Use Certified Mail to Mail Your Tax Returns

If you are among the millions making the annual trek to the Post Office over the next few days, I strongly suggest mailing either your tax returns or extensions by Certified Mail, Return Receipt Requested. Having that receipt in hand will protect your refund or eliminate or minimize any penalties which the taxing authorities try to levy on you for late filing. These receipts do, in fact, hold up under audit.

The returns are required to be postmarked by April 17, 2007 this year. As long as you have a valid post mark, you will be OK. However, since the return will arrive after the deadline, you can protect yourself by using certified mail.

Since I personally find the Post Office forms more confusing than IRS forms, I have provided an example of how to complete the forms in the picture above. If you step into the lobby of a post office late on the night of the filing deadline, you will notice that most people are lost when it comes to completing these forms.

If you double click on the picture above, you should be able to enlarge it enough to see the detail. The form on the left shows the front of the certified mail form. On there, you put the address of the recipient on the left hand side, and check the box as shown for certified mail. At the bottom, put the article number of the letter being mailed. The article number comes from the left hand side of the certified mail receipt shown below in the middle. Just peel off the article number and transfer it to the front of the green card. Then turn the card over and put your return address on the back of the green card. This allows the post office to notify you that the package has been delivered and acknowledged by the recipient.

Please note that the addresses shown above are examples only, and they are not to be used for your personal mailing. I have included the specific addresses in each return or extension which has gone out. In recent years, the IRS has set up about a zillion different addresses for various tax forms. Addresses vary by the state in which you live, whether you have a refund or whether you owe money, whether your return was prepared by a professional or whether you prepared it yourself, etc., etc., etc. The variations never end, so please do not use the addresses shown above for your personal mailings.

Happy Easter???????

Given even a little bit of time, I would have expected to produce a really nice formal Easter post for this blog. However, since we are just a little over a week from the tax filing deadline, and I am working around the clock, you will not be seeing my ideal posts here. Since this blog clearly went to the birds with the last post, I thought I would just continue along the same lines.

Yesterday, I received a call from my 2 and a half year old niece letting me know that she and her 6 year old sister were putting together an Easter basket for me. Since, I could not join in any of the family Easter festivities, I received a call to let me know that they were dropping off my Easter basket on the way home this evening. My older niece walked up to the door and gave me a big smile as she handed me the bag. I could not wait to dive in!!!!! Right on the top, I spotted one of my favorites - Peeps!!!! The girls had previously separated the chicks so that they were in the basket individually. I grabbed one and went to take a bite off of the tail. I had to look twice. There was no tail!!! I just assumed that it got ripped off in the process of pulling apart the peeps. I reached for another one. The next chick was missing both the head and the tail. A third one was in the same condition.

Apparently, the bag was sitting next to the youngest in the car, and she had beaten me to the peeps. I could not stop laughing. The evidence is shown above. I will never forget this Easter basket. To really view the detailed evidence, double click on the picture to enlarge it.

Happy Easter!!!!!!!!!!

Time to get your ducks lined up!!!!!!!!

OK - It is now April 3, and the tax deadline for filing either your personal tax return or an extension for 2006 is on April 17, 2007. So it is time for all of you stragglers to get your ducks lined up and give me a call. Just remember, even if you are extending your return, I still need some time to determine whether or not you need to send in a payment with your extension. For easy reference, my phone number is 301-353-9680.

Last Chance for 2003 Refunds and Amendments

April 17, 2007 will be the last chance to claim a refund for a 2003 return that was not extended. Likewise, if you need to amend your 2003 return to claim a refund, the deadline will be April 17 if you did not extend the return. The statute allows you to claim a refund if you file the return within 3 years of the due date, including extensions. After that, you will no longer receive the refund.

This is true even if you owe taxes for another year subsequent to 2003. Unfortunately, many people wait too long to file those overdue returns and end up paying unnecessarily. So, if you are expecting a refund for 2003 and you have not filed 2004 and expect to owe, get that return in as soon as possible.

If you do end up filing a return for a refund for 2003 at the last minute, make sure you mail the return Certified Mail, Return Receipt Requested. If you do not, they will find a reason to show the return was not filed on a timely basis.

Good News on Option Arms

With quite a few of the sub-prime lenders going out of business in the last few weeks, it certainly feels as though the mortgage market is experiencing a major meltdown. In some ways, it is true, but there is quite a bit of unfounded hysteria floating around. Every time we pick up the newspaper these days, the headlines hit us over the head with someone else who is losing their house, because they did not understand the terms of their current mortgage. One of the most complex mortgage animals out there is the loan often known as an "option arm" or "cash flow arm." This particular type of mortgage has been crucified in recent weeks. However, this type of loan has MANY good points. You just have to know how to use the loan properly before you get into one of these.

