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WalletPop experts answer your tax questions

IRS formsTo help Americans and businesses struggling during this recession, lawmakers signed off on many tax changes that took effect for the 2009 tax season. One of the biggest was the American Recovery and Reinvestment Act, according to the Journal of Accountancy. Areas to pay attention to include the Making Work Credit Pay, education incentives and home buyer credit.

To help cut down on some of the confusion, WalletPop experts are on hand to answer your questions. This week, they tackle refinancing, filing taxes and capital gains.

:I have an interest only house payment. I would like to convert it to a 30-year fixed rate. What would you suggest as the best way to achieve this? The term for this is 10 years.
--Riley Little, 54, Chester, Va.

Answer from Cameron Findlay, chief economist at LendingTree
For a current mortgage that is based on an interest-only payment (IO) to be refinanced into a 30-year, Fixed Rate Mortgage (FRM), there are many considerations. Foremost is the qualifications. Assuming the IO was originally selected because a conforming mortgage was not an option, you're looking to refinance into a Federal Housing Administration (FHA) loan from Housing and Urban Development (HUD). Assuming you have made your mind up on this 1-4 unit property, it's simply a qualification process that requires 3.50% of the purchase price, and most of your closing costs will be included in the loan. Credit scores and Loan to Value will weight your ability to qualify. Given this has been an IO loan and home values have declined, I'll assume further you may owe more than the home is now worth. In this case, you will need to discuss terms with your current servicing company and evaluate options. Clearly, they do not want you to default, so they have an incentive to work through a payment program or modify the loan through one of the many government-sponsored loan programs. In the event you qualify and have saved 3.50% of the purchase price and can verify income and credit history as stable, your chances are good. We have an entire Web site dedicated to making good decisions called "Smart Borrowers" that you can visit to determine your eligibility.

I made $6,859 using my car for delivering flowers for a grocery store. I received a 1099Misc. as an independent contractor. I also made $3,000 from my W-2. What tax forms do I need, and what advice can you give me in filling out these forms?
--Don Moriarty, 56, Omaha, Neb.

Answer from Barbara Weltman of
The J.K. Lasser Institute
As an independent contractor, you'll need to complete Schedule C, which is part of your Form 1040. Report your income and expenses from the flower delivery activity on Schedule C. If you show a net profit, you'll need to also complete Schedule SE to figure self-employment tax (covering Social Security and Medicare taxes). Wages from Form W-2 are reported directly on Form 1040. You can learn more about reporting your income and expenses as an independent contractor from IRS Publication 334, Tax Guide for Small Business, and from J.K. Lasser's Small Business Taxes 2010.

Question: Every year I prepare my own taxes. We sold some land in 2009. I was told we had to file a Schedule D form for capital gains, but I also need a 1099b form to be able to fill that form out -- and I need to get that form from a broker who handled the sale or transaction. We did not use a broker when we made the transaction. We sold the land for the same price we paid for it in 2003, so there is no profit made. Is it necessary to report it?

Answer from Frank Armstrong, founder and CEO of Investor Solutions, Inc.
You must report a capital transaction on Schedule D even if there is no profit. That would imply at least information on cost basis and net proceeds. See IRS Publication 550, Page 65 for more information.

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