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Mortgage News

The Fed Finally Gets Something Correct

The Federal Reserve has launched a new website that shouldbe bookmarked by everyone.  Finally thereis a website that is a good resource for credit related information that doesnot try and sell you anything; nothing, no related services, no underlying adrevenues, purely informational and completely trustworthy.

The Consumer’sGuide to Credit Reports and Credit Scores is a well planned, easy to understand website that deserves high praisefor the government.  As the site says:

Your credit history isimportant to a lot of people: mortgage lenders, banks, utility companies,prospective employers, and more. So it’s especially important that you understandyour credit report, credit score, and the companies that compile thatinformation, credit bureaus. This site–maintained by the Federal ReserveBoard–provides answers to some of the most common, and most important,questions about credit.

Here are what I believe to be some of the highlights of thewebsite:

• Getcopies of your creditreport— then make sure information is correct. The site tells you how.

•Understand how your credit score is determined. The new site tells you.

• Learnthe legal steps to take to improve your credit report. Again, the informationis online.

• Bewareof credit-repair scams. The web site keeps you up to date.

• Thewebsite offers step-by-step instructions to help you correct an error on yourcredit report — not an uncommon job for credit-active consumers.

The siteis new and fresh with the latest government regulations dovetailing into yourresponsibilities, indicating it’s not just up to the law to make sure creditorsdo the right thing.

Tax Tips for Real Estate Agents

I have a great accountant. He works with a lot of real Estate Agents and he sent me this information yesterday. I thought it might be usefull for all of my Real Estate Agent partners as the year is quickly coming to an end!

Real Estate Agents are Self-Employed

As a realtor you are considered to be a self-employed, independent contractor. See also the Statutory Nonemployees section.

That means making quarterly estimated income tax payments since you will be paid gross commissions generally without taxes being withheld. Failure to pay sufficient tax estimates in a timely manner could lead to costly IRS and state penalties.

You will be required to pay federal self-employment taxes (ie. Social Security taxes which equal 15.3% of net income). In addition, you will still have to pay federal and state income taxes.

Being self-employed, you will be able to deduct expenses, some of which you may not get the benefit of … if you were an employee.

Statutory Non-employees

Licensed real estate agents are statutory nonemployees and are treated as self-employed for all Federal tax purposes, including income and employment taxes, if:

Substantially all payments for their services as real estate agents are directly related to sales or other output, rather than to the number of hours worked.

Their services are performed under a written contract providing that they will not be treated as employees for Federal tax purposes.

Straightforward Deductions

A few expenses directly related to your work, include marketing costs, such as advertising, flyers, signage and other promotional materials. Other items in this category are professional fees, such as Realtor fees or errors and omissions insurance, professional dues and licenses, MLS fees and continuing-education classes or seminars.

If you pay desk fees at your office or need to purchase computer equipment, software or office supplies, some or all of those costs might be deductible, along with expenses associated with the business use of your cell phone or your camera.

Auto Expenses

As a realtor, one of the major expenses you can deduct is the business use of your car. You may deduct either the standard mileage rate or actual expenses for the amount of business use. Standard mileage is a flat rate of 55 cents per mile.

The miles you drive in the course of your work are deductible, but there are a couple of ways to figure this deduction. One way is keep track of your work-related miles, separating them from miles driven for personal reasons, and use the IRS’ mileage rate to determine the amount to be deducted. Actual tolls and parking can be added to the standard mileage deduction.

The other option is to document the actual cost of insurance, gas, repairs and maintenance, then determine the percentage of the time your car was used for business and deduct that percentage of the costs. Tolls and parking can be added.

The depreciation and Section 179 deduction, which allows you to take all or a portion of the business cost of a qualifying vehicle in one year as opposed to depreciating over multiple years, is limited based on vehicle type and business use percentages.

