Transcription
First-TimeHomebuyer CreditPresented byEarned Income Tax Credit/PreRefund OfficeandTaxpayer Advocate Service
Homebuyer Credit Laws The Housing and Economic RecoveryAct of 2008 (HERA) The American Recovery andReinvestment Act of 2009 (ARRA) The Worker, Homeownership andBusiness Assistance Act of 2009(WHBAA) Homebuyer Assistance andImprovement Act of 2010
Homebuyer Assistance andImprovement Act of 2010 Eligible Taxpayers who contracted tobuy a home before the end of April 2010now have until Sept 30, 2010 toclose on the deal. President Obama signed this act intolaw July 2, 2010
WHBAA 2009 and FTHBC May be first-time homebuyer or longtime resident AGI limits increased Purchase price cannot exceed 800,000 Must be age 18 or older (for MFJ, onlyone spouse must be age 18 or older)
WHBAA 2009 and FTHBC Must be main home Buyer or spouse (if MFJ) cannot be adependent of another person Cannot be acquired from spouse orrelated person or a related person ofspouse
Math Error AuthorityThe Worker, Homeownership andBusiness Assistance Act of 2009gave IRS the authority to adjustreturns using Math Error Authority
Common EligibilityQuestionsQ. What is considered aprimary residence?A. Generally, theresidence used themajority of the yearwill be considered thetaxpayer’s principalresidence.
Common EligibilityQuestionsQ. Can the credit be claimed prior to closing?A. No. This is a hardconcept for sometaxpayers - someadvertisements maylead a taxpayer tobelieve they canclaim the credit inorder to buy ahome.
Common EligibilityQuestionsQ. What about land contracts?A. This one is a little complicated .
Common EligibilityQuestionsQ. Who is considered arelated person?A. The law (IRC36(c)(5)) specificallystates that a familyonly includesspouse, ancestorsand linealdescendents.
Common EligibilityQuestionsQ. Can the credit be claimed on a homeacquired by gift or inheritance?A. No, there must be a purchase from anunrelated party.
Common EligibilityQuestionsQ. Are there exceptions for militarypersonnel?A. Yes. Under WHBAA, members of themilitary and intelligence community servingoutside the U.S. have an additional year topurchase a principal residence in the U.S.and qualify for the credit.
Requirements to File Form 5405 Claim the First-Time Homebuyer Credit Disposition of home Repayment of credit
Common FTHBC Filing Errors Credit claimed prior toclosing or occupancy ofhome Incomplete/incorrect Form5405 MFS taxpayers both claimthe full credit on separatereturns Taxpayer owned home inlast three years (notapplicable to the LongTime Resident credit)
Audit Documentation Copy of closing contract (HUD-1)Most recent mortgage statementOccupancy permit, if newly-constructedAt least two of the following showing nameand address:– Current driver’s license or state ID– Recent pay statement– Recent bank statement– Current automobile registration
Repayments of Credit HERA (2008 purchases) - repaid in 15equal, annual installments beginning 2010- If the home ceases to be a main home thismay cause an acceleration of repayments ARRA/WHBAA (2009/2010 purchases) –no repayment unless a repayment triggeroccurs within 3 years WHBAA - provides an exception forcertain military and intelligence personnel
Repayment Trigger Events Home ceases to be main home before endof 15-year recapture period Home ceases to be main home within 36month period from purchase date Primary residence is sold (or otherwisedisposed of) to an unrelated individual repayment is limited to gain realized
Repayment Trigger Events Sale of home to a related person Primary residence is destroyed orcondemned and taxpayer does notacquire new home within 2 years The entire home is converted tobusiness or rental property
Special Events That WaiveRepayment Death of taxpayer Primary residence destroyed orcondemned - taxpayer acquires newhome in 2 years Primary residence sold to unrelatedindividual - no gain on the sale
Special Events That WaiveRepayment Individuals (and spouses, if married) onqualified extended duty outside U.S. home disposed of or ceases to beprimary residence Primary residence is foreclosed andthere is no gain
Recapture and RepaymentStrategy Reminder notices to taxpayers– 15 year annual reminder notice totaxpayers who purchased main home in2008– 3 year annual educational notice totaxpayers who purchased main home in2009/2010 Utilize math error authority for 15 yearrepayment
Recapture and RepaymentStrategy Assess use of third party data sourcesto validate purchases and identifyunreported dispositions Expand post refund audits for thecampus and the field Continue to identify schemes andpursue investigations
Penalties Penalties may be imposedfor negligence, substantialunderstatement of tax,filing an erroneous refundclaim and fraud Criminal penalties may beimposed for tax evasion ormaking a false statement
To Contact TAS- Call 1-877-777-4778- Visit http://www.irs.gov/advocate- File Form 911, Request for TaxpayerAdvocate Service Assistance (AndApplication for Taxpayer Assistanceorder)For Updated Information- Visit http://www.taxtoolkit.irs.gov
Resources IRS.gov– Search “ARRA information center”– Search “first time homebuyer credit” Publication 523, Selling Your Home Form 5405, First-Time HomebuyerCredit Publication 530, Tax Information forHomeowners
Thank you! Questions?
May be first-time homebuyer or long- time resident AGI limits increased Purchase price cannot exceed 800,000 Must be age 18 or older (for MFJ, only one spouse must be age 18 or older) WHBAA 2009 and FTHBC Must be main home Buyer or spouse (if MFJ) cannot be a dependent of another person Cannot be acquired from .
