FTHB Credit

[OtisMozzetti]

Form 5405

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Thought it was out at first, but then read that disqualifiers are spouse, parents, grandparents, children, grandchildren only. This relative is an aunt, so no problem (that's right isn't it?).
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Form 5405 has the instructions included, and that provides an explicit definition of "related" person. It says that consists of "your spouse, ancestors(parents, grandparents, etc.) or lineal descendants". Also, certain corporations and partnerships are related.

Even your brother, who may have the same last name, would not be considered a related party according to what it says on that Form.

Unless one thinks that an aunt is an ancestor, then an aunt would not be considered a related party for these purposes.

[Black Bart]

Thanks, Dave

Why not explain your concerns over the risk and work required and explain that if it happens, you will be charging whatever hourly fee for any audit work. If the taxpayer knows up front that an audit is not unlikely and that you charge for the work it won't come as a surprise later on.

I guess that's about all I can do, but sometimes you practically have to "adopt" them on such matters and spending the summer wallowing with it is definitely unappealing.

Sighhh.....the things I do for money.

By the way, do you agree about the aunt being "unrelated" for purposes of this credit?

Has anybody else here received an IRS letter requesting closing statement, documents, etc. (like the ATX guy)?

[David1980]

Why not explain your concerns over the risk and work required and explain that if it happens, you will be charging whatever hourly fee for any audit work. If the taxpayer knows up front that an audit is not unlikely and that you charge for the work it won't come as a surprise later on.

[Black Bart]

To do or not to do (the tax return), that is the question.

I haven't done any First-Time Homebuyer Credit returns yet and have generally been avoiding/running them off (don't want to risk the penalty liability on $8K mistakes).

Got one in recently -- single, no prior house, $8K qualifier -- everything good to go except: he bought it from a relative. Thought it was out at first, but then read that disqualifiers are spouse, parents, grandparents, children, grandchildren only. This relative is an aunt, so no problem (that's right isn't it?).

But, John H. recently mentioned that an ATX board poster said IRS wrote his client asking for closing statement and notarized documents. Which is okay except both his and auntie's identical last names are on them. I'll get $100 for this wages-only 1040X, but I see maybe a long-running back-and-forth with IRS -- they ask for docs, I send, they catch same-names, demand proof they're NOT "related" (beats me how I'd do that), and on and on and...

High fee/low fee, many clients feel they've bought a lawyer and expect you to get that refund you claimed at no extra charge no matter how much time and trouble it takes. His family are good clients, but with the possible complications (I've never been particularly lucky), I'm inclined to send him away.

Thoughts?