Over the past year we've talked quite a bit the home-buyer tax credits that were available to both first time home-buyers, and more recently to existing homeowners looking to buy a new primary residence. The bill was originally passed in February 2009 as a part of the Obama stimulus package, and was extended at the end of last year to be available to home-buyers on homes purchased by 4/30/2010. First time home-buyers had a $8,000 tax credit available to them, and current homeowners were able to claim a $6500 tax credit. Both credits are refundable credits – in other words, if your tax liability was already 100% covered, you would get the money back in a check from the IRS.
There was a flurry of activity at the end of April as home-buyers scrambled to get in on the credit before the deadline passed on 4/30. My brother and his wife were one of those couples jumping in on the deal before it was too late. As a result home sales jumped in April 2010 jumped a whopping 14.8%.
So now that everyone has claimed their credit, they still have to claim their credit on their taxes in order to receive the money. Apparently that's where things get a bit trickier for many.
Homebuyer Tax Credits Denied Or Delayed For Many
According to IRS data through February there were over 1.8 million claims for home-buyer tax credits . About $12.6 billion has been pumped back into the economy as taxpayer refunds, according to Bruce Friedland, an IRS spokesman.
Let's take a step back for a minute, and talk about just how many claims that is, and what it means for people waiting for their check. From Market Watch:
Let's get this processing volume into perspective. IRS started processing claims for the first-time home-buyer credit when taxpayers started filing their 2008 tax returns in early 2009. That means IRS employees have processed about 150,000 claims per month.
It's a monumental task. Since discovering millions of dollars of fraudulent claims, the IRS has been reviewing a substantial portion of the claims instead of letting the computer process and pay.
That's where the delays start.
The IRS has been deluged by claims (for the $8000, $6500 and $7500 tax credits), many of which have been found to be fraudulent or not complete. The result is that even some taxpayers who have filed their claims correctly, are being caught up in avalanche and are receiving slow response time.
Steve B. said he feels he's being lied to about his tax-credit claim. He filed for his home- buyer credit in January, certain that everything the IRS requested was attached. It's now been over four months and IRS simply tells him “it is in the errors department” and they have no further information. Steve has tried calling the IRS “a million times,” he said. He's even tried the Taxpayers Advocate Service, but they tell him they don't deal with this issue.
Steve isn't alone. Delays seem to run 25 weeks and more.
Some of the reasons that people are being denied? (Both legitimate and not)
- Fraudulent Claims are being made. There are some legitimately fraudulent claims being made by people who are looking to just get some extra money. Because of many of those the system is slowing down and claims being examined more closely.
- IRS is rejecting claims from people who have ITINs, the Individual Taxpayer Identification Numbers issued to aliens who do not qualify for real Social Security numbers. The reason? There's no credit for non-resident aliens. One proviso, however – if you're a resident alien, you may still be eligible. Ask the IRS to re-examine your claim.
- IRS is rejecting claims from people who have listed an apartment number as the credit isn't available to apartment dwellers. The problem? Condos, duplexes, boat slips (which are eligible) and other things have numbers too. If you've been rejected, re-file with proof showing it isn't an apartment.
- No proof of purchase included with filing. If you didn't include all the documentation required to claim the home-buyer tax credit, you may get denied. Refile with the correct documentation.
- IRS errors are being made because of large volume. Some home-buyers are finding that their claims are being denied despite being filed correctly, simply because the IRS is overwhelmed with tax credit requests, and errors are being made.
Hurry Up And Wait For Your Tax Credit
So if you've bought a home, filed for the tax credit and are now awaiting your big fat check, don't be surprised if it takes a while. Hopefully you weren't depending upon that check arriving anytime soon.
If you're still waiting for a home-buyer tax-credit refund, you may be in for a long wait. Call the IRS every week or two until you're sure someone has received your file. (Some have been getting lost.) Once you know they have your file, make sure they have the correct address for correspondence. In fact, consider sending in a Form 8822, change of address, just to ensure it's in the system. When you get any correspondence, other than a check, respond to it immediately.
So if you're waiting for your tax credit, stay on top of the IRS, call them frequently and be sure to respond to any correspondence immediately. And good luck!
Have you filed for the home-buyer tax credit? If so, have you received it yet? Have you run into problems. What do you think of the credit and the IRS's handling of it? Tell us your thoughts in the comments!