April 2013

• New Taxes, Guidelines and Legislation Pertaining to Real Estate

  
  According to the National Association of Realtors (NAR), the inventory of homes for sale has reached its lowest level since 1999, which is helping home prices rise in many markets. After a 9 percent increase in existing home sales last year, there are simply fewer houses available. This has created a seller’s market in much of the country.
  
  Buyer traffic is up 40 percent from this time last year, so while demand has increased exponentially. Insufficient inventory is what’s lagging sales. Laurence Yun, chief economist for the NAR, has noted that the current supply and demand ratio is apt to result in more frequent incidences of multiple bidding and faster-than-normal price growth. Yet despite recent price gains, mortgage interest rates continue at record lows.
  
  All of these signs point to an invigorated residential real estate market this spring. Homeowners who have been waiting for values to rise may be more willing to sell their homes in order to relocate for better job prospects, which could help the unemployment situation. Others who have been waiting to trade up or down, depending on their age and financial situation, appear ready to participate in a robust market this year.
  
  Buying and selling isn’t the only activity where real estate finances are concerned. Pre-retirees who want to “age in place” are taking advantage of what may be the tail end of low interest-rate refinancing to remodel their homes with more senior-friendly enhancements.
  
  One issue homeowners are dealing with is whether they can get back the money they invest in upgrades. Another consideration is how to take advantage of any tax breaks for home sellers, buyers, and refinancers, in light of the changes and quagmire of legislative and agency provisions of late.
  
  To that end, this month we provide a review of the tax laws and public agency guidelines issued recently as they relate to today’s real estate market.

March 2013

• IRS Pushes for More Stringent Regulation of Paid Tax Preparers

  
  In a 2008 report, the General Accounting Office (GAO) indicated that tax returns prepared by paid preparers had a higher error rate than returns prepared by taxpayers, 56 percent comparedto 47.3 percent.
  
  The number one error professional tax preparers make when filing a 1040 for their clients is declaring an incorrect amount of taxable Social Security benefits. The second most popular error is the amount of tax reported because tax rates on qualified dividends and capital gains are generally lower than income rates.
  
  The fact is, because the U.S. tax code is so complex, filing errors are rampant each year. Furthermore, identity theft cases relating to IRS tax filings have increased by a whopping 650 percent since 2008. In just 2012 alone, the IRS experienced a 78 percent increase in identity theft cases. Tax-related identity theft occurs when someone intentionally uses another person’s Social Security number to file a false tax return in order to obtain an unauthorized refund, or to gain employment under false pretenses. As of September 30, 2012, the IRS had almost 650,000 identity theft cases under investigation.
  
  To help curb the number of errors and fraudulent returns filed each year that result in costly changes and audits, the IRS has taken steps to help mediate the number of errors by requiring more stringent qualifications for tax preparers.

February 2013

• Congress Passes Last-minute American Taxpayer Relief Act of 2012

  
  On January 1, 2013, Congress passed last minute legislation to avoid automatic income tax increases for millions of Americans. The eleventh-hour legislation also included extensions of various tax provisions related to estate taxes, deductions, credits and businesses, as detailed herein.
  
  In her annual report to Congress published in January, the National Taxpayer Advocate named the complexity of our tax code as the most serious problem facing taxpayers today. She cites the fact that Congress has made 4,680 changes to U.S. tax law since 2001.
  
  The new American Taxpayer Relief Act of 2012 does a pretty good job of illustrating just how complex our tax legislation is.

January 2013

• FICA Treatment of Severance Pay

  
  In September of 2012, a federal appellate court decision granted Michigan-based Quality Stores a refund for FICA taxes paid on severance packages the company issued to laid-off employees. The refund of $1 million represented taxes paid by both the employer and its former employees, with whom the refund must be shared. The question now is whether or not hundreds of employers and thousands of employees are due for a refund of back taxes paid within the last three years.