Those of you lucky enough to take advantage of the First-Time Hombuyer Tax Credit might be getting a not-so-lucky tax assessment. Somehow the IRS managed to record the wrong purchase date for 73,000+ homebuyers cashing in on the credit.
This IRS screw-up could be costly for the unfortunate taxpayers affected. When the First-Time Homebuyer’s Tax Credit appeared in 2008, it was structured as 15-year, no interest loan, with the 1st of the 15 installments due at the time of filing the taxpayer’s 2010 tax return. The Credit in 2009 and 2010, however, does not require repayment unless either the home is sold within 36 months of the purchase date or the home ceases to be the taxpayer’s primary residence.
The problem arises if the IRS recorded a 2008 purchase date for a home purchased in 2009 or 2010. Accordingly, the IRS will be trying to collect the first installment payment by April 15, 2011 from the 2008 first-time homebuyers–including those with an improper 2008 purchase date.
Finally, here’s a few pointers for those of you who took advantage of the Credit in 2009 or 2010 and receive a deficiency notice from the IRS:
- Don’t freak out!
- Contact the IRS immediately.
- Find out where the tax assessment is coming from (i.e. your 2007 1040).
- Be prepared to dig up your closing documents to correct the recording date.
- If you cannot resolve the issue by following the above steps, you may need to contact a tax attorney.