First-time homebuyer credit extended
Present homebuyer credit expanded
A flurry of activity has occurred this past week in our federal government. Last Friday, Nov. 6, President Obama signed into law the Worker, Homeownership and Business Assistance Act of 2009. The main provisions of the bill extend the first-time homebuyer credit and expand the credit to present homebuyers. Our federal government has been in the habit lately of extending and expanding—mainly expanding. However, in this instance, I think this extension and this expansion are good things.
The basics of the extension are two-fold. First, the $8,000 first-time homebuyer credit is extended to include purchases made from December 1, 2009, through April 30, 2010. Second, the credit will apply to contracts that are written as of April 30 as long as the actual close occurs before July 1, 2010.
Under the current first-time homebuyer rules, the closing had to occur by this November 30. Now, taxpayers effectively have until next July to get all
of their ducks in a row and get the $8,000. For purchases occurring in 2009, taxpayers will have
the continued option to either file an amended 2008 return or wait to file the credit with their original 2009 return this coming tax season. This is actually an important decision.
Currently, it is taking the Internal Revenue Service about 20 weeks to process an amended 2008 return and get the credit back to the taxpayer. They are checking out each credit carefully to make sure the applicant really does qualify for the credit. It goes without saying that $8,000 will bring out the worse in some people.
So far, the IRS has prosecuted 153 taxpayers and tax preparers for filing fraudulent claims and they have another 800-plus claims that may be prosecuted. They have about 90,000 claims currently in process.
As part of the amended return submission, we are attaching a copy of the closing document that clearly shows the closing date, the purchase amount, and the buyer. The buyer must coincide with the first-time homebuyer. Along with the closing document, we are also attaching a notarized statement from the buyer stating that the buyer has not owned a home in the past three years and does qualify for the credit. Hopefully, these attachments will keep the processing time down to 20 weeks.
The other option is to file the claim with the original 2009 tax return. This original return will be e-filed and theoretically should allow for faster processing. However, if the IRS is checking every credit claim, this could set up even more of a delay than the 20 weeks we are now incurring. The reason is that when returns are e-filed, we have no process for attaching the closing document or the notarized statement. Based on the IRS’ present processing methods, they will not send the $8,000 without a copy of the closing document. The IRS will write the taxpayer, asking for a closing document, and the taxpayer will send it back. That response gets in line with all of the other responses. To get a check in 20 weeks might be a miracle.
The downside of filing the credit with the original return is the IRS will probably also hold up any potential regular refund the taxpayer had coming. For example, our taxpayer would have a $2,600 refund coming and the first-time homebuyer credit of $8,000 makes the total refund increase to $10,600. If the IRS ties up the credit for 20 weeks, it may also tie up
the $2,600—not good. In this instance, we would probably file the regular return and get the $2,600 back in two to three weeks and then file an amended return—ask for the $8,000 and hope it is processed in less than 20 weeks.
The expansion portion of the bill gives all homebuyers who have owned and occupied a principal residence for five consecutive years out of the last eight years the ability to buy a new principal residence and get a $6,500 refundable credit. Only houses with a purchase price of under $800,000 will qualify. That will cover all of the houses in my neighborhood and most houses, period. Purchases made between Nov. 7, 2009 (the day after the date the bill was signed) and April 30, 2010 will qualify. This will help taxpayers immediately and should help to move some of that unsold housing inventory into the sold category. This is Jerry Coon signing off.
Jerry Coon is an Enrolled Agent. He owns
Action Tax Service on Northland Drive in Rockford.
His telephone number is (616) 866-4704 and
his e-mail address is firstname.lastname@example.org.
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