Claimed 1st time credit. IRS just told us we are not eligible?
We were advised back in 2008 by our broker that we were eligible for the tax credit. I have a home that I own independently and my husband was the sole purchaser on the new home. I did not think we could take the credit but were told to. Now 3 years later the IRS says we are not eligible and that we have to pay it back with $2500 in fees? What should we do? We would not have taken the credit if not advised to. Should we sue our broker for informing us?
Wow! You may have a problem here. I did a little research on this tax credit for you at the IRS website. It seems I get a lot of questions on this first time home buyer credit. I'm going to provide you a quote from the site and the link just below.
Before I do that, I just wanted to make a few comments. Your broker may have misdirected you. However, did he/she know that you owned a home in your name only? If they did not know this, then they would have assumed that you were a first time home buyer and thus qualify for a tax credit.
The qualification for the credit requires that you must not have owned a home in the last 3 years. The fact that you owned a home when buying this second home would automatically disqualify you if I understand this thing correctly.
Now to go back on the broker would probably be a waste of time and money. I would be concerned about your tax preparer though. Did you hire your taxes done in 2009? Or do you do your own taxes?
If the tax preparer knew you owned a home and were taking interest deductions on your taxes, they really should not have applied for the tax credit on the new home purchased.
Even though this home may have been bought in your husbands name only, if you file taxes jointly my guess would be that is what raised the red flag at the IRS. They may have seen an income tax deduction for mortgage interest and a request for a tax credit on the same tax return.
I'm just guessing here, but if that was what happened, you do have a serious problem on your hands.
I know this is not what you want to hear. However somewhere along the line you got some bad advice.
The worse part is that the IRS seems to take forever to find mistakes and by the time they do you have all kinds of fees and penalties added on.