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First time home buyer tax credit and IRS

by Diane O
(Hanover, PA)

My husband and I took the first time home buyer credit and now the IRS says we did not qualify for it.

1. We rented a home for three years before we purchased our new home. I have sent the IRS utility bills proving this was our address for the three years time.

2. Our previous home, was up for a short sale. We had to move out and into our parents home for a month before our rental home was ready.

3. This one month is the snag in the IRS's inquiry. We did not have any magic ball to know that we would be able to take a home credit three years later when we finally could re purchase a home.

4. This has been a nightmare. We have supplied the IRS with every piece of information they requested and then some. It takes them months to respond and then more interest is added onto the balance they say we need to pay back.

5. We lived in our new home for three years before this problem was ever brought to our attention. SO SO frustrated.

=====ANSWER=====

Hello Diane;

Wow!! Your issue sent me reeling! It brought back memories of when I went through an IRS tax audit. Man it was painful, I felt like I was guilty until I proved myself innocent.

In my case, I did make a mistake and had to pay the tax, penalties and interest. I find it interesting that it was about 3 years afterwards for me also. My thinking is that gives them time to accrued interest. Besides the fact they are very behind with computer software and such.

Sorry, got on my little soapbox for minute.

So if I understand correctly, you lived with parents for a month and bought a new house. My guess is you bought the house sometime in 2008 since you said it has been three years now.

Well, I'm sorry to say this, but the qualifications for the 2008 first time home buyer tax credit was that you could not own a home in the past 3 years. From what you are telling me, you did own a home. It may have been 2 years and 11 months prior to the purchase of your new home, but never the less, you owned a home. It's about the closing dates from the sale of one home to the purchase of the next one.

Beside this, the 2008 tax credit for first time home buyers has to be paid back over 15 years anyway. This was for homes purchased after April 8, 2008 and before January 1, 2009.

Here's a link to the IRS website regarding this:

IRS Comments

So as much as I hate to be a bearer of bad news, it would appear to me you may owe the IRS what they are asking for.

Seek legal counsel if you feel you should not owe this. But with every minute that goes by, as you know the amount continues to increase and the IRS really does not have any heart. They just want their money and will not let go until you come to some kind of a settlement.

You may want to try and set up a payment plan or something.

I'm very sorry for your hardship, I wish things were better for you but with what you're tell me and what my research shows, the IRS may be correct.

I wish you the best.

Kind Regards,

Jeffrey Ragan

Comments for First time home buyer tax credit and IRS

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Fighting the IRS
by: Diane

I am hoping that this is not the case. We are appealing once again and hopefully if we do need to repay, (we have already paid our first amount of $500.00 on last years taxes) we can negotiate away the penalties and interest.

I wish the IRS would make things clearer on their tax laws and credits. It is so frustrating and we are just now getting back on our feet from long layoffs.

We have consulted a tax expert and we really appreciate your helpfulness on this matter. I guess fighting the IRS is like swimming up a river, You are just S**t out of Luck. We will remain positive that the results will be in our favor.

Thank you again for your knowledge on this matter.

Diane and Kevin

=====MY REPLY=====

Diane,

I commend you for your positive outlook. One thing I learned with dealing with the IRS, they are just people doing their jobs. They seem to be trained to be rude and obnoxious.

Also, they will not let go until they have a settlement. So do not be afraid to negotiate. The person who gets assigned to your file gets measured for future wage increases etc. based on their ability to settle cases.

Your tax expert should know the system. Get yourself out of the loop and let them handle it.

I wish you the best,

Jeffrey Ragan

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