Archive for the ‘Home Buying Tax Credit’ Category
There is a proposal in the work right now for the $8,000 tax credit for first-time home buyers to be extended. If this bill passes, the First Time Home Buyer Tax Credit that is supposed to expire soon will be extended. In the new proposal, First-time home buyers will be eligible for up to $8,000 on the tax credit, which is the same as the current credit. The Senate version of this bill creates a new credit for existing homeowners of up to $6,500. This credit is for homeowners who have lived in their homes for five years.
When will the The New First Time Home Buyer Tax Credit expire?
The new tax credits would expire on April 30, 2010. However, home buyers whose homes are under contract by April 30 would be able to qualify providing that they complete the sale within 60 days.
The tax credit phases out for high income home buyers with incomes above $125,000 for single filers and $225,000 for married couples. Also, homes that cost more than $800,000 are not eligible for the tax credit.
Some people think that if you are buying a home now, in 2009, taking advantage of The American Recovery and Reinvestment Act of 2009 which gives first time homebuyers tax credit, then you have to wait until you file your tax return in 2010 to claim the credit and get the money from the IRS. This is not the case. You can actually get the tax credit money from the IRS now before the year ends. You can think of this First time homebuyer tax credit as a gift from the IRS or the government. You do not have to wait to claim it when you file your tax return next year.
How much is the First Time Homebuyer Tax Credit?
The American Recovery and Reinvestment Act of 2009 expanded the first-time homebuyer credit by increasing the credit amount to $8,000 for purchases made in 2009 before Dec. 1. That means you have until November to buy a house to claim the tax credit.
Can I get the tax credit and then sell the home?
There are a few restrictions to what you can do but not many. For home purchased in 2009, the credit does not have to be paid back unless the home ceases to be the taxpayer’s main residence within a three-year period following the purchase. That means, you have to live in the home for at least 3 years. After that, you can sell for a profit or do whatever you want with the home. This tax credit is for homebuyers, not for real estate investors who want to flip homes. There are real estate investors who buy homes regularly and then turn around and sell them. This is called flipping homes and it is not allowed for the First time homebuyer tax credit.
Do I have to wait until I file my tax return to get the First Time Homebuyer tax credit?
No. First-time homebuyers who purchase a home in 2009 can claim the credit on either a 2008 tax return, due April 15, 2009, or a 2009 tax return, due April 15, 2010. The credit may not be claimed before the closing date. But, if the closing occurs after April 15, 2009, a taxpayer can still claim it on a 2008 tax return by requesting an extension of time to file or by filing an amended return. In another word, you can claim your First Time Homebuyer Credit as soon as you close on your home by filing an amended return for your 2008 tax return and you can be expecting a check from the IRS immediately after they have processed the claim and the amended return.
The IRS has issued a warning about bogus IRS scam emails that are floating around the Internet. This is one of the latest identity theft scheme aimed to scare taxpayers into giving up personal information. The IRS urges the public to protect themselves from falling victims to identity theft thieves or to tax return preparers who urge them to claim tax credits on your tax return for which they are not really eligible.
Delete all Emails Claiming to be from the IRS
The IRS does not send out emails period! If you have received an email claiming to be from the Internal Revenue Service, no matter how official it looks, then it is a scam. The email may contain the IRS’ information such as address and even a logo but it is not from the IRS. There have been many IRS email scams especially around tax filing time. The bottom line is that you will never receive an official email from the IRS. The IRS will not discuss your tax situation via email and will not send you an email asking information so that they can give you proper tax credit, tax deductions or tax rebate.
The scam email you receive will not point you to the official, authentic IRS website. Instead, you will land on a scam website which you will be asked many questions such as your name, address, social security number, etc. The scammers might ask you to register for a stimulus credit. They might utilize information that can be found on CNN or other news channels. They might reference President Obama’s stimulus progams in order to convince you that their program or email is legitimate. They may say that they need your information to deposit money into your bank account.
