1.4 Million Families Have Filed for First-Time Homebuyer Credit

Whew! Have we done that many amended returns already?

It certainly seems that way. Earlier this year, we started working with a developer to help him sell houses. Their sales have gone crazy. We've done hundreds of 2008 amended returns to claim the credit right now, instead of next year.

In the process, we've learned all about the different iterations of relationships. We've learned how people can totally foul up their tax lives by filing multiple amended returns in the same year. And how, even when they correct their own oversights, they don't prepare the new return to take into account how the originally omitted income affects other limits, credits and tax benefits. We've also seen the way tax professionals can completely mis-interpret the tax code, even when they make a good-faith effort to understand it.

One of the situations we've run into that makes it impossible to file the 1040X to get the credit, is where the buyer had filed a MFJ Form 1040 for 2008 - but is now getting divorced, or is married to someone else. Some of these folks are surprised to learn that when you amend a joint return to get the credit, you just might have to share it with your ex! We've convinced them to wait until they file their 2009 tax returns to claim the credit.

When I first saw the Form 5405 Form 5405, First-Time Homebuyer Credit, I contacted my friends at IRS and asked them why they didn't include a requirement that a copy of the sales document be included? They didn't know; but thought it was a decent idea. I mean, really, doesn't that Form 5405 just beg for fraud?

As it turns out, it does. On July 29, 2009, IRS announced their first successful prosecution related to fraud involving the first-time homebuyer credit.

Sheesh. Didn't IRS learn from all the EITC fraud a few years ago. This one was a no brainer. Sigh.

It's no surprise that IRS is clamping down on the distribution of the refunds. Some people are getting letters, instead of checks. Letters we've seen include:

1) An alert to tell the taxpayer that IRS is investigating their claim. Do nothing. You will hear from us soon.
We have responded anyway, sending them proof of the purchase.

2) A letter requesting proof of the purchase, with a copy of a purchase document signed by both the buyer and the seller.
Since we work with the seller, it's easy to get the paperwork directly from them. The buyer, doing his/her own amended return ought to have the escrow closing documents or the equivalent. Only, they often don't know which of the 200 pieces of paper it is.

As a result, we are sending in all our Forms 5405 with a copy of the signed sales document in the first place. Knowing what IRS (finally) wants, it's just as easy to give it to them up front, isn't it?

Have you been filing amended returns?

What have you learned?

This blog

Eva Rosenberg, MBA, EA, is the publisher of TaxMama.com, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.

More from this blog

Bloggers crew

Steve Knowles has spent 25 years in business and practice in the UK, but he also worked in the states and the years haven't dulled his way of seeing an alternative view to everyone else, and every day is a new adventure.

42434

Joel M. Ungar, CPA is a lifelong resident of the Detroit area and a graduate of The University of Michigan. He is a principal with Silberstein Ungar, PLLC, a Top 15 auditor of SEC public reporting companies.

74633

Allan Boress, CPA, with over 25 years as a practitioner and consultant to the accounting profession. Mr. Boress is the author of 12 published books in 6 different languages, including a best-seller, The "I-Hate-Selling" Book.

47408

Larry Perry, CPA, CPA Firm Support Services, LLC, is the author of accounting and auditing manuals, author and presenter of live staff training seminars, and author of webcast and self-study CPE programs. He blogs about small audits, reviews, and compilations.

87046
Sandra Wiley, COO and Shareholder, is ranked by Accounting Today as one of the 100 Most Influential People in Accounting as a result of her prominent role as an industry expert on HR and training as well as influence as a management and planning consultant. She is also a founding member of The CPA Consultant's Alliance. Sandra is a certified Kolbe™ trainer who advises firms on building balanced teams, managing employee conflict and hiring staff.
19926

Maria Calabrese, CIR, Human Resources manager for Fazio, Mannuzza, Roche, Tankel, LaPilusa, LLC in Cranford, New Jersey, Maria's topics revolve around the world of: Mentoring, Performance management, and The "Y Generation," a.k.a. "The whY generation".

54518

William Brighenti is a CPA, Certified QuickBooks ProAdvisor, and Certified [Business] Valuation Analyst, operating an accounting, tax, and QuickBooks consulting firm in Hartford, Connecticut, Accountants CPA Hartford.

79177

Ken Garen, CPA, is the co-founder and President of Universal Business Computing Company (www.ubcc.com), a software development firm of high-volume, high-productivity accounting and payroll technology.

24523

Eva Rosenberg, MBA, EA, is the publisher of TaxMama.com, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.

62918

Amy Vetter, CPA, CITP is the CPA Programs Leader for Intacct Corporation responsible for leading the CPA/BPO Partners nationally.

33905
Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State tax Notes entitled, "The SALT Effect." For more info, visit his website: www.leveragestateandlocaltax.com
100908
Scott H. Cytron, ABC, is president of Cytron and Company, known for helping companies and organizations improve their bottom line through a hybrid of strategic public relations, communications, marketing programs and top-notch client service. An accredited consultant, Scott works with companies, organizations and individuals in professional services (accounting, finance, medical, legal, engineering), high-tech and B2B/B2C product/service sales.
25183

Rita Keller is a nationally known CPA firm management consultant, speaker, author, mentor and blogger. She has over 30 years hands-on experience in CPA firm management, marketing, technology and administrative operations.

51376
Stacy Kildal is the mom of two fantastic kids, an Advanced Certified QuickBooks ProAdvisor, Certified Enterprise Solutions ProAdvisor, Sleeter Group Certified Consultant, a nationally recognized member of the Intuit Trainer and Writer Network, and co-host of RadioFree QuickBooks.
27003
Michael Alter's blog specializes in providing practical advice to those who seek greater profitability and practice management tactics that enhance deeper client relationships.
31322

Sally Glick, CMO, Principal, Marketer of the Year in 2003 and AAM Hall of Famer in 2007, leads a lively discussion of the constantly expanding roles of marketing and the professional marketers that drive this initiative in accounting firms of all sizes.

98276

The IMA Young Professionals Blog features the insights of IMA’s Young Professionals Committee. Committee members share advice and experiences on careers, continuing education, work/life balance, and other issues affecting young accounting and finance professionals.

32503

FEI Financial Reporting Blog provides highlights from SEC, PCAOB, FASB, IASB, and other regulatory news, including reporting under Sarbanes-Oxley Sect 404. It is written by Edith Orenstein, Director of Technical Policy Analysis at FEI.

109167

Sue Anderson has 30 years of experience in continuing education for accountants. Currently she is the program director for online CPE provider CPE Link.

59613

Jim Fahey is COO of Apple Growth Partners, a regional CPA firm in Ohio. His focus is on the effective and efficient use of technology within the firm by all team members.

38550
Caleb Newquist is the Editor-in-Chief of Sift Media US, overseeing content for both AccountingWEB and Going Concern.
65485

Leita Hart-Fanta, CPA, CGFM, and CGAP is the author of "The Yellow Book Interpreted" and owner of Yellowbook-CPE.com a website devoted to training for governmental auditors.

91313

AccountingWEB is more than just a U.S. team of journalists and financial and technology experts - we have an international side, too! Members of our British team who publish AccountingWEB.co.uk share their ideas, insights, and perspectives from across the pond.

52391