If you purchased your home between April 9, 2008 and before July 1, 2009 then the First-Time Homebuyer Credit payback period does not start until you file your 2010 tax return by April 15th, 2011.

When you file the 2010 return you will have to recapture ratably, interest free, the $7,500 First-Time Homebuyer Credit over 15 years. This means that $500 will be added to the tax owed or $500 will be deducted from your refund.

We currently have not seen the 2010 1040 form nor have we received any guidance from the IRS regarding how to enter the First-Time Homebuyer Credit information into the 2010 tax returns. I expect that we will receive that information this summer at the IRS Tax Convention regarding the 2008 First-Time Homebuyer Credit. I will post a blog as soon as I receive guidance from the IRS regarding the recapture of the 2008 First-Time Homebuyer Credit.

I hope this answered your question, if we can be of any further assistance, please feel free to email or call our office!

That’s a great question. There are some definite differences between the two accounting methods but rest assured, most Condo associations use the accrual method of accounting. This is because it is very helpful for budgeting reasons to determine the budget vs. actual comparisons.

The Accrual Method of Accounting allows balance sheet accounts like Accounts Receivable to populate all current amounts owed but not received yet by the condo owners and at the same time it allows the income from Accounts Receivable to be reported on the Income Statement in the period that the income was actually earned. This method is also helpful when tracking delinquent receivables from condo owners.

It also allows Accounts Payable expenses to be reported on the Income Statement as an expense if the amounts have not been paid yet to venders and at the same time it allows the expenses from Accounts Payable to be reported on the Income Statement in the period that the expense resulted. This method is also helpful when tracking aging payables to venders so you can better manage cash flow.

The Accrual Method also allows the accrual of certain expenses that need to be added to a reserve account so the money will be available when a very large outflow of cash is needed. For example: The replacement of a roof, repaving of a parking lot and yearly insurance premiums are some of the expenses that should be accounted and accrued for on a monthly basis.

We account for these expenses on a yearly basis because each month a portion of the roof has depreciated or an amount of the Insurance premium has been consumed. The roof will one day need to be replaced, the parking lot will need to be repaved and the yearly insurance bill will come due. If these amounts are not accrued for and money is not set aside for these expenses, then most condo associations would have to assess its owners to cover the huge outlay of cash.

Also, the monthly expenses would be understated over many periods and then all of a sudden the expenses would be overstated in the period that the condo pays for its new roof. Accounts Payable expenses are reported on the Income Statement as an expense if the amounts have not been paid yet to venders and at the same time it allows the expenses from Accounts Payable to be reported on the Income Statement in the period that the expense resulted.

I hope that this explanation helps. If you have any additional questions, please contact me at 727.474.0922 and I would be happy to discuss them with you.

During a recent meeting it was brought out that our in-house bookkeeper books the maintenance fees, as receivables (income) when they are due and not when they are actually paid. One gentleman criticized that practice as the worst accounting policy he had ever heard of.

It is my understanding that our practice is exactly correct for us since we use the Accrual Method of accounting, which differs from the Cash Method.

Am I missing something here?

What has been your experience as far as accounting methods used in other condominium communities, and what is your opinion on our present policy as stated above? I would ask this question of our present CPA firm, but since they recommended the Accrual Method in the first place, and have never questioned our use of that method, I want to get an opinion from elsewhere.

Regards, Brad

thanks,

family finance

I believe that you are talking about claiming exempt on the W4 that you would present to your employer so that your employer does not withhold federal income tax from your wages. Ok, I am going to get on my soapbox and preach it now, get ready. This is legal under the following conditions:

1. The employee must have had NO tax liability for the previous year and must expect to have NO tax liability for the current year.
2. If the employee can be claimed as a dependent on a parent’s or another person’s tax return, additional limitations apply and they may NOT be able to claim exempt on the W4.

In addition, I would recommend that a person who files exempt read the instructions for the W4 and seek professional tax advice prior to making the exempt election on the W4. This election DOES NOT mean that you don’t have to pay federal taxes, it means that the employer does not have to withhold federal taxes from your paycheck. When tax time comes, a person who made the “exempt” election should be faced with 1 of 2 scenarios: 1. They do not owe the IRS any taxes due on the tax return or 2. They should be receiving a refund.

The reason that I take a strong stance on this issue is because a lot of people eventually get caught owing the IRS money at the end of the year and they don’t have the money to pay the IRS. This is where the tax problems start and generally the taxpayer never files and runs from the IRS for a number of years. Then one day the taxpayer wakes up and decides to fix the problems for one reason or another, calls a tax professional, finds out that their mistake is going to take a good amount of time to fix and cost them thousands of dollars. And of course, they don’t have the money to fix the problem, less pay the taxes. It’s a viscous cycle and I have seen too many taxpayers get hung in the end with IRS levis and garnishments.

My final advice is to see your tax professional before adjusting withholdings or claiming “exempt” on a W4 on a yearly basis because tax circumstances change with new circumstances such as: getting married, a new baby, the purchase of a home, divorce, working as a sub contractor (1099 Misc), getting a raise, getting a unexpected bonus, starting a new job and the list goes on and on. The small investment you will pay your tax professional, will help keep the IRS away.

Ok, I am putting the soap box away now, Please let me know if you have any additional questions. Take care.

Fred Daus

Can you clarify the purpose of why one would file exempt on their taxes for a few months and then change back? Can you also confirm if this is legal? Some co-workers and I have been discussing this. One feels that this is legal & has done it for years. I thought it was illegal & if caught would have a hefty price to pay.