthly payment on all your debt cannot exceed 45 percent of your gross income.  The federal HAMP loan modification program may qualify borrowers up to a 52% debt ratio.
• The federal government requires that your mortgage loan balance is less than $729,750 to qualify for the Making Homes Affordable Program.
• Do you have a toxic loan?  Does your loan balance increase each month due to the minimum interest payment being less than the monthly-accrued interest on the loan balance?  If so, your chances of qualifying for a Loan Modification are greater as the banks are looking to mitigate the exposure these loans add to its loan portfolio.

If you find yourself in financial hardship and are worried about staying in your home, you are, at the minimum, better informed and educated on the criteria banks consider when making a decision regarding Loan Modifications.

Part II of this blog series will provide an overview of the Loan Modification process.  If you are contemplating tackling the loan modification process on your own or are curious as to what is required to get approved, don’t miss my next blog titled “Loan Modification Basics” Part II.

Taking a Stoll down Memory Lane in Marin County

Valentine’s Day 2010 was one of my most memorable to date, yet not for reasons anyone would guess.  I did not spend the day with my wife, children or friends.  On the contrary, I spent most of the day alone, traveling back in time to my childhood in Marin County, California.

Have you ever had a time when you wanted the traffic to slow down, to find yourself stuck behind a vehicle making a left turn waiting for an opening in the oncoming traffic?  Just so, I had a few moments to survey the landscape and people outside my car window.  Valentine’s Day 2010 was such a day for me.

Marin County has garnered itself a reputation over the years.  In the 1970’s, Marin County was known as the land of hot tubs made famous in the 1980 movie “Serial”.  Mountain biking also came into being around the same time in the 1970’s near Mt. Tamalpais.  Marin is home to affluent left-wingers who use their influence and money to buy up land and create open space for public use.  I remember elementary school in the 1970’s… being taught to recycle and getting my parents to bring aluminum and tin cans to local recycling center.

My trip began on Highway 37  heading west from Vallejo to Marin County.  The mostly sunny, 65 degree Valentine Sunday held promise of a trip down memory lane. 

After passing over the Sonoma River and entering Marin County, the highway rises above Black Point into low-lying Oak and Madrone wooded hills.  Veering to the left, the highway quickly opens up a panoramic view that is breath-taking in its beauty.  Descending from the hills into level farmlands carved from San Francisco Bay’s abundant wetlands, Big Rock Ridge stands majestically dead ahead while off to the left Mt. Tamalpais stands sentry over the land connected to San Francisco by the Golden Gate Bridge.

 Imagine carrying a secret… the same secret that many residents who grew up in Marin carry, but not really knowing what the secret is.   Saying I am from Marin meant something special to those in the know.  It was like being in a club that required no explanation to its members while no explanation was possible to non-members.  It was a state of mind as much as a place to live. 

Residents of nearby counties either admired or resented life in Marin and those who live there.  Marin locals give little thought to what outsiders may think and feel about them.  A common attitude might be, “I live in the best, most beautiful and open-minded place in the country, I don’t have time to worry about what other people think about my home.”

 The abundant rain of the last four weeks had transformed the hills to a shimmering shade of hunter green, triggering memories of spring times gone by.  Upon crossing the county line into Marin from Sonoma County, my mood unexpectedly shifted from watchful anticipation to uninhibited delight.  It was as if the county line triggered a narcotic that began to kick in as I ventured towards my hometown.

I had not spent any time in my home town of San Rafael since the old neighborhood celebrated its thirty-year anniversary in 1994.  My parents moved from their home in Marin’s northern most town of Novato in April 1996 marking the end of my connection to Marin County.  I left behind fond memories that were slowly crowded out by life moving forward.   

As I merged on Highway 101 South in the town of Novato, I noticed how much the trees had grown in the ensuing years.  101 felt almost snug as I dropped down into Terra Linda.  Lincoln Avenue exit in San Rafael came up sooner than I expected.  Heading South on Lincoln, I felt as if nothing had changed.  San Rafael and most cities in Marin County have severely limited growth and encourage the preservation of all buildings.

Driving West on Sir Francis Drake Boulevard I came to my first stop of the day in Fairfax.  A few miles West of San Rafael, Fairfax was a regular weekend night hangout for my friends and I back in the late 1980’s.  Most nights live music could be found at local bars and clubs.  My favorite, 19 Broadway is still open.

Fairfax has been Marin County’s counter-culture soul for as long as I can remember.  The 1960’s hippie culture still influences the downtown business area but it has adapted to the times.  The earthy 1970’s vibe of indifferent disrepair has evolved into a commercialization of the counter-culture ethos with one noticeable change.