These are great loans if you are carrying multiple properties, because they can allow you to make a smaller payment than you would on a "normal" loan. The key to managing your loan properly is remembering the real reason you went into that type of loan in the first place. Many people use these loans to help pay off higher interest credit cards or other "bad debt." If you are making the minimum payment on the mortgage each month and you are continuing to spend as though there is no tomorrow, then you WILL end up in trouble no matter what type of loan you have. However, if you make the minimum mortgage payment and put an extra $1,000 or more toward your credit cards, then you will be working toward your goal of paying off higher interest rate debt.

The minimum payment is set very low at what I often call the "fake rate, " and it can often be as low as 1%. If you choose to make the lowest possible payment, and do not pay all of the interest due each month, then the monthly interest that you have not paid will be added to your mortgage balance. This amount is the difference between the "real" rate as set forth in your mortgage note and the rate of interest you are paying. The monthly interest that you do not pay can be added to your mortgage balance until the loan reaches typically either 110% or 115% of the original outstanding balance. Once the loan tops out at that point, it will begin to amortize over the remaining life of the loan such that you will be required to pay the full interest and principal payment each month. This can often be double of the amount of the payment you have been making. This normally does not happen until several years into the loan, but there is no set time limit in most cases. If you are not prepared to make the full payment at that point, then your loan could blow up on you.

While the loan balance can increase if you do not make the full interest payment, the balance can also decrease if you make any additional principal payments. One major advantage of an option arm is that if you own multiple properties, and then you sell one, you can pay down the mortgage balance on one or more properties with option arms. When you make the large payment, your minimum monthly payment will most likely decrease. So, if you have an option arm that adjusts monthly, and you pay down $200,000 on your mortgage, your subsequent monthly payments will adjust downward to take into account the $200,000 principal payment. This can not happen on a 30 year fixed rate mortgage. Your monthly payment on a fixed rate mortgage will not change if you make additional payments of principal.

If used wisely, the homeowner has the chance to get out of other debt or just refinance when a better deal comes along. It seems that most people seem to refinance every two or three years in any event, so it does not necessarily pay to go into a 30 year fixed rate mortgage, particularly if cash flow is an issue.

Another plus to the option arm is that it does carry an adjustable rate. While many people panic at the thought of an adjustable rate, remember that rates can actually go down. While this has not been true in the recent past, many of the option arms out there contain very favorable adjustment features such that the payment will be very manageable at a point when the rates drop a little.

Please give me a call at 301-353-9680 if you have an option arm that you are uncomfortable with at this time. I can either show you how to make it work for you or find you a new loan that works better for you. We can look at how you are using the loan and determine how you long you have before it potentially "blows up." Many people do keep these loans for the life of the loan. Just remember, that if you don't make the payment, the bank will foreclose no matter what type of loan you have!!!!!!

As always, the advice given here is general, and there are exceptions with every mortgage.

Your brother's, wife's, cousin's accountant said what???

Over the years, I have noticed that most of the tax and financial advice people receive comes from a co-worker, friend or neighbor. This advice MAY have been passed on by the co-worker's accountant. So heaven help you if the person sitting at the next desk has a lousy accountant and you had no clue!!!! The other danger in this situation is that the accountant provided outstanding advice to your friend. However, the advice given by the accountant only applied to your friend's VERY SPECIFIC fact situation. If your fact situation is even SLIGHTLY DIFFERENT from that of the person receiving the advice, you could be totally screwed by following that same advice.

But this situation is not necessarily related to people who don't have accountants. I was talking to one of my clients the other day (you know who you are!!!) who told me she was also taking some advice from another client of mine who had referred her to me. However, it turns out that both of their situations are VERY different, and the advice I give to one of them would not necessarily work for the other. While some advice may seem very general in nature, it may actually be more specific than you think with respect to income levels, timing of the transaction, past history or a million other factors.

Given the above warning, the advice provided on this blog (and on the website) will tend to be general in nature. However, if you like what you see, please feel free to pass on some of the posts to your neighbors, friends, family and co-workers. If nothing else, it will serve as a discussion point. If you think it may apply to your specific situation, please give me a call, so we can discuss your specific needs.

At the bottom of each post, there should be a little envelope that you can click on. It will open up to a page that will ask for your e-mail address and the e-mail address for your friend. It will then send them a link, and they can access a copy of just that particular post. They won't have to search an entire blog to figure out the point of your e-mail.