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September 11th, 2010

Almost 1 million must repay homebuyer tax credit

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Did you claim the homebuyer tax credit on your 2009 tax return? If so, depending on which version you got, you may have to pay it back:

According to a report from the Inspector General for Tax Administration, released to the public Thursday, about 950,000 of the nearly 1.8 million Americans who claimed the tax credit on their 2009 tax returns will have to return the money.

But I thought I didn’t have to pay the tax credit back?

There is some understandable confusion concerning who has to pay back the credit and who doesn’t. The reason for this confusion is because of the way the credit was originally structured (and it has changed several times since):

Those who bought properties during 2008 were to deduct, dollar for dollar, up to 10% of the home’s purchase price or $7,500, whichever was less. The catch: The money was a no-interest loan that had to be repaid within 15 years.

Had they waited to buy until 2009, they could have gotten a much sweeter deal. Congress extended the credit and made it a refund rather than a loan.

Earlier this year the IRS was criticized for not being able to properly distinguish filers who purchased homes in 2008 versus 2009. Apparently, the IRS says they have found a way to correct this problem:

A review by the Inspector General earlier this year found that the IRS could not easily distinguish between home purchases made in 2008 and 2009. That heightened concerns that some claims could be erroneous or even fraudulent, that buyers could, for example, claim their purchase came later than it actually occurred.

Thursday’s release reported that 73,000 claims, more than 4% of the 1.8 million homebuyers who received the credit, had incorrect purchase dates recorded by the IRS.

Some of the inaccuracies counted against the taxpayers. Nearly 60,000 were listed as purchasing in 2008 (meaning they had to repay the credit) or had no purchase dates at all, rather than their correct 2009 purchase dates, which would free them of the obligation to pay it back.

Not sure what purchase date you included on your 2009 tax return? Check your tax return. While we don’t give out tax advice, we suggest you follow up with the IRS to be certain which version applies to you. The IRS may not have determined whether or not you have to repay your tax credit this year, but the IRS is known for tracking people down and penalizing them. Not to mention, the sale date of your home is public record, so it won’t be too hard for them to find you.

The IRS has some links and information for taxpayers who need to amend their tax returns. Click here to read the particulars about the changes to the homebuyer tax credit.

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5 Responses to “Almost 1 million must repay homebuyer tax credit”

  1. Laura Morton Says: September 11th, 2010 at 10:18 am

    This is an error in coding and the IRS has admitted the mistake. So if you get a notice to start paying call the IRS. You must have your proof that the house closing was in 2009. We just know that the IRS will correct the error.

  2. Tim Manni Says: September 13th, 2010 at 8:17 am

    Thanks Laura!

  3. Tax refund online Says: September 16th, 2010 at 3:55 am

    Now it is very simple to tax filing. I think online tax filing; state tax filing, federal tax filing is the best option for me. I was got fast tax refund in 2009 tax year. So my suggestion is that, File your taxes via internet.

  4. IRS CHANGES ON 2010 TAX RETURNS - Get the Largest Tax Refund Says: September 18th, 2010 at 11:00 am

    [...] Almost 1 million must repay homebuyer tax credit (hsh.com) [...]

  5. Tim Manni Says: September 21st, 2010 at 8:54 am

    Thanks for sharing Tax

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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