Marin County has fully embraced the cycling culture and bicyclists have the right of way.  Mountain biking was born in the 1970’s just outside the Fairfax town limits.  Fairfax lies at the Northwestern base of Mt. Tamalpais, Marin County’s spiritual center and mountain biking Mecca.  The mountain has attracted hikers, bikers, sightseers, spiritual seekers, and many others since the 1940’s.

Capitalizing on the bike culture of the area is a new establishment named Book Ends on Bolinas Road.  The airy establishment is adorned with varnished wood benches and tables.  European and west coast micro beers are the featured refreshments.  The food menu is sparse.  The hot potato salad is definitely worth a visit. 

This work in progress still has a way to go before its wooden bookshelves are full enough that it can live up to its advertised name, “Book Ends”.  The coolest aspect of this place is that cyclists can bring their bikes inside and hang them on the wall or keep them nearby their table, room permitting.  I like the unusual idea of books and bikes, and hope this place has a long life.

The next stop was in San Rafael or more specifically Terra Linda.  Surrounded by hills on three sides and Highway 101 on the other, Terra Linda has changed little since the 1970’s.  Real Estate is unavailable for new construction and tearing down old buildings for new is rarely approved. 

Terra Linda is the community where my parents raised my brother and me.  Driving her quiet streets brought back memories of walking to and from school, riding my bike with friends, playing whatever sport was in season, and exploring the hills that surround the community.  The peace and quiet of Terra Linda was deafening.  Where are all the children playing in the streets?  They had probably grown up and moved on as I have. 

The public elementary school I attended closed years ago while Vallecito Middle School became the new elementary school.  The cost of housing has risen over the years making the community unaffordable for most young families.

Terra Linda has a small mall and retail section that has changed little over the years.  It dawned on me that Terra Linda is a nice quiet place to live, but not a place to visit unless you know someone there.  One reason many of the kids left, besides the cost, is that there is not much to do. 

Elda Drive in Terra Linda is a split-level street carved out of the side of a hill.  My old house has a slight view of San Pablo Bay in the distance.  The subsequent owners of the house my parents bought in 1971 have taken excellent care of the outside and upgraded the roof, garage door and drive way to the point where the house seemed unfamiliar.  A few of the old neighbors still live on the street but I did not see one kid playing outside.

Next stop was the old neighborhood grocery store.  Scotty’s market squeezes a lot of product into a small space.  Walking up and down the aisles seemed remotely familiar.  I purchased an energy drink and proceeded North on Las Gallinas Ave to Marinwood.

Breezing through Marinwood, I entered Hwy 101 North, exited in Novato, and had a late lunch at Moylan’s, an excellent spot for microbrew and better than average food.  I surveyed the crowd looking for a familiar face and found none.  I did not have anyone in mind  so I did not expect to see anyone from my past.

After a leisurely lunch, I drove around Novato making sure to pass by my parent’s old house.  A couple of McMansions had been erected nearby, otherwise everything else seemed unchanged.  The sun was sinking low in the West and I decided to check out my old hiking spot before dusk set in.  I parked at the base of Mount Burdell on San Andreas Avenue and walked briskly up the hill to the first meadow that appears.  I took a moment to take in the scenery before heading back to Vallejo.

The drive to Marin felt like having lunch with a friend whom I have not seen in years.  You relive pleasant memories share a laugh or two but realize a tinge of sadness is also present.  Both of you have moved on with your lives and things will never be what they were.   Thanks for the memories.  We will try to keep in touch but life keeps moving on.

Not All Bad Debt is Treated Equal

The year 2009 was a challenging one for many.  Maybe you lost your long time job joining millions of others who suffered the same fate.  Maybe you gave up your home of five years after the interest only mortgage you secured when you purchased the home re-set the payments higher than you could afford.  Any way you look at it, 2009 was a difficult year for millions of American citizens.

If you thought, bad credit was the only consequence of bad debt you were probably a little surprised when the IRS form 1099-C showed up in your mailbox on the last day of January.  Not sure, what the 1099-C form was you performed an internet search to find out what was up.  Upon discovering you have to pay taxes on the entire loan balance your creditor wrote off in the prior year, no one would fault you if you missed the following day of work due to a sudden onset of illness.

The Cancellation of Debt form (1099-C) discloses the name of the creditor, the date the debt was cancelled or charged off, the amount of debt that was written off, a description of the debt, and a check box stating if the borrower was liable for repayment of the debt.

