Home Buyers Tax Credit
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How not to slow down your home buyer tax credit or refund

by Broderick Perkins

If you are filing for the home buyer tax credit, expect a delay in receiving the credit or a refund.

Gum up the works, by not following instructions, and expect an even longer delay as you work through the rejection.

The Internal Revenue Service (IRS) is just now deploying the new home buyer tax credit forms and instructions and testing the system.

The IRS won't actually begin processing returns claiming the home buyer tax credit until mid-February. If you are filing for the credit or expecting a refund because of it, you will have to wait four to eight weeks -- several weeks longer than those not seeking the tax credit.

The earliest filers may see refunds by the end of March -- provided the necessary proof is in order.

First, because certain documents are required that are not standard tax forms, you cannot file electronically. You can use tax software or IRS IRS Free File to prepare your returns, but you'll still have to print out the return and mail it in with the required proof.

The new home buyer tax credit filing rules are a hedge against a repeat of 90,000 taxpayers fraudulently filing for the credit last year and earlier.

Under the new and expanded home buyer tax credit rule, the credit is worth up to $8,000 for first-time home buyers (who have not owned a principal residence three years prior to buying) and up to $6,500 for qualifying existing home buyers (who have lived in their old home five consecutive years out of the eight years before buying anew) who buy a new primary residence or have one built.

The home can cost no more than $800,000 and your qualifying income is limited to a maximum of $125,000 for single taxpayers and $225,000 for joint taxpayers.

Get the full scoop online from the IRS' "First-Time Homebuyer Credit" page. First, all taxpayers (first time and move up buyers) seeking a credit or refund, must use the new IRS Form 5405 "First-Time Homebuyer Credit and Repayment of the Credit". The instructions, IRS FORM i5405, will teach you what documents you need.

In addition to Form 5405, you'll also need at least one of the following documents:

• A copy of the HUD-1, Settlement Statement (Effective Jan. 1, 2010: HUD-1, Settlement Statement), showing all parties' names and signatures, property address, sales price, and date of purchase.

• For mobile home buyers who don't get a settlement statement, provide a copy of the executed retail sales contract showing all parties' names and signatures, property address, purchase price and date of purchase.

• For new home buyers who don't get a settlement statement, a copy of the certificate of occupancy showing the owner's name, property address and date of the certificate.

Existing home owners applying for the $6,500 maximum tax credit must additionally prove they lived in their old home for the required period.

To do so, use IRS Form 1098, "Mortgage Interest Statement" (IRS Form i1098 offers instructions), or supply mortgage interest statements, or property tax records or homeowner's insurance records. It's not a bad idea to send all those documents as corroborating evidence.

In addition to accuracy and compliance, the only other way to speed up your refund is to request, with your return that, your home buyer tax credit refund be deposited directly into one of your bank accounts.