New tax forms 5405 and Schedule L complicate tax returns
by AccountingWEB on
The Internal Revenue Service (IRS) has now published the new Form 5405, First-Time Homebuyer Credit and Repayment of the Credit, with instructions on its Web site, and the IRS wants more information from home purchasers than was requested last year. Taxpayers must check a box to indicate that they did not purchase the home from a related person, they must enter the purchase price of the new home, and, in the case of first-time homebuyers, confirm that they have not owned a home for three years. Long-term homeowners now eligible for a reduced credit for the purchase of a new home through April 10, 2010 must provide documentation that they have lived in their previous residence for five consecutive years of the last eight years. All claimants for the credit must document their purchase. Paper returns will be required for claiming the credit because of the added documentation.
Documentation of Purchase and Home Ownership
Both the first-time homebuyer and the long-term homeowner must attach a copy of the properly executed settlement statement (or similar documentation) used to complete the purchase. In most cases, this will be a HUD-1 Settlement Statement, complete with dates, and signed by all parties. Long-term homeowners taking advantage of the credit must also provide documentation of ownership of their previous home in the form of mortgage interest statements, property tax records, or homeowner's insurance records.
The Form 5405 for 2008 asked only for the address of the home purchased and the date acquired, in addition to income information. No documentation of the purchase was required.
Taxpayers who claimed the credit for a home purchased in 2008, owned and used as their main home during all of 2009 and 2010, will begin repayment of the credit over a 15-year period with their 2010 return. These people should not file a Form 5405 with their 2009 return.
Individuals who have sold or disposed of a property, including through foreclosure, for which they claimed the credit in 2008 or 2009 must file a Form 5405 and repay the credit. The amount of the previously received credit is entered as a tax on their individual returns.
Increases to Standard Deduction -- Schedule L
Claiming the standard deduction is still easier than itemizing for most people, and three potential increases have added to the tax benefits for taxpayers who do not itemize. But these added deductions require a little more work on the part of filers who will have to complete the new Schedule L to claim an increase in their deductions, because they paid real estate tax, paid sales or excise tax on the purchase of a new motor vehicle, or lived in federal disaster areas and had disaster losses.
Last year taxpayers who paid real estate taxes calculated their standard deduction on a worksheet and checked a box on their return to show the addition ($500 for a filing single and $1,000 for joint filers).
Schedule L asks questions about filing status and income and requires the taxpayer to enter the specific amount of state or local real estate taxes paid as part of the calculation. If taxpayers want to claim an increase in the standard deduction because they paid state or local sales or excise tax on the purchase of a new motor vehicle after February 16, 2009, they need to provide the sales price of the motor vehicle and the amount of the tax on Schedule L. The totals of the vehicle and real estate taxes after certain calculations and net disaster losses are added to the standard deduction.
To claim a net disaster loss from a federally declared disaster that occurred in 2009 taxpayers will have to complete Form 4684 and Schedule L.
Vehicle sales tax and Cash for Clunkers
Individuals should not confuse the sales tax deduction on a new vehicle with the Cash for Clunkers program, the IRS says. That program, the Car Allowance Rebate System (CARS), is handled through the National Highway Traffic Safety Administration, not on a tax return. For more information go to www.cars.gov.
You may like these other stories...
Ernst & Young 2013 audit deficiency rate 49%, regulators sayMichael Rapoport of the Wall Street Journal reported on Thursday that the Public Company Accounting Oversight Board (PCAOB) found deficiencies in 28 of the...
Some of your clients may get away to business conventions from time to time. It gives them a chance to rub shoulders with colleagues, catch up on the latest developments, and fine-tune their skills. And, when the meetings or...
PwC must face $1 billion lawsuit over MF Global adviceA federal judge on Wednesday ordered PricewaterhouseCoopers (PwC) to face a $1 billion lawsuit claiming that its bad accounting advice was a substantial cause of the...
Upcoming CPE Webinars
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.
Transfer your knowledge and experience to prepare your team for the challenges and opportunities of an accounting career.
This webcast will include discussions of commonly-applicable Clarified Auditing Standards for audits of non-public, non-governmental entities.
In this jam-packed presentation Excel expert David Ringstrom, CPA will give you a crash-course in creating spreadsheet-based dashboards. A dashboard condenses large amounts of data into a compact space, yet enables the end user to easily drill down into details when warranted.