Employ Your Child

Do you have a child under the age of 18? If so, you may be able to save some taxes by employing your child. There’s a special loophole that exempts children of self-employed individuals from paying social security, medicare, and federal unemployment taxes on wages paid by a parent.

As of 2008, as long as your child is under the age of 18, you can pay him or her up to $5,450, and your child won’t owe any income taxes on that money (assuming they have no other income). Even so, you get to deduct the wages paid as a business expense. Plus, your child can fund an IRA or Roth IRA with up to $4,000 this year based on the wages paid by you.

Now’s the time to set yourself up with the IRS as an employer if you haven’t previously done so, and to compensate your child a “fair wage” for services provided during the year. Your child needs to actually perform a realistic service for the wage you are paying.

As of 2008, if the W-2 is in excess of half of the child support outlays during the year, it could break the student free of the kiddietax. Accordingly investments in the child’s title can be liquidated at the child’s lower tax bracket.

Kiddie Tax

Reducing Income Taxes. Usually, children (especially minors) are subject to lower tax rates than their parents. In this case, shifting taxable income away from the parents and to their children could be an effective way to lower the family’s tax burden. Many income-shifting strategies were effectively killed by the “kiddietax,” It taxes the unearned income (non-wage income) of children and taxes them at their parent’s marginal rate. Fortunately, wages are earned income, so they are not subject to the kiddietax. Also, children who are claimed as their parent’s dependents usually are limited to a standard deduction which is the greater of $900 (for 2008) or $300 + earned income with a maximum of $5,150. Thus, up to $5,450 of earned income can be completely sheltered from tax.

Children must file a return if any of the following apply. Your unearned income was over $1,700. Your earned income was over $5,450.max (up to $5,150 plus $300).

Change with the 2008 tax year. The kiddietax has been expanded in a very complex manner to potentially apply to children under age 24 as of year end. This extended version of the kiddietax targets two groups who have attained age 18: 1) those who reach their 18th birthday during the year, and 2) those in full-time student status for at least five months of the year who attain their 19th through 23rd birthday during the tax year. The kiddietax has a very small exemption. Under current rules, unearned income of a child avoids Parent’s top tax rate only if the unearned income is under $1,700.

Travel & Entertainment

Travel and entertainment expenses are deductible. Travel away from home for business, conventions, or receptions are deductible expenses. Entertaining customers at restaurants or clubs are deductible on your Schedule C as well, however are only 50% deductible.

If you are in NJ and need an accountant that understands Real Estate Agents, send me an email.n! I’d be glad to make the introduction!

It’s Time to Start Working on Your Business Plan For 2011

It’s Time to Start Working on Your Business Plan For 2011

Yes, it is true, 2011 is right around the corner. Now is a great time to get started working on your business plan. I know many of the Realtors I work with are just starting to see how important the internet is to their business. Anyhow, I read these two articles over the weekend and thought they were a good place to start. Social media and the internet should be a part of everyone’s business plan. My advice, make it a part of your plan, not all consuming!

I would also suggest you get your referral partners involved. I am always looking for ways to help my Realtor partners with their internet presence. It does not have to be overwhelming!

New Law to Speed up The Short Sale Process

Realtors stressed over dealing with lenders on short sales, as well as distressed homeowners looking for a way out of their mortgage that doesn’t involve foreclosure, may find relief is on the way from a new bill introduced in the U.S. House. The new legislation would impose a deadline on lenders to respond to short sale requests, requiring them to return an answer to the borrower within 45 days. I’ve heard that, as well as seen, a couple potential homebuyers walk away from purchasing short sale property because the lender has taken many months without any response.

The idea behind the bill is a good one. Let’s hope that it does not force lenders to deny a larger percentage of short sales just because they are backed up and do not have the workforce to handle the load.

If you want to keep an eye on this bill here’s more info; Prompt Decision for Qualification of Short Sale Act of 2010 (H.R. 6133), is sponsored by Reps. Robert Andrews (D-New Jersey) and Tom Rooney (R-Florida).