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Saturday, January 23, 2010

NO E-File for First Time Buyers Tax Credit



First time home buyers waiting for the $8,000 tax credit and eligible buyers for the $6,500 tax credit will have to wait a little longer for their refunds.

Due to fraudulent claimers, the IRS has been forced to change the system. Eligible first time home buyers claiming the tax credit cannot e-file to receive the credit and must file a paper return with attached proof of purchase resulting in about a 4 month delay in processing.

Form 5405 and Supporting Documents

The IRS has recently released the new form 5404 that eligible first time homebuyers will need to file with their 2009 tax returns to claim the credit this tax season. Filers must also include one (1) of the following documents with their paper return (no e-file) to receive the credit:

A copy of the settlement statement showing all parties' names and signatures, property address, sales price, and date of purchase. Normally, this is Form HUD-1, Settlement Statement.

For mobile home purchasers who are unable to get a settlement statement, a copy of the executed retail sales contract showing all parties' names and signatures, property address, purchase price and date of purchase.

For a newly constructed home where a settlement statement is not available, a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.

Now for the eligible long time residents who have purchased a new principal residence claiming their portion of the tax credit. The IRS has had to beef up its checks and balances on this also. You too must mail in a paper return (no e-file) to receive your credit. To avoid further refund delays home buyers are encouraged to attach the following documentation with regards to showing proof of the five-consecutive-year period during the eight-year period ending on the purchase date of the new home.

*Form 1098, Mortgage Interest Statement, or substitute mortgage interest statements,
*Property tax records or
*Homeowner’s insurance records.

How Long?

According to the IRS the processing of these tax returns will begin in mid-February after they have completed their system updates. Normally, it takes about four to eight weeks to get a refund claimed on a complete and accurate paper return with all required documents attached. Some early taxpayers claiming the homebuyer credit may see tax refunds take an additional two to three weeks. The IRS estimates that the first refunds based on the homebuyer credit will be issued toward the end of March. The IRS encourages taxpayers to use direct deposit to speed up their refund.

Tax filers can still use IRS Free File to prepare their returns, but the returns must be printed out and sent to the IRS, along with all required documentation. In addition, Where’s My Refund is still available on IRS.gov to track the status of refunds. More details on claiming the credit can be found in the instructions to Form 5405, as well as on the First-Time Homebuyer Credit page on IRS.gov. If still have additional questions please consult with your Accountant or Tax Preparer.

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