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Update on First Time Homebuyer Credit and Tax Refunds
Posted By susanne On March 26, 2011 @ 12:07 AM In Business Development,Business Development & Best Practices,Business Outlook,Finance and Economy,Finance, Economy & Government Issues,Real Estate,Real Estate Consultants,Real Estate Information,Real Estate News,Real Estate Trends,REALTOR Marketing,Sales & Marketing Tips,Today's Marketplace,Today's Top Story,Today's Top Story - Consumer | Comments Disabled
RISMEDIA, March 26, 2011—The IRS recently released information on processing issues that are impacting a small percentage of tax returns involving repayment of the First Time Homebuyer Credit (FTHB), primarily involving 2008 home purchases. While most of these returns are processing normally, the IRS recognizes the hardship caused by delayed refunds, and it has assigned additional staff and resources to address the issues promptly.
It is important to note that taxpayer returns claiming a home purchase in 2010 are not affected, and those returns are being processed as are the vast majority of other homebuyer returns.
Here’s an update on the source of the processing issues:
1. Married Filing Joint taxpayers who received the FTHB credit on a 2008 purchase
There seems to be an identified processing issue primarily impacting refunds for married couples filing joint returns this year who received the First Time Homebuyer credit on their 2008 tax return. This credit was an interest-free loan, and must be paid back beginning this year under the provisions of the law.
This issue, related to Form 5405, First-Time Homebuyer Credit and Repayment of the Credit, primarily impacts Married Filing Jointly taxpayers who filed their tax returns this year before Feb. 22. The IRS is working aggressively to manually process tax returns for this group of taxpayers. It expects most, if not all, of these refunds to be available by April 5, and others the following week. (The date assumes that there are no other issues with their return, and that their refunds are not subject to any offsets for unpaid federal taxes or other debts.)
2. Taxpayers who received the FTHB credit and are now reporting the sale or disposition of their home
3. Taxpayers who received the FTHB credit and are attempting to pay back more than the amount required (typically $500)
These two issues require changes to IRS’ core tax processing systems. The IRS is actively working on the development and testing of the required changes that will allow these impacted tax returns to be processed and appropriate refunds issued. The IRS does not currently have a definitive date for when these changes will be complete, although it will be in April.
What should taxpayers do?
The IRS understands that taxpayers affected by this issue are anxious to get the status of their refund. For those who have already filed, no action is necessary. They can check “Where’s My Refund” at www.IRS.gov for updates. Because the IRS is already aware of this issue and is taking corrective action, there is no need to call.
For those who have not yet filed and are making a repayment of a First Time Homebuyer Credit this year, there is a simple step taxpayers can take to help speed processing. Couples filing a joint return for tax year 2010 who received the credit on their jointly filed 2008 tax return should file two 5405 forms, one for each taxpayer. For couples filing a joint return for 2010 but who had a different filing status in 2008 and only one spouse received the credit, the IRS recommends filing one Form 5405 for the taxpayer who received the credit.
For more information visit www.IRS.gov .
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