subject: New Form Required for First-Time Homebuyers Tax Credit [print this page] The first-time homebuyers tax credit has been credited with stabilizing the anemic housing market during the latter part of 2009 and first quarter of 2010. Alas, the credit has been claimed by many who have no right to do so according to the IRS. Given this, the agency has announced it will be auditing many of the claims. It has also just issued a new form that people claiming the credit must file.
The new form in question is known as Form 5405. It was created pursuant to the legislation that extended and expanded the first round of the tax credit, legislation known as the Worker, Homeownership, and Business Assistance Act of 2009. The new form fights the fraud problem by requiring homeowners to attach and file documentation regarding the purchase of the home they are claiming the credit for. Because of this, the taxpayers are barred from e-filing their tax returns. Also, the processing of any tax refunds they might expect will take longer, usually four to eight weeks.
So, what is involved in this Form 5405? The form flushes out the specific information of the purchase. The information must then be backed up with one of two types of attached documents substantiating the information claimed. The two types of documentation are:
A copy of the closing or settlement statement showing all the names and signatures of the parties to the agreement, sales price, the address of the property address, and date of purchase.
Newly Built There is often not a settlement statement available for new home purchases. As a result, the IRS will accept a copy of the certification of occupancy. It must show the taxpayers name, address of the property and the date of certification.
The new version of the tax credit has been expanded to allow current homeowners to make a claim if they buy a new primary home and sell their old one. To make the claim, the taxpayer must show documented proof that they lived in the former primary home five out of the previous eight years or longer. Without said documentation, the claim will be denied. The appropriate documentation can include property tax or homeowner insurance records as well as copies of Form 1098 mortgage interest statements.
The expanded first-time homebuyers tax credit is a real boon to those looking to buy. When taking advantage of it, just make sure you have the necessary documentation lined up in case the IRS decides to verify your claim.
New Form Required for First-Time Homebuyers Tax Credit
