Federal banking regulators recently announced a new mortgage foreclosure settlement to replace a 2011 settlement between the regulators and certain home loan servicers. Lenders participating in this new settlement, including Bank of America, Citigroup, Wells Fargo, JPMorgan Chase, MetLife Bank, PNC, Sovereign, Sun Trust, U.S. Bank and Aurora, have agreed to distribute $8.5 billion to settle complaints alleging that some homeowners were improperly foreclosed upon. A portion of the settlement, in the amount of $5.2 billion, will be provided to certain borrowers in the form of loan modifications, forgiveness of deficiency judgments and other relief, while the balance of the settlement will be paid directly to other eligible borrowers

A Social Security Number (SSN) is used by a U.S. person and third parties for purposes of reporting income, loss, and interest realized by that particular person. The SSN allows IRS to track the accuracy and satisfaction of each person’s tax filing and payment obligations. For a person, who does not qualify for an SSN, but does have a tax filing and/or payment obligation, IRS may assign an Individual Taxpayer Identification Number (ITIN). An ITIN may be assigned regardless of an applicant’s immigration status because the Internal Revenue Code (IRC) imposes tax filing obligations on both resident and nonresident aliens. The primary use and purpose of issuing an ITIN is to ensure a non-citizen’s compliance with the IRC. Therefore, to qualify for and obtain an ITIN, an applicant must have a tax filing obligation and file a return, subject to certain exceptions. To ensure ITINs are being used for legitimate tax purposes, IRS recently revised certain procedures to provide that new ITINs will expire after five years.

For Corporations (Form 1120) and S-Corporations (Form 1120-S) with a fiscal year-end of December 31, the deadline to file a tax return is March 15. For many of these businesses, the required documentation may not have been finalized or available to prepare the return, so an extension of time to file may have been requested. The IRS will allow an automatic 6 month extension to file the return if a Form 7004 is filed by the original tax deadline. An extension does not extend the amount of time to pay the tax due on the return. It is an extension of time to file, not an extension of time to pay. Any taxes due are still due on the initial deadline or additional penalties and interest will be assessed from the original filing deadline.

Did you know that if the buyer of a Short Sale is a Limited Liability Company (LLC) or Corporation, there are specific documents that must be completed? If required documents are not provided, processing of the Short Sale will be delayed, and ultimately the file will be closed if not supplied timely.

Federal banking regulators recently announced a new mortgage foreclosure settlement to replace a 2011 settlement between the regulators and certain home loan servicers. Lenders participating in this new settlement, including Bank of America, Citigroup, Wells Fargo, JPMorgan Chase, MetLife Bank, PNC, Sovereign, Sun Trust, U.S. Bank and Aurora, have agreed to distribute $8.5 billion to settle complaints alleging that some homeowners were improperly foreclosed upon. A portion of the settlement, in the amount of $5.2 billion, will be provided to certain borrowers in the form of loan modifications, forgiveness of deficiency judgments and other relief, while the balance of the settlement will be paid directly to other eligible borrowers.

The Bank of America Cooperative Short Sale Program may be able to help homeowners complete a short sale if they owe more on their mortgage than their house is worth and do not qualify for the Home Affordable Foreclosure Alternatives (HAFA) short sale program. This program can streamline the approval process and offers financial assistance to help homeowners with relocation and moving expenses.

After weeks, indeed months of proposals and counter-proposals, seemingly endless negotiations and down-to-the-wire drama, Congress has passed legislation to avert the tax side of the so-called “fiscal cliff.” The American Taxpayer Relief Act permanently extends the Bush-era tax cuts for lower and moderate income taxpayers, permanently “patches” the alternative minimum tax (AMT), provides for a permanent 40 percent federal estate tax rate, renews many individual, business and energy tax extenders, and more. In one immediately noticeable effect, the American Taxpayer Relief Act does not extend the 2012 employee-side payroll tax holiday.

Businesses

The business tax incentives in the new law, while not receiving as much press as the individual tax provisions, are valuable. Two very popular incentives, bonus depreciation and small business expensing, are extended as are many business tax “extenders.”

Bonus Depreciation/Small Business Expensing. The new law renews 50 percent bonus depreciation through 2013 (2014 in the case of certain longer period production property and transportation property). Code Sec. 179 small business expensing is also extended through 2013 with a generous $500,000 expensing allowance and a $2 million investment limit. Without the new law, the expensing allowance was scheduled to plummet to $25,000 with a $200,000 investment limit.

Small Business Stock. To encourage investment in small businesses, the tax laws in recent years have allowed non-corporate taxpayers to exclude a percentage of the gain realized from the sale or exchange of small business stock held for more than five years. The American Taxpayer Relief Act extends the 100 percent exclusion from the sale or exchange of small business stock through 2013.

Tax Rates: The American Taxpayer Relief Act extends permanently the Bush-era income tax rates for all taxpayers except for taxpayers with taxable income above certain thresholds:

$400,000 for single individuals, $450,000 for married couples filing joint returns, and $425,000 for heads of households. For 2013 and beyond, the federal income tax rates are 10, 15, 25, 28, 33, 35, and 39.6 percent. In comparison, the top rate before 2013 was 35 percent. The IRS is expected to issue revised income tax withholding tables to reflect the 2013 rates as quickly as possible and provide guidance to employers and self-employed individuals.