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First-time home buyer tax credit usage monitored by IRS

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Services for Real Estate Pros

Silverstone Ranch golf course homesThe real estate market has been pumped up nicely with the up to $8,000 first-time buyer tax credit, Las Vegas definitely being one of the beneficiaries. Many renters go for it here and acquire good homes that have become very affordable during the prolonged housing and mortgage slump. The program runs through November, 2009, so those thinking about it should get their ducks in a row pretty soon.

To claim the credit is relatively simple, basically requiring the filling-out of form 5405, sending it in and the qualified money should be coming within a couple of months. That and as it goes with any program anyway, there are always going to be abusers. Some borrowers think that they can get away with falsifying applications and collect some undue cash in the process.

IRS, however, is keeping a keen eye on this, using smart computer screening software to catch fraudulent filings. It has a few dozen criminal investigations under way around the country right now, involving individual mortgage borrowers and tax preparers.

Some of the key abused or misunderstood categories that will negate an application are:

            - Purchasing a property when one spouse is ineligible.

            - Buying a home from a "related person", like parents, children, grandparents, grandkids and spouse or from a corporation or partnership where the borrower holds over 50% ownership.  

            - Becoming a homeowner via an inheritance or gift.

            - Earning too much money - over $95,000 for singles and $170,000 for married couples filing jointly.

            - Funding the purchase with a tax exempt bond program.

It's better to know in advance whether the borrower qualifies or not. It's generally not much fun to be subject to lengthy IRS audits and potential penalties.   

Posted by

_______________________________________________________________________________

Provided by: 

Esko Kiuru
Mortgage, real estate and apartment industry analyst 

www.BluefoxToday.com - syndicated mortgage, housing and property management blog

eskokiuru@gmail.com
My cell: 702-499-1006

Patricia Aulson
BERKSHIRE HATHAWAY HOME SERVICES Verani Realty NH Real Estate - Exeter, NH
Realtor - Portsmouth NH Homes-Hampton NH Homes

I think it's a good idea.

 

Patricia Aulson/portsmouth nh

Aug 14, 2009 12:57 PM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Esko it took a friend of mine over 16 weeks to get her credit because of all the checking that the IRS is doing on this.  I hope they catch those who are committing fraud and make an example of them.

Aug 14, 2009 01:57 PM
Esko Kiuru
Bethesda, MD

Patricia,

It's good to see that IRS is on this.

Aug 17, 2009 06:06 AM
Esko Kiuru
Bethesda, MD

George,

The process has to be kept as fraud-free as possible.

Aug 17, 2009 06:09 AM
Anonymous
Tim Manni

Esko,

Like flies to honey, the unscrupulous are drawn to any opportunity involving large sums of cash. I have a couple questions though: one, is the form the borrower's responsibility to fill out? So if that's the case, is most of the potential/suspected fraud coming from the borrower side, rather than the lender/servicer side?

Here's another, is there much chatter in your industry regarding the extention of the first-time homebuyer tax credit?

Nice post, look forward to hearing from you,

Tim

Aug 18, 2009 05:27 AM
#5
Esko Kiuru
Bethesda, MD

Tim,

It's the borrower's tax issue, so he's filling it out, or his tax preparer. Not much talk so far over any potential extension of the tax credit, but it would be nice if it did happen and that it would cover all buyers.

Aug 19, 2009 11:25 AM