***January 15, 2010 ***

The IRS just relased the updated form 5405 and instructions.  You will need this form to request your First Time Homebuyer/Repeat Buyer Tax Credit.

5405 Revised This is the form you will need to complete in order to request your FTHB Tax Credit.  5405 Instructions to complete form 5405.

1040 X This is the form you will need if you want to amend your previous year tax returns so you can request the credit immediately.  (If you purchase in 2009, you can amend your 2008 returns and receive the money now.  1040x Instructions  to complete 1040x.

Requesting your Credit

The new form and instructions follow major changes in November to the homebuyer credit by the Worker, Homeownership, and Business Assistance Act of 2009. The new law extended the credit to a broader range of home purchasers and added new documentation requirements to deter fraud and ensure taxpayers properly claim the credit.

Taxpayers claiming the homebuyer credit must file a paper tax return because of the added documentation requirements.

The IRS expects to start processing 2009 tax returns claiming the homebuyer credit in mid-February after it completes the updating and testing of systems to meet the law’s new requirements. The updates allow the IRS to put in place critical systemic checks to deter fraud related to the homebuyer credit. <?xml:namespace prefix = o /><?xml:namespace prefix = o />

Some of these early taxpayers claiming the homebuyer credit may see tax refunds take an additional two to three weeks.

In addition to filling out a Form 5405, all eligible homebuyers must include with their 2009 tax returns one of the following documents in order to receive the credit:

• A copy of the settlement statement showing all parties' names and signatures, property address, sales price, and date of purchase. Normally, this is the properly executed Form HUD-1, Settlement Statement.
• For mobile home purchasers who are unable to get a settlement statement, a copy of the executed retail sales contract showing all parties' names and signatures, property address, purchase price and date of purchase.
• For a newly constructed home where a settlement statement is not available, a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.

In addition, the new law allows a long-time resident of the same main home to claim the homebuyer credit if they purchase a new principal residence. To qualify, eligible taxpayers must show that they lived in their old homes for a five-consecutive-year period during the eight-year period ending on the purchase date of the new home. The IRS has stepped up compliance checks involving the homebuyer credit, and it encouraged homebuyers claiming this part of the credit to avoid refund delays by attaching documentation covering the five-consecutive-year period:

• Form 1098, Mortgage Interest Statement, or substitute mortgage interest statements,
• Property tax records or
• Homeowner’s insurance records.

The IRS also reminded homebuyers that the new documentation requirements mean that taxpayers claiming the credit cannot file electronically and must file paper returns. Taxpayers can still use IRS Free File to prepare their returns, but the returns must be printed out and sent to the IRS, along with all required documentation.

Normally, it takes about four to eight weeks to get a refund claimed on a complete and accurate paper return where all required documents are attached. For those homebuyers filing early, the IRS expects the first refunds based on the homebuyer credit will be issued toward the end of March.

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**SPECIAL provisions for Military

The $6,500 Move-Up / Repeat Home Buyer Tax Credit at a Glance

· To be eligible to claim the tax credit, buyers must have owned and lived in their previous home for five consecutive years out of the last eight years.

· The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $6,500.

· Maximum Purchase price is $800,000

· The credit is available for homes purchased after November 6, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, the home purchase qualifies provided it is completed by June 30, 2010.

· Single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

· You must provide verification of the home purchase with the appropriate tax forms.

 $8,000 First-time Home Buyer Tax Credit at a Glance

· The $8,000 tax credit is for first-time home buyers only. For the tax credit program, the IRS   defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase.

· The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.

· The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.

· For homes purchased on or after January 1, 2009 and on or before November 6, 2009, the income limits are $75,000 for single taxpayers and $150,000 for married couples filing jointly.

Provisions for both FTHB and Repeat Buyer

· The tax credit does not have to be repaid as long as you continue to live in the home as your primary residence for three years without selling.

· The tax credit applies only to homes priced at $800,000 or less.

· For homes purchased after November 6, 2009 and on or before April 30, 2010, single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

· You cannot purchase the home from a related party; i.e., spouse, parent, grandparent or child.

· If you are married, both spouses must qualify.

· If more than one unmarried individual is buying, the credit can be split up among all who qualify

· You must be at least 18 and not a listed dependent.

· Credit applies to 1-4 unit homes as long as you live in one of the units as your primary residence.