Creditors will send you a 1099-C form after they charge off your credit card debt.  Did the bank snatch your auto in the middle of the night because you defaulted on your loan payments?   If so, expect a 1099-C in the loan amount left over after the bank applies the proceeds from selling your repossessed vehicle at auction.  Did you stop making payments on your secured and unsecured installment loans?  Your budget may have received a temporary reprieve when you stopped making payments, but the tax refund you were counting on in March of this year may turn into a tax bill after adding the dollar amounts of those charged off loans to your taxable income. 

The dollar amount on the 1099-C is treated as taxable income and is posted on-line 21 of your federal tax form 1040.  Expect to receive a 1099-C on all bad debts over the amount of $600.

Now let us look at the largest debt most of us ever incur, our mortgage.  If financial hardship hits and we are unable to afford our mortgage payments, the mortgage default ultimately results in foreclosure.  A foreclosure is the term used to describe the bank using legal means to kick you out of your house and sell it at auction for as much money as it can get.  If they cannot sell it for as much as you owe on the house, you will get a 1099-C in the amount left on the loan after the bank applies the foreclosure proceeds to your loan balance. 

A short sale is preferable to foreclosure and occurs when the outstanding loans against a property exceed the market value of the property. Short sales are a way for homeowners to avoid foreclosure on their homes and still be able to pay off their loan by settling with lender.  The lender may allow you to sell the home for less than the amount you owe on the mortgage but not without consequences.  Your credit will not show paid as agreed,  the desired credit rating, but will disclose the bank settled for less than full balance with the borrower.  The second adverse action you will deal with is a 1099-C stating that you be required to pay income tax on the loan amount that was not paid off from the sale of the property.

The federal government anticipating the rise in foreclosures and the inability of consumers to pay for the taxes they would incur by including unpaid mortgage balances in their taxable income, provided relief to the consumer in 2007.  The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.  The act allows married couples to exclude up to $2 million in debt if their primary residence is sold at a foreclosure auction.  The debt relief exception will be in effect until 2012.

What if my rental property or my vacation home is foreclosed on, what relief do I get?  No residential property other than primary residence is included in the Mortgage Debt Relief Act of 2007.  A 1099-C received on a rental property will be counted as taxable income.  The only option other than paying the taxes is to file bankruptcy.  The debt will be treated as unsecured debt and should be completely wiped out in a bankruptcy chapter 7. 

The Federal government’s temporary leniency in waiving income tax on bad debt incurred in the foreclosure or short sale of a taxpayer’s primary residence should not be taken as an invitation to blow off disclosing other 1099-C bad debt.  The federal deficit is reaching new heights, as is the number of federal government employees.  IRS agents are federal employees and their numbers are increasing.  The sense of urgency to scrutinize tax returns and collect taxes is rising.  If you are audited, IRS agents will not find it humorous if you tell them the dog ate my 1099-C as your excuse for not disclosing taxable bad debt as income.  Do it right the first time!

For more information on “The Mortgage Debt Relief Act”

http://www.irs.gov/individuals/article/0,,id=179414,00.html

Shooting on Springs Road

“Credit This” is a blog dedicated to individuals and their finances and the macro-economic issues that affect all of us.  Most of the middle class is working hard to take care of their obligations while setting aside money for the future.  Some communities have a few residents who are antithetical to middle and working class values and engage in activities that rip at the social fabric that holds a community together.  Yesterday afternoon, Wednesday the 4^th, a tragic incident unfolded one block away from my office in the Springstowne section of Vallejo, California.  My compelling need to comment on this tragedy is a detour from the usual subject matter.

Wednesday afternoon was like many afternoons at the tax and accounting office where I work except the anticipation of the tax seasons onslaught of business hung heavy in the air.  Traffic on Springs Road was heavier than normal and exuding anxiety.  My colleagues and I at EPS stepped outside the front door and wondered why the police had closed Springs Road at the intersection of Castlewood Boulevard.  We figured another automobile accident had occurred and the police needed to sweep up the pieces of vehicle that littered the street.

At 2PM that afternoon, I was out the door looking forward to re-energizing on my lunch break.  Immediately I noticed Springs Road was still closed.  Police tape stretched from the chain link fence of Springstowne Junior High across Springs Road anchored by the metal post holding the street sign at the corner of Springs and Castlewood Boulevard.  A crowd had begun milling about.  A vibe of morbid fascination emanated from the crowd.  I was wondering why the ambulance one block down was still parked on the side of the street.