If you receive this type of email, you should delete it or report it to the authority. However, the FBI says that it is very hard to track this type of scam. It is hard to monitor them because they usually come from outside of the US. They may be from Europe or other parts of the world and by the time they are reported and investigated, they are long gone.
What is Phishing?
Scammers often try to steal their victims’ identities by sending them phony e-mails (such as ones from the IRS) which claim to come from trusted sources, such as well-known financial institutions or government agencies (including the IRS), and ask them for detailed personal and financial information. This practice is known as “phishing.” The information requested is used by the scammers to gain access to the victims’ bank accounts, open new credit cards in their victims’ names and get cash advances, and more.
First-Time Homebuyer Tax Fraud
The IRS has begun to investigate tax returns that falsely claim the first-time homebuyer tax credit. The first-time homebuyer credit, originally passed in 2008 and modified in 2009, provides up to $8,000 for first-time homebuyers. The purchaser must qualify as a first-time homebuyer, which, for purposes of claiming this credit, is someone who has not owned a primary residence in the past three years. If the taxpayer is married, this requirement also applies to the taxpayer’s spouse. The home purchase must close before Dec. 1, 2009, to qualify. The credit may not be claimed on the purchaser’s tax return until after the taxpayer actually closes and has purchased the home. Different rules apply for homes bought in 2008.
People who don’t meet the requirements for claiming the credit shouldn’t claim it, even if their tax return preparer urges it. Taxpayers are responsible for the accuracy of their tax return, even when the return is prepared by someone other than the taxpayer.
With home prices at record low and mortgage interest rates also at record low, there are many people thinking about buying homes for the first time. Homes that they thought they would not be able to afford have become affordable to many people. However, the IRS warned people about first time homebuyer tax credit scams.
IRS’ Prosecution of a Florida Tax Preparer
The Internal Revenue Service announced last week its first successful prosecution related to fraud involving the first-time homebuyer credit and warned taxpayers to beware of this type of scheme.
On Thursday July 23, 2009, a Jacksonville, FL tax preparer, James Otto Price III, pled guilty to falsely claiming the first-time homebuyer credit on a client’s federal tax return.
To date, the IRS has executed seven search warrants and currently has 24 open criminal investigations in pursuit of potential instances of fraud involving the credit. The agency has a number of sophisticated computer screening tools to quickly identify returns that may contain fraudulent claims for the first-time homebuyer credit.
Penalties of Falsely Claiming First Time Homebuyer Credit
James Otto Price III faces the possibility of up to three years in jail, a fine of as much as $250,000, or both.
“We will vigorously pursue anyone who falsely tries to claim this or any other tax credit or deduction,” said Eileen Mayer, Chief, IRS Criminal Investigation. “The penalties for tax fraud are steep. Taxpayers should be wary of anyone who promises to get them a big refund.”
Whether a taxpayer prepares his or her own return or uses the services of a paid preparer, it is the taxpayer who is ultimately responsible for the accuracy of the return. Fraudulent returns may result not only in the required payment of back taxes but also in penalties and interest.
The First-Time Homebuyer Credit, originally passed in 2008 and modified in 2009, provides up to $8,000 for first-time homebuyers. The home purchase must close before Dec. 1, 2009, to qualify, and the credit may not be claimed on the purchaser’s tax return until after the taxpayer closes and has purchased the home. Different rules apply for homes bought in 2008.
How to qualify as a first time homebuyer?
The purchaser, however, must qualify as a first-time homebuyer, which for purposes of this credit means someone who has not owned a primary residence in the past three years.
How can a married taxpayer qualify as a first time homebuyer?
If the taxpayer is married, this requirement also applies to the taxpayer’s spouse.
How much is the first time homebuyer tax credit?
The first time homebuyer tax credit is 10%of the purchase price of the home, with a maximum available credit of $7,500 ($8,000 if you purchased your home in 2009) for either a single taxpayer or a married couple filing a joint return, but only half of that amount for married persons filing separate returns. The full credit is available for homes costing $75,000 or more ($80,000 if purchased after Dec. 31, 2008, and before Dec. 1, 2009).