Advice for taking advantage of new tax breaks

By Chuck Weber - bio | email

DELRAY BEACH, FL (WFLX) - The year's not even over yet, but tax professionals say it's a good time to start getting your paperwork in order -- especially considering our tough economic times.

"Don't wait until April, and carry in your paperwork in a bag to your tax return preparer," advised Danny Underwood, a federally certified tax preparer in Delray Beach.

Underwood said to get the home buyer tax credits the government is offering to boost the housing market, or any tax deduction, you have to have the documentation. Underwood warned, "The days of saying, 'Oh, I gave $10 a week to my church, put $520 down as a charitable contribution,' are gone. You've got to have a receipt from the church or a canceled check."

Underwood also said if you lost your personal residence to foreclosure or short sale, there's a good chance you will not owe taxes on the canceled debt, but not in every situation. "If they used it to buy an automobile, or take a vacation, that was not qualified residence debt," said Underwood. "It may not be forgiven under the tax law. You may have to pay tax on it."

Negotiated a reduction in credit card debt? You may have to pay for that forgiven debt too. Underwood said, "The only way that's not reportable is if you file bankruptcy or if you're insolvent."

Underwood advises hiring a professional to sort out foreclosure situation, credit card debt renegotiations, and other complex situations. "You've got to save money, you've got to protect yourself," said Underwood. "There are some benefits out there, if you know what the law says and how to take advantage of it."