IRS Audits for Real Estate Professionals, II

IRS logo

Why has the IRS targeted real estate professionals at this time?  According to their own December 20, 2010 report:

Actions Are Needed in the Identification, Selection, and Examination of Individual Tax Returns With Rental Real Estate Activity.

In August 2008, the Government Accountability Office stated that “at least 53 percent of individual taxpayers with rental real estate activity for Tax Year 2001 misreported their rental real estate activity, resulting in an estimated $12.4 billion of net misreported income.”

Internal Revenue Service (IRS) data show that during Tax Year 2001, 8.7 million (6.7 percent) of the 130 million filed individual income tax returns had rental real estate activities. Specifically, taxpayers reported net rental real estate income of approximately $47 billion on 4.2 million tax returns and $31 billion in net rental real estate losses on 4.5 million tax returns.

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The IRS is Liening Hard


When times are good and cash is flowing, Congress tends to pick on the IRS.  Times, like now, when the government is out of money, Congress prefers to ignore any IRS pursuit of the public.

Look out, here comes the IRS.

To give you an idea of their added zeal, in 1999, the IRS issued 168,000 liens.  Last year, in 2009, they issued 966,000.  Your odds of hearing from the Internal Revenue Service have improved.

Here in Greensboro, Uncle Sam just put 20 more agents in the field.  Timothy Geitner said the government is going to spend $250 million for tax compliance to generate $2 billion worth of revenue this year.

Right. According to the US Treasury, the IRS is going to spend $250 million going after people who have under-paid on their taxes and believe they will be able to raise an additional $2 billion from their efforts.

Publicly filed tax liens can destroy your credit as well as wreck careers and businesses.  They can attach to your car, home, other real estate, even accounts receivables if you own a business.  The IRS is ahead of anyone else who may file a lien against you.

Many employers use credit histories to screen applicants, even though credit reports are meant to determine credit-worthiness, not job-worthiness. Repossessions, collections, high credit card balances could cost you the job you want.

Recorded tax liens can seriously hinder your ability to earn a living, pay off your debts, even stay off government assistance!  Once you do the right thing and pay off your tax lien, it can stay on your credit for 7 years.

This is not the news any of us wants to hear, however, our growing monetary deficit is pressuring the IRS to get even tougher.

If I can make a suggestion, pay your tax bills before you pay anything else.

Fed Stopped Buying Mortgages

Federal Government

As of March 31, 2010, the Federal Government stopped buying mortgage-backed securities.

Which means…?

Well, the way these mortgages are often bought and sold is by being bundled together into mortgage-backed securities.   Institutions such as pension funds, hedge funds, banks and investors then buy these large pools of mortgages.  Once the financial crises hit and the sub-primes began collapsing, it became harder and harder to sell these pools.

Compounding the problem, as the market began to slide, these same institutions began racing to sell off their packages which threatened to make the recession even worse.

In an effort to slow the values decline, the federal government began buying up these packages.  By early March 2010, the Fed and Treasury together became the largest mortgage-backed security investor in the world.  They have purchased more than $1.2 trillion dollars worth even though, as with any home loans, they come with some risks.

So far, their efforts to control the slide have worked.  Interest rates dropped for millions of homeowners which, of course, helps our economy.  It appears that the government is currently making money on the loans they hold.

So, what happens now that they’ve stopped buying?  We’ll soon find out.  Predictions are that, to begin with, interest rates will climb.

Many analysts believe that, without this government intervention, the housing market would have “imploded” and we could have actually entered into a financial depression.

Bottom line, should we be grateful for the governments efforts to prop up our housing market?

Opinions?

North Carolina – Number 3 for US Population Growth last Year

North Carolina

The Census Bureau develops state population estimates by measuring population change since the most recent census. It uses births, deaths, administrative records and survey data to develop estimates of population.

Here are the final set of state estimates that will be available before the official 2010 Census population counts are released next December:

Texas gained more people than any other state between July 1, 2008, and July 1, 2009 (478,000). Next came California (381,000), North Carolina (134,000), Georgia (131,000) and Florida (114,000).

California remains the most populous state with a July 1, 2009, population of 37 million. Following were Texas (24.8 million), New York (19.5 million), Florida (18.5 million) and Illinois (12.9 million).

The only three states to lose population over the period were Michigan (-0.33 percent), Maine (-0.11 percent) and Rhode Island (-0.03 percent).

The nation’s population as of July 1, 2009, was 307 million, an increase of 0.86 percent since July 1, 2008.

North Carolina continues to be a great place for investing in real estate.  I love North Carolina!

What rights does the Census Bureau have?

Have you completed the Census yet? What were you asked? What do you think about this video? Don’t they only ask 10 questions this year? What has been your experience?

Thank you, Martin, for this.

HUD SAFE Mortgage Act

HUD

In case you haven’t heard, there’s a new bill out there called the HUD SAFE Mortgage Act. From what I understand, it passed and became law in the summer of 2009, but states were given up to two years to implement the bill. This legislation makes Owner Financing illegal. If you are not a licensed broker, you will not be able to do owner financing.

This bill is huge. They are considering Lease to Own as a possible owner finance and, if determined to be so, this bill could immediately outlaw lease to own. So many buyers are not able to buy a home with traditional financing and this could eliminate options to those wanna be homeowners.

If you have ever purchased or sold a property using seller financing, you need to take a few moments to read the following message. After you have reviewed the information, send your comments to HUD per the instructions to help stop this devastating proposal. Please, get involved and make your voice heard. Please, help us Make a Difference.

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Can the Government save the Housing Market?

Senate

The federal government is beginning to cut back on its support for the private sector. Is it too soon?

Over the past year, the government has intervened heavily at essentially every stage of the home-buying process and the housing market has become very dependent upon the government. In fact, more than 80% of the new residential mortgage loans made this year benefited from some form of government support, according to the trade publication Inside Mortgage Finance.

To keep funds flowing to the housing market, the government bailed out Fannie Mae and Freddie Mac last year and now basically owns the mortgage finance giants and their $5.4 trillion in loan portfolios.

And to boost sales, the government also is offering $8,000 tax credits to first-time home buyers.

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