The two home buyer tax credits have helped many first time home owners. The IRS has found that more information is needed to prevent any type of fraud in the program. In 2009 people had claimed and received $8,000 checks for transaction that never occurred.
Due to these types of common frauds, the IRS has added additional regulations to the program and is requesting additional documentation.
• A complete IRS Form 5405, potential homebuyers can find this form at www.irs.gov.
• A copy of the settlement statement that proves the transaction took place. This document will include all parties’ names and signatures, property address, sales price and date of purchase.
• Those who qualify for the previous home buyer tax credit of $6,500, must show proof that they lived in their former home for five years out of the previous eight years.
o Property tax records, copies of annual mortgage interest statements and hazard insurance records can be used to prove residency of five years or more.
• Prior to attaching settlement statements, even though the form does not require signatures, the buyer should sign anyway it before attaching it to tax returns.
If for instance a signature is not required on the settlement document, the IRS will allow this if the form is complete and meets the standards of local law. California is one of the states that does not require both signatures on the HUD-1, Settlement Statement.
Strict regulations will be enforced and monitoring systems will be used to detect fraud before it escalates. Due to the new regulations a period of four to eight weeks is the expected wait time for the delivery of the tax credit checks.
Contributor, designer & admin for JohnHart Gazette.
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