WASHINGTON — The Internal Revenue Service (IRS) recently released the new form that eligible homebuyers need to claim the first-time homebuyer credit this tax season, and also announced this week that processing of those tax returns will begin in mid-February. The IRS also announced new documentation requirements to deter fraud related to the first-time homebuyer credit.
The new form and instructions follow major changes in November to the homebuyer credit by the Worker, Homeownership, and Business Assistance Act of 2009. The new law extended the credit to a broader range of home purchasers and added new documentation requirements to deter fraud and ensure taxpayers properly claim the credit.
With the release of Form 5405 (www.irs.gov/pub/irs-pdf/f5405.pdf), First-Time Homebuyer Credit and Repayment of the Credit, and the related instructions (www.irs.gov/pub/irs-pdf/i5405.pdf), eligible homebuyers can now start to file their 2009 tax returns.
The IRS expects to start processing 2009 tax returns claiming the homebuyer credit in mid-February, after it completes the updating and testing of systems to meet the law’s new requirements.
Some of these early taxpayers claiming the homebuyer credit may see tax refunds take an additional two to three weeks.
In addition to filling out Form 5405, all eligible homebuyers must include with their 2009 tax returns one of the following documents 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 the properly executed 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; or
• 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.
In addition, the new law allows a long-time resident of the same main home to claim the homebuyer credit if they purchase a new principal residence. To qualify, eligible taxpayers must show that they lived in their old homes for a five-consecutive-year period during the eight-year period ending on the purchase date of the new home. The IRS has stepped up compliance checks involving the homebuyer credit, and it encourages homebuyers claiming this part of the credit to avoid refund delays by attaching documentation covering the five-consecutive-year period:
√ Form 1098, Mortgage Interest Statement, or substitute mortgage interest statements;
√ property tax records; or
√ homeowner’s insurance records.
The IRS also notes that the new documentation requirements mean taxpayers claiming the credit cannot file electronically and must file paper returns. Taxpayers still can 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.
Normally, it takes about four to eight weeks to get a refund claimed on a complete and accurate paper return, for which all required documents are attached. For those homebuyers filing early, the IRS expects 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 their refund. In addition, taxpayers can use the Where’s My Refund? service to track the status of their refund.
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 at www.irs.gov.
This information was provided courtesy of the Internal Revenue Service.