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  1. #1
    Join Date
    Sep 2010
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    6

    Unhappy Denied First Time Home Buyer Tax Credit - This Will Make Me Homeless

    I bought my first home for $76,000 in April 2010 and my tax cpa sent in the correct forms with a copy of the contract for deed so we could claim the first time home buyer tax credit.

    Four times the IRS requested we send in the forms as they hadn't received them. Four times they asked for a copy of the HUD and four times my cpa told them contract of deeds don't come with a HUD and that the contract for deed we'd sent in had all the information they were requesting. Each time the IRS requested my cpa resent the forms in.

    Enough time had passed and that I had evidence showing hardship that my cpa could act on my behalf on filing form 911/hardship and take my claim to the taxpayers advocacy.

    The response has been that my claim has been denied based on the following verbiage that was in the contract for deed.
    Downpayment of $4,000 (to be tendered upon receipt of tax return proceeds) leaving a balance of $72,000


    My total expected tax return was around $9,700 which included $7,600 first time homebuyer tax credit. The balance of $1,900 was sent to me several months ago when the IRS initially denied my claim based on they hadn't received the paperwork for the property purchase even though my cpa had sent it in four times.

    I'm at my wits end and about to have my utilities turned off, my car repossessed, and am unable to make my mortgage payments. There is an external influence which means I'm unable to get employed at the moment which will take another three or four months to pass before I can rejoin the workforce.

    Apparently the next step is to wait for the IRS to put the latest denial in writing so we can appeal it but that doesn't help me now where I'm about to lose everything. I don't have the support of a family around me and will end up homeless!!!

    Can somebody point me to a tax law that shows I haven't done anything wrong that I can take back to the taxpayers advocacy? As I understand it the taxpayers advocacy are funded by the IRS so not entirely independent...

  2. #2
    Join Date
    Mar 2007
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    9,085

    Default Re: Denied First Time Home Buyer Tax Credit - This Will Make Me Homeless

    I don't understand.

    You are going to be homeless due to your tax return?
    All you need in this life is ignorance and confidence; then success is sure.
    - Mark Twain

  3. #3
    Join Date
    Jan 2006
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    25,785

    Default Re: Denied First Time Home Buyer Tax Credit - This Will Make Me Homeless

    Quote Quoting cyjeff
    View Post
    I don't understand.

    You are going to be homeless due to your tax return?
    I think it is this:

    Downpayment of $4,000 (to be tendered upon receipt of tax return proceeds) leaving a balance of $72,000
    they haven't paid the down payment of $4k yet. They were going to pay it from the tax return and since they have been denied the tax credit, they don't have the $4k to pay so the sale is going to crash.

    from what I understand, buying on land contract is allowed:

    from:

    http://www.irs.gov/newsroom/article/...206291,00.html

    Q. Can a taxpayer claim the first-time homebuyer credit if the purchase is pursuant to a seller financing arrangement (for example, a contract for deed, installment land sale contract, or long-term land contract), and the seller retains legal title to secure the taxpayer's payment obligations?

    A. If the taxpayer obtains the "benefits and burdens" of ownership of a residence in a seller financing arrangement, then the taxpayer can claim the credit even though the seller retains legal title. Factors that indicate that a taxpayer has the benefits and burdens of ownership include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property.
    what I suspect the problem is is that the down payment has not been made so the "sale" has not been finalized (been to closing). A requirement to be able to claim the credit is that the closing be before whatever the cutoff date was. Since the down payment was never made, the contract is not enforceable by the OP. They are not even bound to the contract. I suspect that lack of the OP being bound to the purchase is the justification for the denial.

    I don't see any way around it myself. I agree with the IRS on this one.
    I am not an attorney and any advice is not to be construed as legal advice. You might even want to ignore my advice. Actually, there are plenty of real attorneys that you might want to ignore as well.

  4. #4
    Join Date
    Mar 2009
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    LA LA Land
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    9,194

    Default Re: Denied First Time Home Buyer Tax Credit - This Will Make Me Homeless

    Quote Quoting jk
    View Post
    what I suspect the problem is is that the down payment has not been made so the "sale" has not been finalized (been to closing). A requirement to be able to claim the credit is that the closing be before whatever the cutoff date was. Since the down payment was never made, the contract is not enforceable by the OP. They are not even bound to the contract. I suspect that lack of the OP being bound to the purchase is the justification for the denial.

    I don't see any way around it myself. I agree with the IRS on this one.
    I agree... Your "CPA" should have known better...
    I am right 97% of the time... Who cares about the other 4%!

  5. #5
    Join Date
    Sep 2010
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    6

    Default Re: Denied First Time Home Buyer Tax Credit - This Will Make Me Homeless

    The IRS are saying the tax credit cannot be used for a down payment and are reading the contract verbiage "Downpayment of $4,000 (to be tendered upon receipt of tax return proceeds) leaving a balance of $72,000" as Downpayment of $4,000 (to be tendered upon receipt of first time homebuyer tax credit) leaving a balance of $72,000. I guess it's their interpretation of tax return proceeds which is the kicker.

    It's funny how if you take out a government loan i.e. FHA you can use the tax credit as a downpayment but any other form of loan you cannot? That seems like a conflict of interest to me.

    The seller would write the $4k off and let me keep the house if it would help but from what I'm hearing the IRS are doing everything they can to deny the credits to people. The whole thing seems a scam. They wanted people to get the property market going with offers they didn't intend on keeping.

