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Francis Vayalumkal

With so much of talk out there about who can get help with their mortgage and what they need to do, people are often confused or overwhelmed.

The Make Home Affordable program, a treasury initiative to try to help many people stay in their homes, divides homeowners into three categories - those in need of a refinance, those in need of a mortgage modification and those beyond government help.

You should pursue a government-backed refinance at today's low rates if:

1. Your home's value is within a few percentage points of the amount of your loan. If you live in an area hard hit by price declines, and the value of your home has declined substantially from its purchase price, you may not be eligible for this type of refinance.

2. You are current on your loan payments.

If it's clear that you won't qualify for a refinance, you should pursue a mortgage modification if: 1. You're having trouble making your mortgage payments.

2. You've experienced some kind of verifiable hardship -- such as a job loss, rising mortgage payment or an increased expense such as emergency medical care -- that has prevented you from staying current on your payments.

3. Your home is worth less than the amount of your loan, leaving you unable to refinance.

Here are the items you need to gather before you go in for any of these options.

" Your most recent income tax return;

" Information about your savings and other assets;

" Information about your first mortgage, such as your monthly mortgage statement;

" Information about any second mortgage or home equity line of credit on the house;

" Information about the monthly gross (before tax) income of your household, including recent pay stubs if you receive them or documentation of income you receive from other sources;

" Account balances and monthly payments on all your other debts such as student loans and car loans;

" Account balances and minimum monthly payments due on all of your credit cards;

" A letter describing any circumstances that caused your income to be reduced or expenses to be increased (job loss, divorce, illness, etc.) if applicable.

Check for information that could help you.

Francis Vayalumkal is a mortgage banker with Colonial Bank and can be reached at (813) 719-0303

Kamlesh Patel
CRUNCHING ‘EM NUMBERS: Check your withholding and estimated tax payments for 2009


If you expect a large tax refund this year, or if you've already received one, chances are you're happy. But why give the government an interest-free loan? Why not keep more of your money and invest it throughout the year for your own benefit? Whether you pay your taxes through withholding or you make quarterly estimated tax payments, you can take steps now to ensure that you don't receive a large refund on your 2009 taxes - and that you won't owe a lot of money either.

Your tax bill in 2009 could vary from last year's tax for many reasons. If your spouse or you get a new job or leave a job this year, your income may change. Perhaps, your eligibility for the various tax credits, exemptions and deductions that are available will change this year.

If your income decreases or if you can take advantage of any of the tax breaks to reduce your taxes, you may be able to lower your tax withholding or quarterly payments and put more money in your pocket now. The opposite is true if your income rises or you lose eligibility for a deduction, exemption or credit. In that case, you may have to increase your Withholding or quarterly tax payments.

To adjust your withholding for 2009, ask your employer for a new Form

W-4, and take the time to complete it carefully.

If you make quarterly tax payments, you should be aware of the safe harbor rules that will let you make the lowest required payments without subjecting yourself to possible penalty charges. The rule that fits most taxpayers is the one that calculates your 2009 quarterly estimated payments based on your 2008 tax liability.

Get an early start on cutting 2009 taxes

Once you've filed your 2008 tax return, you may be tempted to file away your records and relax a little. However, you could be missing a perfect opportunity to save on your 2009 taxes. With your completed 2008 return in one hand, and a recent paycheck stub in the other, you're ready to get an early start on tax planning for 2009.

First, review your current paycheck deductions. Are your federal, state, and local tax withholdings on target? Significant life changes in 2009 could result in tax underpayment penalties unless you adjust your withholdings.

Are you taking full advantage of your employer's retirement plan match? If not, you're leaving money on the table. Contribution limits on 401(k) and SIMPLE plans have gone up as well, so consider telling your employer to increase your retirement withholding. And while on the subject, ask your employer if the company offers the Roth 401(k). It might fit nicely in your overall retirement plan.

Maximum use of your flexible spending account also is a tax-smart move. A review of your 2008 medical deductions may shed light on how much you'll use in 2009. Remember that IRS rules let you buy over-the-counter medications out of your flexible spending account, so factor that into your calculations.

You might actually save taxes in 2009 by spending money. How? By investing in qualified, energy-efficient equipment, such as hybrid vehicles and home improvements. Such purchases may be eligible for tax credits in 2009. So what's good for the environment could also be good for your wallet.

If you meet the requirements, you might also qualify for tax breaks for buying a first home or a new car in 2009.

Kamlesh H. Patel, CPA, can be reached at (813) 949-8889 or e-mail or

Seema Ramroop

Because your retirement planning is so important to your future well-being, you should ask questions about the retirement plans available to you and how they work, as well as how best to use your retirement dollars.

Below are answers to several commonly asked questions about 401(k) plans.

Q. How do my 401(k) contributions lower my income taxes?

A. Your 401(k) contributions are made on a pre-tax basis. This means that they aren't reported to the Internal Revenue Service as current income on your W-2 form to the Internal Revenue Service. For example, if you earn $25,000 a year and decide to contribute 10 percent of your salary ($2,500) to your 401(k) account, only $22,500 will be reported as current income for income-tax purposes.

Why does the government give you this excellent tax break? Because it wants to encourage individuals to save as much as possible with their own dollars today so that they are better prepared for their retirement in the future.

Q. What is a Roth 401(k)?

A. Roth 401(k) is not a type of plan, but rather a type of plan contribution. If a 401(k) plan offers this feature, employees can designate some or all of their elective contributions as designated Roth contributions, (which are included in gross income) rather than traditional, pre-tax elective contributions.