Forty minutes later, I walked down Castlewood towards Springs Road and could not believe the size of the assembled crowd.   The group consisted primarily of middle and high school students but was well represented by late teen early 20 something young men who made sure you knew this was their neighborhood.  A couple of high school girls gyrated to the middle schools drum line team who was practicing 200 yards behind the chain link fence on the other side of the street. 

I slowly yet purposefully walked behind the crowd towards the office, sensing something about this whole scene did not feel right.  Why has the road been closed for over two hours?   I stopped a 50 something male with a dark brown and silver-colored ponytail walking away from the crowd and asked him what is going on.  In all seriousness, he looked right at me and said, “This is not an accident, a couple of kids shot the ice cream lady”.    “Shot the ice cream lady”, I proclaimed, “What are you talking about”?  I could not wrap my brain around what had just been said.

A moment later it dawned on me, the ambulance parked on the side of the road was not an ambulance.  I weaved my way through the crowd towards the police tape until I could read the back of the truck parked on the side of the road.  It read “Ice Cream”.  It is interesting how the mind sees what it wants to see.  I repeated over and over to myself, “THE ICE CREAM LADY, HOW CAN YOU SHOOT THE ICE CREAM LADY”. 

I hustled back to the office and broke the news to my stunned colleagues.  Their shocked yet partially disbelieving expressions spoke more than any words could have.  Within this moment of distorted time, one by one each of my office mates asked the same question, “WHAT KIND OF A PERSON SHOOTS THE ICE CREAM LADY”?  The absurdity of the question begged a punch line that was not to follow leaving an uncomfortable silence in its wake.

The local TV stations representing ABC, NBC and one other parked their white vans across the street raising their satellite uplink antenna nearly twenty feet into the sky.  Do the tech guys ever get uplink envy?  The scurrying reporters with their cameramen in tow reminded me of the nature shows that display the habits of the hyena looking to push and shove their way to get the meat that some other predator had killed hours earlier.

A client of ours who arrived for his tax appointment around 3:45PM was silent as the other clients and EPS employees carried on about the shooting of the ice cream lady.  Shortly after 5:00PM, our client had finished with his business and was ready to leave.  I approached him, thanking him for the business and prompted him for his take on the shooting.  He went on in detail of the scene described by his friend who is a Vallejo police officer who was called to the scene where the ice cream lady was gunned down.

The Vallejo police officer told our client the victim had been shot twice in the chest at close range, most likely for the money she had in her van.  She was rushed to John Muir hospital in Walnut Creek and would probably survive.  The suspect is a teenage boy of Hispanic descent.  He ran through the hot dog store just down the street and was caught on the security camera.  On Thursday the local newspaper had a still shot of the suspect, taken from the security camera, running through the store.  The suspect remain at large.

 Rachel Raskin-Zrihen of the Solano Time Herald reported Two people who identified themselves as acquaintances, said the woman is a 39-year-old widow originally from India with three teenage children.   http://www.timesheraldonline.com/ci_14331553

 In the 1980’s and 90’s the Springstowne area of Vallejo had been a somewhat edgy yet vibrant working class community.  The kids in low-rider trucks were cruising Springs back in the day.  In the last few years, this part of Vallejo has been deteriorating.  Crime has been on the rise and longtime local residents do not feel safe.

 How could this kind of brazen crime happen in broad daylight on Springs Road?  Who would shoot the ice cream lady?  In 2008, the city of Vallejo filed bankruptcy in large part due to labor costs.     http://www.bloomberg.com/apps/news?pid=20601103&sid=atl3yFmV508A

The Vallejo police force has been reduced from 150 members to around 100, due to budget cuts.  Is the criminal element feeling embolden with less police presence.  Neighborhoods do change; maybe the decline of Springstowne was inevitable.  Whatever the cause the people in the community feel vulnerable. 

Thursday morning I arrived at work ten minutes early.  I walked one block down the street to the scene of the crime.  A make shift memorial had been haphazardly erected.  I felt empty until I looked up at the business in front of the crime scene.   A red neon open sign caught my attention.  The name on the storefront read Reigned Preschool.  I felt sick.  What if the children saw the ice cream lady…?

Tax Tips from Credit This!

Income tax season is upon us and as in most years the federal government and the Internal Revenue Service have made some changes for the coming 2009 tax season that will affect many income tax filers.  Filing taxes can be a very stressful time of the year.  Whether remembering all of the forms and documents you need to bring to your tax preparer or wondering if you will have to pay more than you expected, uncertainty raises anxiety.

