Monday, October 12, 2009

Questions for the Tax Lady: October 12th, 2009

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question #1: I owed the IRS thousands, and I want to hire an attorney but I am afraid I will not have enough money to afford the retainer fee. How much does it usually cost to hire an attorney?

Answer: The amount you will pay is going to depend on the attorney you hire. Typically an attorney, or law firm, with a lot of experience helping taxpayers settle their debts will cost a little more then an inexperienced lawyer or enrollment agent. Additionally, the amount of time it takes the attorney to work on your case will also influence fees.

Question #2: Is it true that I can use my federal tax credit to help pay for closing costs on my new house?

Answer: Yes. If you do not want to have to wait until April to collect your Federal tax credit, then you can elect to use it to pay for your closing fees or even part of your down payment. However, it can be a tricky process, and not all loan companies can handle it. If you do want to use your credit upfront then be sure to speak with your loan agent as soon as possible. For more information on the topic, check out the following article from Lending

How to use tax credit at closing

To use the tax credit at closing, home buyers must obtain a loan that's insured by the Federal Housing Administration (FHA). To obtain an FHA-insured loan, be sure to apply through an FHA-approved lender. Keep in mind that not all lenders can accommodate using the tax credit at closing. If you're interested in applying the tax credit to your closing costs, ask your lenders in advance. You may also want to consider working with a state housing finance agency that enables the tax credit to be applied towards closing.

The credit can't be used toward the first 3.5 percent of the down payment on an FHA loan. That means borrowers who want to use the tax credit as a down payment must still bring at least that amount to the transaction in addition to the tax credit. The 3.5 percent down payment must come from the buyer's own funds or a gift, subject to FHA rules. However, if the borrower obtains a loan through a state housing finance agency, the minimum down payment requirement to use the tax credit at closing may be waived.

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