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Francis Vayalumkal

A big segment of society is suffering the effects of real estate meltdown and credit crisis. However, first-time home buyers could be in the best position to take advantage of the situation and step into homeownership.

A few years ago, information inundated potential first-timers about how to take the leap via first-time home buyer programs and other avenues that would make down payments affordable and escalating home prices feasible.

In today's turbulent real-estate environment, renters might think the days of first-time home-buying assistance are over. But that's not true. The programs for first-time home buyers that were always tried and true are still there. Combine that availability with low interest rates and low home prices, and you have one of the best times in recent years.

Not only are market conditions favorable, the government is adding incentives to attract first-time home buyers. As part of the economic stimulus package, a tax credit worth 10 percent of the purchase price up to $8,000 is available to first-time home buyers as long as they sign on the dotted line this year. Unlike previous tax credits for first-time buyers, this one does not require repayment.

In addition to the one-time credit, first-time home buyers can take advantage of special programs through the Federal Housing Administration or FHA. The FHA doesn't make mortgage loans directly, but it insures loans made by private lenders, protecting those lenders from losses.

FHA-backed loans tend to have less stringent credit requirements, and let home buyers use financial gifts from family members, nonprofit organizations and employers to pay the entire down payment. However, the onset of the economic downturn has brought a change in these programs. The minimum required down payment has been raised to 3.5 percent.

Many first-time home buyer programs now require higher credit scores to qualify. Although FHA doesn't require a credit score of 700, FHA lenders also have gotten very conservative. Many programs also contain an education component, so prospective buyers will get help with budgeting, as well as advice on clearing up any debt or credit problems. So, even if they don't have the required credit score, a housing or credit counseling agency can help them improve their financial situation as they look for first-time home-buying programs that they will qualify for.

Another requirement of many first-time home-buyer programs is that participants must have income below 80 percent of the region's median income. But if your salary was lowered or your bonuses stopped, you might be earning less than 80 percent of the median income now. So even if you didn't qualify before, you might now. However, as median income levels drop, so does the amount that represents 80 percent.

First-time doesn't have to be your first time ever!

Another thing to remember: Don't always take the term "first time" literally. Many programs don't rule you out if you bought a home before. If you haven't owned a home for three years or more, you are eligible for many of these loans. Down payment assistance for some first-time home-buying programs comes in the form of a second mortgage, and in many cases, some or all of that second mortgage could be waived if the buyer stays in the home a certain number of years, typically between five and seven years. That might have been a limiting requirement during the real estate boom because homeowners often used equity to trade up quickly.

In addition to looking for first-time home-buying programs, prospective buyers also should check out the terms of other programs that have similar advantages. For example, the U.S. Department of Agriculture offers Rural Development Guaranteed Housing Home Financing options, which provide up to 100 percent financing to homeowners in rural areas, typically areas with a population of 20,000 or less. The eligible area for USDA's home loan is preset and can be found on their Web site.

Although some first-time home buyers may qualify for conventional loans, a first-time home-buying program will likely yield better terms and give buyers the option of holding on to their cash rather than using it for a down payment.

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

Kamlesh Patel


"Show me a company with a very busy manager, and I'll show you a company that can be ripped off." So goes the song of the embezzler.

The bookkeeper looking for an easy mark likes to work for a manager who says, in words or attitude, "I don't want anything to do with the books; that's your department."

No company is too small to be safe from embezzlement. In fact, small companies, because of the limited number of employees, have a serious problem. They don't have enough personnel to divide the money-handling functions among different employees. Usually the same employee opens the mail and prepares the checks, payroll reports, deposits, monthly billings, bank reconciliations, and perhaps even the financial statements.

If you have employees handling money functions and you are not personally acquainted with the necessary safeguards, you should have a review of internal controls done by your accountant.

Some simple embezzlement techniques used by dishonest employees in even the smallest companies include the following: - Overpaying payroll taxes to the government, then applying for a refund and cashing the refund check. - Establishing a second checking account with the company's name and signature authority of the bookkeeper (often done in the same bank as the legitimate company account).

