The time for a credit check up is NOW.  When you find errors on your credit report, you need to have some time for the corrections to be recorded and for the credit building actions you take to have a positive impact on your scores. 

With the 2009 income tax filing date so close to the homebuyer’s tax credit date and all the talk about “taxes” right now,  we went to CPA Janet Davis of Trusted Advisors Consulting to get the facts.  Ms. Davis has over 15 years of experience and works with clients in several states.

Who is a first time homebuyer?

For the current tax credit, first time homebuyers are defined as someone who has not owned a home in the past three years.  If a first time homebuyer enters into a contract to purchase a home by April 30, 2010, and the purchase closes by June 30, 2010, the homebuyer can qualify for up to an $8,000 federal income tax credit.  

NOTE: If you are a qualifying first time homebuyer and you purchase your home in 2010, you can claim the tax credit on either your 2009 or your 2010 income tax return.  If you’ve already filed your 2009 return, you can amend that return to claim a refund, says Ms. Davis.

Are you a long time homebuyer?

A long time homebuyer is someone who has owned a home for at least 5 out of the last 8 years and decides to purchase a new home.  They can qualify for long time homebuyer’s tax credit.  Like the first time homebuyers credit, the long time homebuyer’s credit of up to $6,500 is also available for homes in contract by April 30, 2010 that close by June 30, 2010.  The long time homebuyer’s credit can also be claimed on the 2009 or 2010 income tax return, and the 2009 return can be amended to claim the credit.

NOTE: High income taxpayers do not qualify for the credits.  The Internal Revenue Service (IRS) article provides information on the income limits for this tax credit and your tax advisor can help you determine your eligibility.  

MILITARY AND FEDERAL EMPLOYEES
The tax credit may be extended for one year for certain active military and federal employees currently serving overseas.  The IRS provides some information here.  Again, check with your tax advisor to learn more.

The Homebuyer’s Tax Credit will be beneficial to many tax payers.  Be sure you are working with a team of licensed and experienced professionals.  Your realtor, lender and tax advisor can guide you to a happy home purchase that gives you full benefit of all that the current market and regulations have to offer.

Thank you to Janet Davis of Trusted Advisors Consulting for sharing her expertise.

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A few follow up points from that article:

Be sure to get everything in writing.
This includes the negotiated amount and how it will be reported on your credit report before you send any money to the company.
Keep all records, statements and copies of cancelled checks even after it's paid off.  We've seen items pop back up on credit reports a few years later and having the paper trail as proof for yourself is invaluable.

Stay out of debt.
Once you've paid everything off, don't charge accounts back up again.  If you do, the likelihood of another successful debt negotiation is very slim.  Stay debt free and start saving for your future.

Be aware of tax consequences.
The Internal Revenue Service (IRS) says that if a debt you owe is canceled or forgiven, other than as a gift or bequest, you must include the canceled amount in your income.  A debt includes any indebtedness for which you are liable or which attaches to property you hold.

That’s because a little known detail on last year’s law was that Americans could use either their 2007 OR their 2008 tax return for eligibility.  You can read the full article here for complete details.

The Internal Revenue Service did post some reminders for people to help avoid recovery rebate credit confusion when completing their 2008 tax returns.  Part of it involves knowing exactly how much you received last year.  They have a handy and quick form to fill out that can show you the exact amount of the check you received.

Meanwhile, the IRS says that last week’s economic stimulus won’t have much impact on 2008 tax filings.  The majority of tax implications from the bill will be helpful when we file our 2009 taxes next year, such as being able to deduct state and local taxes on certain new vehicle purchases in 2009.

We are providing this information because we have many people contacting us with questions about how to use their tax refund most effectively to improve their credit scores.  We’ll be talking about tips and strategies to do just that throughout the week; be sure to subscribe to get the latest articles delivered directly to you. 

WHY IT MATTERS
Typically, the federal tax lien comes first; it must be paid off and released before any new loan can be taken out on the property.  This can prohibit the refinancing of a mortgage for someone who is in economic distress and facing the possibility of losing their house.  It can also be a hinderance for the short-sale of a property.

HOW IT HELPS
For homeowners who must refinance their existing loan, or sell their property for less than the amount currently owed, to avoid foreclosure, having the tax lien issue resolved quickly can make the difference in keeping or losing their home.  Anyone with a tax lien and a mortgage should read this article in its entirety to see if and how it may affect you.

There are currently more than 1 million federal tax liens outstanding that are tied to both real and personal property.  Tax liens are public record and often show up on credit reports when they are filed.  They have a negative affect on credit scores.  They are not always updated after they are paid off or released.  It is important for consumers to keep all paperwork associated with paying off a lien and to check their credit reports regularly to be sure the information is reporting accurately.

Therefore, if you did not qualify for a check or did not receive the maximum amount, you may be able to with your 2008 tax return that will be filed in 2009.   According to an Internal Revenue Services spokesman, the IRS website will have details, tools and a worksheet to figure out your stimulus amount.

Additionally, some people who were eligible this year haven’t received their check due to an incorrect mailing address.   You can update your address information with the IRS to get your stimulus or tax refund check mailed. 
NOTE: You should update your address by November 28, 2008 as checks are to be mailed by December 31, 2008.

The Wall Street Journal reported that over 380,000 checks were returned to the IRS by the U.S. Postal Service due to mailing address errors. 

As the nation continues to feel the effects of economic turmoil, making sure you get all the money you are entitled to is a great way to help your personal Financial Fitness.  You can add a credit checkup to your Financial Fitness routine with your personal Credit Analysis to make sure your credit rating is the best it can be.