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Archive for Friday, April 16, 2010

Want to get audited? Apply for homebuyer credit

April 16, 2010

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— Here’s a good way to get audited by the Internal Revenue Service this year: claim the new homebuyer tax credit.

About a fifth of all IRS examinations done by mail in the past six months were for people claiming the credit, National Taxpayer Advocate Nina E. Olson told a congressional committee Thursday — the filing deadline for individual tax returns.

The audits mean big delays in getting refunds — as much as five months — just as Congress and the Obama administration hope that tax refunds will spur economic growth and the homebuyer tax credit will improve the housing market.

“The first-time homebuyer credit is a program that I personally would not have run through the tax code,” Olson, an independent watchdog within the IRS, said in an interview. The taxpayers need the money at the closing, and by definition, the tax code is a one-time-a-year filing event.

“Most people don’t close on their houses on April 15,” she said.

Congress passed an $8,000 credit for first-time homebuyers early last year to help jump-start housing markets as part of the massive economic recovery package. The program was so popular, Congress extended and expanded the program in November, opening it up to longtime homeowners who buy new homes.

Buyers who have owned their current homes at least five years are eligible, subject to income limits, for tax credits of up to $6,500. First-time homebuyers — or people who haven’t owned homes in the previous three years — can get up to $8,000. To qualify, buyers have to sign purchase agreements before May 1 and close before July 1.

To help prevent fraud, homebuyers are required to include a settlement statement, also known as a HUD statement, with their tax returns. Longtime homeowners have to provide proof they have owned their current home for five years. That could be done with old property tax bills, said Jackie Perlman, an analyst at the Tax Institute at H&R Block.

“Understand your obligation to provide documentation and provide it, it’s as basic as that,” Perlman said.

The documentation requirements mean that taxpayers applying for the credit cannot file their returns electronically, which also delays refunds.

Refunds take about 10 days for returns filed electronically in which the refund is deposited directly into a bank account. Refunds can take six to eight weeks for last-minute filers who use paper returns and receive checks.

As of April 2, the average refund was $2,950, up about $255 over last year.

The National Association of Realtors estimates that about 2 million first-time homebuyers took advantage of the credit last year, said spokesman Walter Molony. The Realtors project that about 900,000 additional first-time homebuyers will qualify for the credit this year, along with 1.5 million repeat buyers, he said.

Through March, the IRS had completed more than 650,000 correspondence exams in which taxpayers are required to share additional information by mail. Of those exams, or audits, about 140,000 were for people claiming the homebuyer credit.

Through the end of February, more than 1.8 million taxpayers applied for the credit. Of those returns, 260,000, or little more than 14 percent, were selected for audits, Olson said in written testimony to the Senate Finance Committee.

By comparison, the IRS completed a little more than 1 million correspondence exams last year, out of about 140 million individual returns filed.

Deputy IRS Commissioner Steven Miller said the agency has worked to publicize the requirements of the homebuyer tax credit as well as others that were part of last year’s economic recovery package.

Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, said the IRS has a responsibility to help taxpayers understand the new tax breaks.

“The IRS needs to effectively implement the many tax incentives we enacted last year to help jump-start our economy and create more jobs,” Baucus said.

Comments

Richard Heckler 4 years, 9 months ago

The banking industry and their friends are back promoting what took our economy down. Flood the markets even more with more houses and retail.

There are warnings of this on radio news frequently.

Reverse mortgages are coming up on the horizon as a huge problems =

Commercial real estate is becoming a concern = too much plus people owe more than properties are worth.

The housing/real estate industry is no longer the golden goose.

The USA is over retailed.

14-15 million are still out of work. Most of these jobs will not return cuz our legislators are watching them go abroad.

The USA needs NEW INDUSTRY instead of trying the squeeze blood from a turnip that no longer has the blood.

FOCUS on new industry.

feetup 4 years, 9 months ago

totally agree with you merrill. I'm watching our jobs go to CANADA of all places. The jobs are going and ain't comin' back. The blue collar guy is screwed as there are fewer and fewer of the line of work im in and no clue or desire to work in a cubicle as an I T person or a health care person. WE MUST HAVE NEW INDUSTRY!!!!!!! AND SOON!!! BOA - scandalous banking tactics - i know first hand. Wont be any retail if we can buy anything. I heard on the news yesterday the government was "optimistic" because consumer spending was up in March. OF COURSE spending was up in march! Tax refunds arrived in the hands of those that needed it most and we all went out and bought stuff we needed that our checks wont cover. Stuff like food, and clothing for the kids. Me? it was pay off some bills and get new jeans and socks for work. PS the irs can kiss my backside. Go audit the companies sending our jobs away. sorry for the rant but this one hit a nerve...

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