IRS FORM 5405 AT TIME OF HOME PURCHASE AS DOWNPAYMENT
GETTING CALLS FROM CLIENTS WHO ARE BEING TOLD THEY CAN USE IRS FORM 5405 AT TIME OF HOME PURCHASE AS DOWNPAYMENT.(DPA)
WHO KNOWS THE REAL DEAL ???
IS THIS A CREDIT ON YOUR TAX RETURN WHEN YOU FILE ~
OR DID I MISS SOMETHING ???
("Qualifying first-time homebuyers who purchase a home between 1/1/09 and 11/30/09 may claim an $8,000 tax credit that they do not have to pay back as long as the home remains their primary residence for 36 months after
by interfaithcap April 28, 2009 11:40 PM
I am not a tax professional, but I have had multiple customers that applied and received the tax credit which is in the bank. They are not closed on homes yet. They made the decision to do this, and I would suggest you tell any customer to speak to a tax professional.
by jlorenz April 29, 2009 12:23 AM
I'm not a tax professional either but I cannot see how this does not play out as tax fraud. You become eligible for the credit when you purchase the home and the form asks for that date. I guess they are betting on not getting audited. People could lose big time on this. I would love to hear from a tax professional how they are justifying this. I personally can tell you that I would not want to be an IRS test case for this. People (usually not the tax "professional") end up in jail over this kind of thing.
by lighthouse1 April 29, 2009 2:04 AM
It is clearly illegal.
Q. I am in the process of buying a home. I expect to close the deal before December 1, 2009. Can I claim the first-time homebuyer credit now? That would allow me to use the refund for a down payment.
A. No. You may not claim the credit in anticipation of a purchase that has yet to happen. Until you have finalized the purchase of your home, which for most purchasers occurs at the time of the closing, you do not qualify for the credit. IRS news release 2009-27, First-Time Homebuyers Have Several Options to Maximize New Tax Credit, contains details for filing options if the home is purchased after April 15, 2009.
by 1Capital April 29, 2009 2:55 AM
We have been asking this question on the vine almost since Jan 1st. The IRS adding that little provision allowing people to claim the credit on the 2008 return for a purchase that occurred in 2009 is messing things up.
My advice has always been to talk to a tax professional. The law is pretty vague, and leaves some loopholes.
I had a client with an even wackier scenario- She had owned her primary residence up until 2005, at which time she moved in with her boyfriend. On her 05, 06,07, and 08 taxes, that former primary residence (which she still owned and had a mortgage on) was a rental property- listed as such on her schedule E. Now she was buying a new house on her own, and felt that she should be able to get the credit.
Her tax guy agreed- she filed her tax return in Feb, after the new purchase was under contract. She filed in early feb, and clearly indicated on the IRS form 5405 that she was going to close on March 22nd (or something like that- I forget the specific date, but it WAS SPECIFIC, and it WAS after she filed).
Anyhow, her return sailed through- she got her refund (including the full 8k credit) about 1 week BEFORE closing.
Her tax guy was an IRS employee for 20 years- I asked him those two questions specifically, and he said that if she is audited, he will happily defend her, and if it's a problem, he would cover both the repayment and any fees or penalties PERSONALLY. Now, he may be an idiot, but he certainly feels that she will have no problems. Where is the fraud? She filled out form 5405 with the exact, correct closing date- and her return was approved and funded by the IRS.
I"m not saying that everyone should do this, only that it can be done, and is being done. It's going to be up to each individual borrower to decide what is best for them.
by XpressOH April 29, 2009 7:28 AM
ain't that sumthin
by Hank Foley April 29, 2009 11:31 AM
the spriit of the tax credit is that you buy the house and get an $8000 credit when you file for 2008/2009. The form itself is not money. If you do not have $8000, you probably can't afford the house. I think the reason people do not call a tax professional is because they would get laughed at.
by aztec90 April 29, 2009 12:00 PM
how 'ya been?
haven't been on the same threads as you, for awhile, I think
by Hank Foley April 29, 2009 1:52 PM
Some states offer a 90-day 2nd on the tax credit at low interest for the FTHB, funded at time of closing on the first.
by TEXAM February 25, 2010 8:10 PM