  6. #6
    Join Date
    Jul 2007
    Location
    Florida
    Posts
    1,666

    Default Re: Denied First Time Home Buyer Tax Credit - This Will Make Me Homeless

    If you can find a way to come up with the $4000 and get the transaction closed (i.e. without the contingency, which is holding up the final closing) then you can resubmit your claim with the final closing paperwork. You could even submit an IRS form 911 to request expedited service from the Taxpayer Advocate's office. Without doing that, I don't see that you have met the requirements to claim the first time home buyer's credit. Fortunately, the deadline for closing was extended so you still have time to get the deal closed if you can come up with the $4000 or get the seller to waive that provision and get the deal closed.

  7. #7
    Join Date
    Sep 2010
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    6

    Default Re: Denied First Time Home Buyer Tax Credit - This Will Make Me Homeless

    Quote Quoting jk
    View Post
    I think it is this:

    they haven't paid the down payment of $4k yet. They were going to pay it from the tax return and since they have been denied the tax credit, they don't have the $4k to pay so the sale is going to crash.

    from what I understand, buying on land contract is allowed:

    from:

    http://www.irs.gov/newsroom/article/...206291,00.html



    what I suspect the problem is is that the down payment has not been made so the "sale" has not been finalized (been to closing). A requirement to be able to claim the credit is that the closing be before whatever the cutoff date was. Since the down payment was never made, the contract is not enforceable by the OP. They are not even bound to the contract. I suspect that lack of the OP being bound to the purchase is the justification for the denial.

    I don't see any way around it myself. I agree with the IRS on this one.
    The property was closed on in April 2010 and has been recorded. The seller was kind enough to wait for the down payment up until I got my tax return proceeds which was mentioned in the contract and seems to be why the IRS are giving me problems.

  8. #8
    Join Date
    Jan 2006
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    25,785

    Default Re: Denied First Time Home Buyer Tax Credit - This Will Make Me Homeless

    Quote Quoting TwoDogs
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    The property was closed on in April 2010 and has been recorded. The seller was kind enough to wait for the down payment up until I got my tax return proceeds which was mentioned in the contract and seems to be why the IRS are giving me problems.
    has title been transferred?



    If the deadline is has truly been extended, borrow the $4k from somebody (the seller maybe) and pay the seller. Your agreement for the borrowing of the money would be totally outside of the sales agreement.






    BubbaJimmy; what is the newest deadline? I can't seem to find that it actually had been extended let alone to what date.
    I am not an attorney and any advice is not to be construed as legal advice. You might even want to ignore my advice. Actually, there are plenty of real attorneys that you might want to ignore as well.

  9. #9
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    Sep 2010
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    6

    Default Re: Denied First Time Home Buyer Tax Credit - This Will Make Me Homeless

    Title hasn't been transferred yet because it's contract for deed. That means Title will get transferred once the seller has been paid in full in about 20yrs from now. In the meantime I have full rights to the property to do as I wish.

    Like I said the problem seems to be with IRS interpreting 'Tax return proceeds' as 'First time homebuyer tax credit' even though the tax return proceeds exceeded the FTHB tax credit. The IRS are saying that the tax credit cannot be used for a down payment even though Gov loans (FHA) do allow for the tax credit to be used as a down payment. Conventional loans would allow for it too but Fannie/Freddie blocked that wanting consumers to have the money upfront or via a non repayable gift. As far as I know there isn't any Gov IRS verbiage saying you cannot use the tax credit as a down payment yet that is the reason I'm being denied.

    Why would the Gov allow the tax credit to be used on FHA loans as a downpayment but not contract for deed?

    Smells like a scam to me so Gov can deny tax credits. This after my cpa sent in form 911 proving a real hardship!

  10. #10
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    Jan 2006
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    25,785

    Default Re: Denied First Time Home Buyer Tax Credit - This Will Make Me Homeless

    =TwoDogs;454290]Title hasn't been transferred yet because it's contract for deed. That means Title will get transferred once the seller has been paid in full in about 20yrs from now. In the meantime I have full rights to the property to do as I wish.
    so there has been no actual closing. Closing is when title is transferred. I would guess that the contract was simply registered as an attachment to the current deed to provide public notice of the constructive lien on the property.

    The IRS are saying that the tax credit cannot be used for a down payment even though Gov loans (FHA) do allow for the tax credit to be used as a down payment. Conventional loans would allow for it too but Fannie/Freddie blocked that wanting consumers to have the money upfront or via a non repayable gift. As far as I know there isn't any Gov IRS verbiage saying you cannot use the tax credit as a down payment yet that is the reason I'm being denied.
    the FHA does not loan money. They guarantee loans from private lenders. I suspect the refusal to allow the use as a down payment is there is no guarantee of the credit. While it is a reasonable determination it will be issued, it is not guaranteed. Due to that, the sale really isn't a sale until the credit is actually issued. That means you cannot actually file for the credit because there was no sale yet.

    Why would the Gov allow the tax credit to be used on FHA loans as a downpayment but not contract for deed?
    once there is a closing (and title transfers), it is difficult to reverse the transaction. In your situation, there has been no closing so the seller still holds the title. As such, it is a very simple scam to write up a land contract, apply for the credit, and once the credit issued, cancel the sale. Not saying you are doing that, just that is would be very easy to scam the gov using that process.

    Smells like a scam to me so Gov can deny tax credits. This after my cpa sent in form 911 proving a real hardship!
    to me, smells like the gov trying to avoid being scammed more than the other way around.
    I am not an attorney and any advice is not to be construed as legal advice. You might even want to ignore my advice. Actually, there are plenty of real attorneys that you might want to ignore as well.

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