- Making duplicate payments on different dates for the same invoices and sending one to the real vendor and the other to an account set up by the embezzler.

Even small companies can benefit from the segregation of duties established in larger companies. This control is accomplished by having the owner/manager be involved in certain paper-handling activities.

Once your internal controls have been established, they should be reviewed annually to see that they are effective and that they are being followed.


Millions of people move each year. If you're making a move, be aware that moving can have some important tax consequences.

- Retirement plans. If you have a retirement plan at work, you may have several choices upon leaving a job. You can roll your retirement funds into an IRA, possibly roll the money into a new employer's plan, or perhaps even leave the money in your former employer's plan. Keep in mind that any amount distributed directly to you is subject to automatic 20 percent income tax withholding, and you may also face a 10 percent early withdrawal penalty.

- 401(k) loans. Facing a layoff or new job and need cash? Tap your 401(k) account only as a last resort. If you have an existing 401(k) loan, pay it off. If you leave your employer and can't repay the loan within a preset time, the loan balance is considered a withdrawal. As such, you'll be hit with income taxes and possibly a 10 percent penalty.

- Job search expenses. Expenses incurred to search for a new job are tax-deductible, even if your job search doesn't land you that coveted position. To qualify, you must be looking for a job in your current occupation.

- Moving expenses. If your job-related move qualifies (the IRS has both a distance and a time test), you can deduct the costs of moving your household goods and your family.

- Home sale. When you sell your home, you can exclude up to $250,000 of the gain from your taxes. The exclusion amount is $500,000 for married couples filing a joint return. To qualify for the full exclusion, you must have owned and occupied the house as your main home for two out of the five years prior to its sale. A partial exclusion may apply if you fail the two-year test due to a job-related move.


If your child is a teenager or a college student, he or she probably has a part time or summer job. Let's say your son, Bill, earns $2,300 this summer. Probably the last thing on his mind is saving for retirement. But here's why he should seriously consider putting some or all of his earnings into a Roth IRA.

First, by investing while still a teenager, his earnings will have extra years to compound, and those extra years will make a huge difference. For example, a one-time investment made at age 17 and compounded at 4 percent until age 65 will be worth 50 percent more than the same investment made at age 23. By investing in a Roth IRA, the earnings and his withdrawals after age 59½ will be tax-free. In addition, he can make earlier tax-free withdrawals for first-time homebuyer expenses and penalty-free withdrawals for education expenses if needed. And hopefully by starting young, he'll learn the benefits of regular savings as he sees his investments grow.

Bill is eligible to contribute 100 percent of his earned income (up to $5,000) to an IRA. By choosing a Roth IRA, he'll lose the up-front tax deduction, but chances are he'll have no tax liability anyway.

The biggest problem is that Bill probably wants to spend his earnings, not put them away for retirement. That's where mom, dad and the grandparents come in. If they can afford it, they could give Bill the money to make his IRA contribution. They can use their annual gift exclusion to give Bill a tax-free savings account. But even if they can't afford to help Bill, he should still be encouraged to invest at least a portion of his earnings in an IRA.

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

Seema Ramroop

Simply stated, staying the course doesn't mean driving with blinders. Investors should monitor their portfolios regularly to determine if they support and respond to their financial goals.

For years, investors have heard the mantra of investing for the long term. That is, to create a portfolio based on your goals and stick with it despite the rumblings of a fickle market or the allure of popular trends. In theory, this is a suitable strategy for many investors, but staying the course wisely also should acknowledge the need for the occasional mandatory detour, taking on additional passengers, having fender benders and making complete about-faces. The better prepared a portfolio is to respond to these unforeseeable life events, the more likely it will be able to help you reach your desired financial destination.


Annual rebalancing is the key to the long-term health of your portfolio. Rebalancing involves shifting assets from one type of investment to another to bring a portfolio in line with an asset mix created for specific goals. If this action is done on a regular or automatic basis, you can help ensure that your portfolio stays on track.