“Credit This” hopes to inform and educate the tax paying public on recent changes and take a little of the mystery and misery out of the process.  If you can walk into your tax interview more confidently and better informed, the better chance you will have to maximize your refund or minimize the amount you owe to the IRS.

The “First Time Home Buyers Tax Credit” has been well publicized by the media and helped to increase home sales across the country.  The Obama administration and the federal government intended to stimulate the real estate market by offering first time buyers an $8,000 tax credit and qualified repeat buyers a $6,500 tax credit.  Unfortunately the IRS was not prepared to handle the credit in the way tax payers may be accustomed.  Most taxpayers file their returns electronically, but if you are claiming the “First Time Buyers Tax Credit”, forget about e-filing.  The IRS requires all tax payers claiming this credit to send their return in by mail.  Need your money quickly, not happening.  If you file your return in the next week,  your refund check is not expected to land in your mail box until the end of March.

Unemployment skyrocketed in 2009.  Many friends of mine lost their job, even I lost my job of thirteen years.  Many expenses incurred while searching for are tax-deductible.

Job hunting costs are a miscellaneous itemized deduction and are subject to a 2% Adjusted Gross Income limitation.  You can generally deduct employment and outplacement agency fees, resume preparation fees, mailing costs, travel expenses for job search and interviews.

Did you attend job search network meetings in 2009?  The standard business mileage rate of 55 cents per mile applies for job seekers looking for employment in the same industry.

In most cases COBRA insurance lasts for 18 months.  The federal government is generally covering 65% of the cost for your health insurance premiums.  Health insurance premiums paid pre-tax through your employer are not tax-deductible.  COBRA insurance premiums paid out-of-pocket are tax-deductible, subject to 7.5% of gross income threshold.

Unemployment compensation received in 2009 is taxable above $2,400.  If you have qualifying children and your earned income was below $43,279, $48,279 married filing jointly, you may qualify for the Earned Income Tax Credit.

On February 17, 2009 President Obama signed “The American Recovery and Reinvestment Act” into law.  This one time stimulus program gave a one time payment of $250- to individuals receiving Social Security, Railroad Retirement and pension benefits.  The “Making Work Pay Credit” allows individuals a credit of 6.2% of gross income up to a maximum $400- and $800- to those married filing jointly.  To qualify for this credit your adjusted gross income must be under $95,000($190,000 married filing jointly) for the year.  You will use the newly created Schedule M to claim this credit.

Before 2009, only a few states allowed tax-payers to deduct the sales and excise taxes on the purchase of new motor vehicles.  The Federal Government hoping to pump up sales in the U.S. auto market is allowing tax payers in all 50 states to write off the sales tax paid on all new vehicle purchases.  To qualify, the vehicle must have a gross weight of 8,500 or less be used by the original purchaser.  The deduction includes motor home purchases and is subject to income restrictions.  The amount of tax you are able to deduct is limited to the first $49,500 of the vehicles purchase price.

College students and parents of college students have a new education credit to consider this year.  Under the American Recovery and Reinvestment Act (ARRA), more parents and students will qualify for a tax credit, using the American Opportunity Credit, to help pay for college expenses.  The AOC is a modification of the Hope Credit for the tax years 2009 and 2010 and it expands the number of individuals who qualify for the credit.  The credit now includes required course materials to the qualified list of expenses and allows the credit to be claimed for four years instead of two.  Many of those who are qualified will be able to claim a credit of $2,500- per student.

American’s led the world in disaster relief once again, this time in Haiti.

“Americans have opened their hearts to help those affected by the Haiti earthquake,” says IRS Commissioner Doug Shulman in a news release.” This new law provides an immediate tax benefit for the many taxpayers who have made generous donations.”

Cash contributions made between Jan. 12, 2010 and March 1, 2010 to organizations involved in Haiti relief are eligible.  Text-messaging donations are eligible also, but make sure to save your phone bill.  Check the IRS link for approved organizations.  http://www.irs.gov/charities/article/0,,id=96136,00.html

Make sure to bring all W2’s, 1099’s, social security cards, drivers license and your prior years tax return to your tax appointment.  Other documents will be required, contact your tax preparer for a complete list.  Many other changes were made for the tax year 2009, but my space and time are limited.  Remember, knowledgable tax payers get larger refunds.  If you have to pay this year, you chance of paying less is higher the more educated you are.

For more information click on link.http://www.irs.gov/formspubs/content/0,,id=178012,00.html

Jeff Hubbell has been a licensed tax preparer for 15 years.  Check with your tax preparer for the information that is applicable to your situation.