Meaning that Roth contributions are taxed in the year they are contributed to the plan. Upon distribution, Roth 401(k) contributions are received tax free. Earnings on Roth 401(k) contributions will not be taxed upon distribution if the Roth account has been open for at least five years and distribution occurs after 59½, death or disability. Traditional 401(k) contributions and Roth 401(k) contributions are subject to a combined limit of $16,500 for 2009 ($22,000 if age 50 or older).

Q. Am I able to contribute to both a 401(k) and an IRA?

A. Yes. Many individuals contribute to their 401(k) plan and to an Individual Retirement Account (IRA) or Roth IRA. It may be best to maximize your traditional 401(k) contributions first since they are made with pre-tax dollars. (Your IRA contributions may or may not be tax deductible, depending on your annual salary and other qualifications.) If your employer offers matching contributions and you qualify for a Roth IRA or deductible IRA, it may make sense to contribute enough to your 401(k) to attract the maximum employer match, and then contribute to an IRA or Roth IRA. If you have not exhausted the maximum allowable contribution and can afford to do so, contribute again to your 401(k) plan.

Q. If I change jobs, may I take my 401(k) money with me?

A. Yes. All contributions you have made to your 401(k) account are 100 percent yours. Contributions made by your employer (if any) may be yours depending on a vesting schedule. You will need to check your plan for specific vesting schedules.

In addition, if you do change jobs, it may be a good idea to consider either rolling your 401(k) money over into an IRA or another qualified plan (such as a profit-sharing or 401(k) Plan) at your new employer. Otherwise, you may incur taxes and early withdrawal penalties. Be sure to check with your tax adviser before taking any distributions from your 401(k) plan.

Seema Ramroop, financial advisor at Morgan Stanley in Palm Harbor, can be reached at (727) 773-4629 or e-mail

Shan Shikarpuri

While the media has extensively covered the financial crisis in the banking, insurance and auto industries and other larger retail companies, etc., little or no attention has been paid to the smaller businesses (such as retail, service, etc.) who are struggling to survive during these uncertain and turbulent economic times. As businesses gauge the economic recovery plan from the Obama administration, we can be certain of new tax legislation that will contain many additional deductions and credits for individuals with adjusted gross income of $250,000 or less, as well as bonus depreciation for businesses and allowing loss carry-back for five years (currently two years) in an effort to create new jobs and jump start the economy in 2009.

The recent $787 billion economic stimulus package signed by the president contains significant tax-saving opportunities. However, this subject will be discussed in a separate column.

The purpose of this article is to make you aware of the changes that were made in 2007 and 2008 so you can take advantage of these opportunities of additional deductions and credits for both businesses and individuals for 2008 filing. Please keep in mind that a complete and comprehensive discussion of the recent tax legislations is beyond the scope of this brief article and have merely outlined the tax matters that affect businesses and individuals in our surrounding area.

The recently passed legislations are: (1) The Mortgage Forgiveness and Debt Release, enacted in December of 2007, (2) The Economic Stimulus Act of 2008 passed Feb. 13, 2008; (3) Heartland, Habitat, Harvest and Horticulture Act of 2008 enacted May 22, 2008; (4) Heroes Earning Assistance Act of 2008 passed June 17, 2008, (5) Housing and Economic Recovery Act of 2008 (July 30, 2008, and (6) Emergency Economic Stabilization Act of 2008 enacted October 3, 2008.

Some of the changes affecting individuals include:

1. Exclusion of mortgage debt relief. Up to $2 million of qualified mortgage indebtedness on principal residences is extended to the year 2012.

2. First time home buyer credit is ten percent of the purchase price up to $7,500.

3. Additional standard deduction for real estate taxes is $500 for single ($1,000 for joint filers).

4. Deductions extended through the year 2009 include: sales tax deduction, tuition and fees deduction, out of pocket educator deductions, and IRA distributions to charity.

5. Mortgage insurance premium deduction.

6. Surviving spouse sale of home (full exclusion until two years from the date of death).

Some of the changes affecting businesses:

1. Enhanced code section 179 deductions (immediate write-off of qualified equipment expense). For the year 2008, the expense limit went to $250,000 from $128,000; and asset limits went to $800,000 from $510,000.

2. The first year bonus depreciation: 50 percent of property with 20 years or less life.

3. New luxury auto first year limit is $8,000. Business mileage rate is 58.5 cents as of July 1, 2008. 4. Extension of research credit to the year 2009.

5. Extension of 15 years amortization of leasehold improvements and restaurant properties to the year 2009. 6. Extension of expensing environmental remediation costs.

7. Extension of energy conservation credits and energy efficient property credits (qualified wind turbines and qualified geothermal heat pumps) and energy efficient appliances credits.

8. Extension of deductions for energy efficient commercial buildings.

9. Bonus depreciation for re-used and re-cycled property.

Please note that the above represents a brief outline of only some of the provisions of the legislations passed in the past fourteen months. There are numerous other changes that I have not outlined, such as farmers & agricultural energy credits, tax breaks for military reservists, disaster relief provisions, and issues affecting international businesses and tax preparers, etc. If any of these affect you or your business, we encourage you to consult with your tax advisor.

Shan Shikarpuri, C.P.A., of Shan Shikarpuri & Associates, P.A. is a certified public accountants/business consultant in Palm Harbor, and can be reached at (727) 786-1800 or e-mail

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