Many mutual fund companies offer the option of automatic rebalancing within various investment programs. This service can help investors avoid micromanaging their portfolios and it furthers the lines of communication between an investor and his or her financial advisor. In addition, this enforces use of the commonly embraced discipline of selling high and buying low.


o Construct an initial portfolio with a goal-sensitive allocation of stocks, bonds and cash. Keep informed about the subsets and varieties of these categories.

o Be aware of your short- and long-term goals when designing your portfolio.

o Generally, make more comprehensive rebalancing an annual event. Many experts agree that investors who rebalance at this interval or slightly longer reap many of the same benefits as those who do so more often.

o Remember that rebalancing comes from paring down or eliminating specific investments in a portfolio. In many cases, there may be tax consequences, such as realized capital gains. Try not to burden yourself with tax liabilities you may not be prepared to handle. Yet at the same time, you must weigh the benefits of overall return over some tax savings.

o Don't rely on natural progressions in the market to rebalance a portfolio. But keep in mind that this practice is not applicable to total equity portfolios because stocks typically appreciate over time.

o Consider contributing to your portfolios via a systematic or dollar-cost averaging strategy. Systematic investing, the process of making consistent contributions on a regular basis, can help bring you closer to your financial goals.

o Stand by your plan. Your portfolio was created to respond to a number of scenarios and goals. Don't allow yourself to be easily swayed by the latest trends, but do contact your financial advisor if you feel the need to make a change.

Seema Ramroop, financial advisor at MorganStanley SmithBarney in Pam Harbor, can be reached at (727) 773-4629 or e-mail

Ramesh Parekh

As many people know, Long Term Care (LTC) cost could be high and is escalating at a high rate. Lack of a Long Term Care Insurance (LTCI) protection can wipe out all net worth of many senior citizens. Some important and basic knowledge on LTC policy:

1. Selection of insurance company:

Financial strength - It is important to select a company with good financial strength so that it may be around for a long time when your claim may arise. There are independent agencies that rate insurance companies based on their financial strength such as A.M. Best.

Experience - Select a company with long and good record of payments of claims and customer care. Such an experienced company will generally have a better knowledge in premium rate setting and claim payments.

2. The policy :

LTC policies are quite complex in terms of coverage, options, exclusions and limitation. LTCI policies vary tremendously. Here are some aspects of policy you will need to consider:

Deductible - Elimination period - Could be 20, 30, 90, 120 days or longer period during which you must pay for nursing-home care out of your own pocket. The longer the elimination period, the lower the premium.


How are long-term home care expenses covered? Will the policy pay a relative for the home care?

Does elimination period apply to home care?

Is there a waiver of premium during the care? When does the waiver clause start?

Does the policy pay less benefits for home care or assisted living facility than nursing home stays?

What are the exclusions and limitations in benefit coverage? How much coverage will you have? What will be daily/weekly/monthly and total benefit limits?

Is there an automatic inflation protection rider?

Is the inflation adjustments "simple" or "compound"?

Most states require companies to offer inflation protection. It is up to you to decide whether to buy that coverage.

You have to select the number of years for the benefit period. Insurers do offer lifetime coverage but the premiums can become unaffordable. Usually, the benefit period of 3-6 years is adequate.

3. Pricing :

Make sure that you can afford a premium without affecting your lifestyle or depleting your assets even if the premiums go up in future.

Most of the policies reserve the company's right to increase the premium in future.

Inquire about the past rate increases of the company.

Check out if there is a spousal discount for spouse/partner coverage

The decision to buy the LTC insurance is an important financial decision and lifetime commitment.

There are many experts in the field. I believe your best help will probably come from an insurance representative who specializes in long-term care insurance. A trusted insurance professional can help you in guiding through the maize of information on insurance companies, policy selections and help you determine what suits your needs the best.

For those who want to make decisions on your own, there are resources available. Shopper's Guide to Long-Term Care by National Association of Insurance Commissioners at or contact Florida Department of Insurance at

Ramesh Parekh, CPA, can be reached at (727) 461-9770 or e-mail or

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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