FTHB: Documentation questions

[LCP]

The new Form 5405 is out and I'm getting ready to amend 2008 for a long-time resident ..............

1. The property was sold on a land contract by an individual without the aid of a real estate agent. I don't think a HUD-1 form was completed. Will the land contract suffice?

2. The LC has an 11/5/09 date on the first line which is also the "effective date" per the agreement. The buyer and seller signed and had it notarized on 11/13. Problem?

3. The instructions to Form 5405, in the What to Attach to Your Return section starts with ..."If you claim the credit on your 2009 (or later) original or amended tax return, you must attach the following......." There is nothing at all on what to attach to an amended 2008 tax return. Is there a distinction or did they write the instructions poorly??

4. An associate came up with a list of four identifying documents (DL, pay stub, bank statement and auto registration) two of which should be included...... presumably with the new adress to prove it is the main home. Any idea where that may have come from??

TIA

[Dusty2004]

Had problems with one

I had major problems with verifying documents for the FTHB credit I filed with the 2008 taxes. Here is the bottom line of what they said they would accept.

The HUD-1 statement signed by all parties.

2 months worth of Mortgage Statements.

2 Months worth of Utility Bills

Raised seal showing the Transfer Taxes.

Dusty

[BP.]

An associate came up with a list of four identifying documents . . .

Any idea where that may have come from??

Graciously provided to us by another board member: (thx gretel)

http://www.irs.gov/pub/irs-pdf/f886hfth.pdf

[LCP]

I believe this answers my land contract question. I hope the absence of a HUD-1 isn't going to cause a delay though ....................

October 11th, 2009 at 1:14 pm
A contract for Deed may received the Tax Credit and here is the copy and paste from the IRS website:

http://www.irs.gov/newsroom/article/0,,id=206291,00.html

Q. Can a taxpayer claim the first-time homebuyer credit if the purchase is pursuant to a seller financing arrangement (for example, a contract for deed, installment land sale contract, or long-term land contract), and the seller retains legal title to secure the taxpayer’s payment obligations?

A. If the taxpayer obtains the “benefits and burdens” of ownership of a residence in a seller financing arrangement, then the taxpayer can claim the credit even though the seller retains legal title. Factors that indicate that a taxpayer has the benefits and burdens of ownership include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property. (New 7/2/09)

[Jesse]

Just wanted to say thanks...

Most members on this board provide such useful answers which really aid in the "real world" of income tax preparation when the brain starts to get a little tired after a long day. I have a client with a land contract purchase, did a search of threads and just like that I have my answer with a link to boot!

[dsi]

I filed a 2008 1040X for a client who purchased a home in Apr of 2009. Client later received a notice asking for a HUD statement. We sent it in. IRS subsequently denied the credit. I'm now thinking that we forget the 2008 1040x, and instead claim the FTHBC on the 2009 tax return. Any opinions?

[Burke]

Why did the IRS deny the credit? Did they not receive the HUD-1?

[BP.]

Yes, would love to know the denial reason, please. Did a few 2008 1040X's for purchases in 2009- all refunds received.

[Jesse]

The taxpayer must have received a letter of denial, which is what I would respond to. I have a client that was denied because IRS claims they are not a FTHB because they sold a home in 2006.

I don't know if they are matching up to real estate transfer records? These people sold a piece of land in 2006 but there was no buildings on it. We sent copies of tax bills and HUD statement from the sale as the tax bill had a breakdown of assessment and improvements = zero. That was just a couple weeks ago and haven't heard back yet.

[BP.]

I have a client that was denied because IRS claims they are not a FTHB because they sold a home in 2006.

I don't know if they are matching up to real estate transfer records? These people sold a piece of land in 2006 but there was no buildings on it.

Interesting. Thanks for the info. Please keep us informed & good luck.

BTW- I am definitely seriously increasing my fee for FTHBC with all the doc req'd as well as the follow up that now seems inevitable.

[Jesse]

Just for your information too - I had an unmarried couple in which the secondary listed on the loan took the entire credit. They received a request for more information to provide proof of ownership so we sent past 3 months mortgage bills with her name on it, property tax bill with her name on it and home insurance bill with her name on it. Her name was on the HUD statement we sent originally.

Again I thought because the primary was listed first on the real estate transfer?

[BP.]

They received a request for more information . . . so we sent past 3 months mortgage bills . . .

I anticipate having clients close this spring and wanting to file for FTHBC ASAP w/o 3 mos of proof docs behind them yet. I guess if the HUD-1 isn't sufficient, by the time a request for more info comes in, a few months will have elapsed. I will let folks know they need to save these proof docs as the months go by.

[dsi]

I filed a 2008 1040X for a client who purchased a home in Apr of 2009. Client later received a notice asking for a HUD statement. We sent it in. IRS subsequently denied the credit. I'm now thinking that we forget the 2008 1040x, and instead claim the FTHBC on the 2009 tax return. Any opinions?

Reason for Denial: Form 896-A.
The documentation you provided did not VERIFY your claim for the FTHBC. The property listed on the HUD statement does not appear to be your PRINCIPAL residence. What? My client is the only name listed as the buyer. What is going on here?

[NotEasy]

If you are filing a 2009 amended tax return for the FTHB credit, do you attach those documents now or wait until they send a notice to ask for them?

[Dusty2004]

Send them in now

If you are filing a 2009 amended tax return for the FTHB credit, do you attach those documents now or wait until they send a notice to ask for them?

If you don't send them in now you will just delay your clients refund

Dusty