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Homebuyer credit – 2 weeks left

Tuesday, September 14th, 2010

To claim the first-time homebuyer credit or the long-time homebuyer credit, you must close the purchase of your new principal residence by September 30, 2010, the new deadline extended by Congress from June 30, 2010. The binding contract for the purchase must be dated on or before April 30, 2010. If the residence is under construction, a certificate of occupancy must be issued before September 30.

Don’t expect much leniency if you miss the deadline, and don’t expect to receive the credit quickly. There are several reasons why:

  • The sheer volume of credit claims has created a huge backlog. While some taxpayers have received approval of the credit within a few weeks, many have waited months for their credits to be processed.
  • Many fraudulent and abusive claims have been filed, leading the IRS to scrutinize every claim more carefully, which takes more time.
  • The IRS is requiring the submission of extra documents so they can make sure each claim is legitimate.

You can increase your chances of a less troublesome filing process by submitting the following with Form 5405 to claim the credit:

  • A copy of the HUD-1 settlement statement or similar document;
  • For mobile home purchases, a copy of the retail sales contract;
  • For new construction, a copy of the certificate of occupancy.
  • The document must include all parties’ names and signatures, property address, sales price, and date of execution.

If you are claiming the long-time homebuyer credit, you must prove that you lived in your old home at least five consecutive years in the last eight. To do this, submit for five consecutive years:

  • Forms 1098 or other mortgage interest statements,
  • Property tax records, or
  • Homeowners insurance records.

You have three options for claiming the credit:

  • If you extended your 2009 return filing date from April 15 this year, you may claim the credit on this return;
  • If you have already filed your 2009 return, you may file an amended return (amended returns often receive more scrutiny); or
  • You may claim the credit on your 2010 return when you file next year.

Call us to help you determine your best options for claiming the homebuyer credit and properly document your claim. If you extended your 2009 return, send us your tax information right away so we can prepare it in time for the October 15 deadline. We look forward to hearing from you.

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