There is no need to pay inheritance tax if you happen to be the spouse of the deceased. A widow or widower is not expected to pay inheritance tax for recieving money from his/her deceased spouse’s estate. Inheritance tax is not collected on the money received from life insurance. The money that is received as insurance amount does not come under taxable income and is not considered for the payment of inheritance tax.

When the value of the estate is less than 2 million dollars there is no need to pay tax for the inheritance received from the estate. This tax law is presently subject to Act of Economic Growth and Tax Reconciliation of 2001. This law holds good till the year of 2008 ( no inheritance tax upto 2 million dollars), in the year 2009 the limit will increase to 3 million dollars. The Act is all set to be repealed altogether in the year of 2010. This is subject to the Congress and unless it acts you could be levied tax on inheritance as low as 1 million dollars.

Inheritance tax cannot be avoided by acquiring money from a person before he dies. If a relative of yours gives a part of his fortune before he dies, then the amount recieved will still be considered as part of inheritance and may be taxed. This comes under the category of gift tax. A person can give away amount upto $12,000 to a person without incurring any gift tax. A couple can donate double the amount. However a person can only recieve a million dollars before it starts to fall under the category of inheritance law.

A lender forecloses on a property and then sells the property for less than the outstanding mortgage balance. There still remains an unpaid
mortgage debt, which is the difference between the outstanding mortgage balance and the sales price. What usually happens next is the lender forgives the unpaid mortgage balance.Before the new tax law, the unpaid mortgage balance was considered taxable income leaving the homeowner with an income tax bill.

After the new tax law, the unpaid mortgage balance is excluded from taxable income up to $2 million.What is a mortgage renegotiation? Before starting the foreclosure process, a lender typically performs a cost-benefit analysis of foreclosing on a property. The result may be that the foreclosure is not in the lender’s best interest, which isn’t uncommon since the typical foreclosure nets the lender only about 60 cents on the dollar. In this case, the lender may renegotiate the terms of the mortgage to get to a lower monthly payment for the homeowner.

For example, one renegotiation workout plan organized by the Bush Administration and a group of lenders would bypass adjustable rate resets for up to five years. This type of renegotiation would typically result in forgiveness of indebtedness income creating taxable income to the homeowner if it were not for the new law.

What type of debt qualifies for the exclusion? The new law applies to debt incurred for the acquisition, construction or substantial improvement of the principal residence of the taxpayer and is secured by the residence. It also includes refinancing of such debt to the extent that refinancing does not exceed the amount of the original indebtedness.

What do homeowners need to watch out for? Homeowners who did “cash-out” refinancing and did not put the funds back into the home but, instead, used the funds to pay off credit card debt, tuition, medical expenses, or other expenditures. The “cash-out” amount is indebtedness income and fully taxable unless other exceptions are met.

What qualifies as a principal residence? A principal residence is the one in which the taxpayer lives most of the time. However, the determination of a taxpayer’s principal residence is based on “all the facts and circumstances.” The definition is the same as the home sale gain exclusion.

This rules out vacation homes, second residences and rental properties, even if the properties were purchased with equity from the taxpayer’s principal residence.When is the new law effective? This special relief is available for three years beginning January 1, 2007, and ending December 31, 2009.

What other real estate related benefits are included in the new tax law?Mortgage Insurance Deduction. The new law extends the mortgage insurance deduction to amounts paid or accrued after December 31, 2007, but only with respect to contracts entered into after December 31, 2006, or prior to January 1, 2011.

Survivor’s Home Sale Exclusion The new law extends the time in which a surviving spouse may use the married filing joint $500,000 home sale
gain exclusion before being treated as a single individual entitled only to a $250,000 exclusion. Before the new tax law, a surviving spouse was could use the $500,000 exclusion only to the extent he or she could file a joint return with the deceased spouse’s estate, which is only in the tax year the spouse dies.

Starting January 1, 2008, the surviving spouse can use the $500,000 gain exclusion up to two years following the date of death of the spouse.

What’s the catch? As you have read, this new tax law contains major tax reductions, which are offset by several tax increases included in the new law. These increases include:

An increase in the failure to file penalty for partnerships from $50 to $85 per partner per month, up to 12 months

A new failure to file penalty for S corporations of $85 per S shareholder per month, up to 12 months

Increases in corporate estimated tax payments for corporations with $1 billion-plus assets, by 1.5 percent to 117.25 percent for payments due in July, August and September 2012.

Another consideration must be the attorney’s fee. Now, be aware that legal representation may not be cheap. However, with you attempting to remedy the tax situation yourself, the cost to you could be multiple. First, consider the cost. The actual attorney fee will vary depending on location, the nature and complexity of the case, the particular lawyer involved and the tax attorney’s hourly rate. So before you jump and choose a tax attorney that seems ideal, to prevent delay and disappointment, make sure that you can afford the representation.

Contact a few tax attorneys and ask about their fee schedule, find a payment arrangement that fits your situation. Most reputable tax attorneys will require a down payment for work performed, this is known in the industry as a “retainer”. The retainer amount will vary. Part of the retainer will be refunded if the total amount is not used.

Here are some common fee structures:

* Fixed or Flat Rate: This is an arrangement were specific legal services are covered by set fees.

* Hourly Rate: Very common. Fees will be assessed based on the time the tax attorney spends on your legal issues.

* Contingency Fee: Is a fixed percentage of the amount of recovery the tax lawyer is able to secure, which will serve as the attorney’s fee. However, there are other expenses such as court costs, filing fees, copies, phone charges and more that will be your responsibility.

A successful tax lawyer with a proven track record will likely have a background in tax law, either as a course of study or in service in the IRS. They will also probably have financial experience in some other field such as a Certified Public Accountant. If you have a tax issue involving the IRS, make sure that you choose a tax attorney that is licensed to represent clients before the IRS.

In choosing the right tax attorney you want to know if the tax attorney will handle your case personally or refer it out. How many cases has the tax lawyer or firm handled. What is the ratio of cases that went to trial to those that were settled and the outcomes of those cases. Ultimately, it is essential to choose a tax attorney that you can trust to represent your interest and bring relief to your tax issues.

The fact is that tax attorneys come in different shapes and sizes, and they also come with a range of skills and expertise. Choosing the right kind of tax law attorney to handle your case is important so you can not only save time and money but you can also have the peace of mind of knowing that you have chosen the best tax law attorney to represent you. In order to know the different types of tax law attorneys, you have to know the different types of taxation laws and tax problems and then find the tax law attorney with the greatest amount of knowledge, experience, and expertise in that particular field.

First of all there is the tax planning attorney. A tax planning attorney is an IRS tax law attorney that specializes in tax planning and will assist in reviewing and structuring your financial affairs in order to prevent the IRS from troubling you. Then there’s the tax controversy attorney. Such a tax law attorney is needed if you already have a pending case filed in court because this type of tax law attorney is experienced in the courtroom and he or she is used to defending clients.

The property tax law attorney is an attorney with expertise in property tax, and they are the ones to look for when you wish to renegotiate your property taxes with the IRS and ensure that you are paying the right amount.The bankruptcy tax law attorney specializes in handling bankruptcy cases. These types of attorney’s help their clients file for bankruptcy and ensure that all the information their clients provide about their finances is accurate and valid in order to achieve a positive outcome.