It appears that individuals who want to claim the first time homebuyer tax credit may face a few unexpected hurdles this tax season. Among the issues homebuyers may face in the 2009 tax season are new documentation requirements and filing delays.
About the First-Time Home Buyer Credit
The First-Time Home Buyer Credit is a tax credit designed to encourage people to go out, buy homes and stimulate the economy. As an incentive to take advantage of the credit, first time home buyers (which constituted those who hadn't lived in their own home for three years) would receive an $8,000 credit from the IRS.
The credit was originally set to expire on Nov. 30, 2009; however, due to its popularity, it was extended to the middle of 2010. In addition, current homeowners were included in the credit. If a current homeowner was looking to upgrade to a bigger home, they could also take advantage of the credit; however, theirs would be lowered to $6,500. Still not bad!
Because of the popularity of the credit, many people went out and bought homes. However, now that it's time to claim credits for the 2009 tax season, it seems homeowners are running into problems.
IRS Issues
One issue those wanting to claim the credit are having is that they cannot file their taxes electronically if they do so. This slows down the refund process by several weeks. However, the IRS says there are new documentation requirements thrown into the mix that must be completed on paper. These new documents were added to cut down on the possibility of fraud.
Also, those who decided to file their claims early (in January) will see delays as well. The IRS has not started processing those 2009 tax returns that claimed the credit and won't until the middle of February. Again, to deter fraudulent activity, the IRS has to test its new systems and conduct checks that will take a bit of time.
How to Claim the Credit
However, for those who have yet to claim the credit, now's the time to gather the necessary paper work. You will need to complete a new Form 5405 and include with the 2009 tax return, the following documents if you're a first time home buyer:
- For home purchasers: A copy of the settlement statement
- For mobile-home purchasers without a settlement statement: A copy of the executed retail sales contract
- For newly-constructed homes without settlement statement: A copy of the certificate of occupancy
And if you're a current homeowner buying a new home, you'll need to prove that you lived in the old home for five consecutive years during an eight-year period ending on the purchase date of the new home and submit:
- A Form 1098, mortgage interest statement or substitute mortgage interest statements
- Property tax records or homeowners insurance records
Unfortunately, the claims process is taking longer than hoped. But after all is cleared up, many will receive a great reward for their expenditure.
