Is Your 4 Year Old Taking Advantage of the $8,000 Home Buyer Tax Credit?

$8,000 First Time Home Buyer Tax CreditOne of the key provisions of the $787 billion stimulus package passed by Congress early this year is the $8,000 First Time Home Buyer Tax Credit.  With real estate in the tank, the United States government thought a great way to stimulate the economy and the housing market would be to offer a one time lump sum payment to first time home buyers in the form of a tax credit of $8,000.  I must admit that the idea is unusually solid for our boys and girls on the hill, but unfortunately it doesn’t look like they thought this one all the way through.

The name of this bill implies a couple of pretty obvious conditions, right?  In order to receive this tax credit, I would have to buy a house AND this purchase would have to be my very first one.  The purpose of this bill was also pretty obvious in that more houses would be bought, thus reviving a struggline economy.  What’s not obvious is how this would be implemented and policed in order to avoid fraud. And man, is there some fraud going on!

In a recent investigation conducted by Congress, it would appear that tens of thousands of Americans have falsely claimed this credit on their tax returns.  While some of these claims may be in err, many are undoubtedly intentional, and the IRS has already begun an extensive audit of over 100,000 returns claiming the credit.  If you intend to file a tax return claiming the $8,000 Home Buyer Tax Credit, make sure not to make the following four mistakes.

You must buy a house!!! – You would think that this one is probably the most important and obvious, but so far over 19,000 claims have been received in which a house has not yet been purchased.  For the IRS, it’s been awfully difficult in verifying that the home in question was actually closed upon because no documentation could be accepted electronically.  If you are one of the many who received this credit without purchasing a house just yet, I urge you to make it a priority.  Uncle Sam will come after their $8,000 and then some, very soon.

You must be a first time or non-recent buyer or owner of a new home - This one is a little tricky because the term “first time” does not actually mean that you’ve never owned a home before. The IRS defines a first-time home owner as somebody who hasn’t owned a home in his or her own name in the past three years. If you have owned a home less than three years prior to your new purchase, you are not eligible for this credit.  The US government is looking for new owners of homes, not those with houses already in their name.  Again, fairly clear, but it appears that 74,000 tax payers incorrectly filed their taxes already showing previous home ownership and applying for the $8,000 tax credit.

If you’re income eligible, take the credit yourself – In order to receive the tax credit, your modified adjusted gross income (MAGI) must be less than $75,000 (In some cases this number could be as high as $95,000).  Those that still want to receive this credit have been applying for the $8,000 under their children’s names.  So far, 580 claims show a taxpayer age of under 18, one of which was only 4 years old.  While a dependent can claim the credit, taxpayers who are not eligible to claim the credit do not become eligible simply by using a minor child’s name. If you’re eligible, save yourself a big headache and claim the credit on your tax return. If you are not eligible for the tax credit, don’t enlist your preschooler to claim the credit.

Non-resident aliens need not apply – If you are not a resident of the United States of America, you do not qualify for this tax credit.  Still, 3,200 taxpayers that file with an Individual Taxpayer Identification Number (A surefire way to tell the government you are not a resident of the US) have claimed this credit.  The first step in making this right would be to get your residency, then apply for the credit.  Doing this the other way around could damage your chances of remaining in the US.

All told, these four problems have caused close to 100,000 incorrectly filed tax returns, which cost the US Taxpayers $800 Million.  While most of these errors will be rectified, the lack of security and implementation is causing a doubt in the minds of some Congress members to extend this bill beyond the December 1st 2009 deadline.  Please make sure to have all necessary paperwork saved and available if you decide to claim this credit as there’s a very good chance that your tax return will be up for a closer look.

Published or Updated: October 27, 2009

Comments

  1. wilder boar says:

    Contrary to what the IRS published that is required for the first time homebuyers credit/rebate, significantly more and detailed homeowner documentation is demanded(including personal information, unprecedented in over 40 years directly by the IRS).
    At that, it takes months, and months, and months, sometimes up to two years to receive this rebate from the IRS.
    Be prepared to join class action suits against the IRS, file a personal suit against the IRS, and take out a highway bulletin board against the IRS’s fraudulent practices.

  2. Dean says:

    I have to agree with the previous comment. The so called fraud problem is on the part of the IRS and not the American people. Despite prviding every requested form and proof of purhase with my return, my “credit” is now 6 months delayed. First because they didn’t believe I lived at my house (despite it being the address I filed my taxes from and was asking for the refund to be mailed to), and now because they don’t believe I purchased said house despite the fact that I already supplied my signed purchase contract and notarized deed of ownership. They are now threatening legal action if I don’t pay THEM $3,000. Either the tax credit was a total scam or they ran out of money to pay for it. How do you sue the IRS?

  3. wilder boar says:

    Now comes a letter today from the IRS rejecting my claim for my rebate, stating that I had owned a previous home! I am still scratching my head, thinking back to 1988 when I was still married(single for many years now, no interest nor liability on any property since 1988 other than my own sold vacant lots!).They must have dug real far back to find ownership and maliciously chosen to use that information.I still say they are engaging in fraud to eliminate many legal, legitimate tax filer claimants. This is a typical letter, may others receive as an IRS stall tactic under current Fed Gov orders and license. First rejection was based on their excuse notion that they didn’t have my current addressYet they ‘found’ the right address, finally, not the one four rentals ago, to send a letter to me).
    I am going to find a broad based tax lawyer and sue the IRS for my entitled(as they advertised) rebate, full interest for damages in situation, and the legal fees.PLUS continue to advertise their vindictive behavior;THEY are the fraudulent.
    Hard to believe they have started ANOTHER home buyers stimulus, without resolving their own fraud and paying off all under previous rebate tax filing statuses for up to two years in many cases.
    Will try to update you by this post site.

  4. Jennifer says:

    I also have been denied the credit. The IRS has said we previously owned property, but we have owned nothing our whole lives and have had nothing but the simplest tax returns for our whole lives. We filed a letter, then 6 weeks later received a letter saying they need another 45 days because they haven’t had time to investigate our claim. I think it is a stalling tactic, pure and simple. If we do not eventually get the credit, then that is fraud. I know lots of first time home buyers probably borrowed money to put for the down payment, thinking they’d just repay it as soon as the tax refund came. Fortunately we are not in the position but we really do need the money. It’s unbelievable that this is happening when everything is already tracked with our SSN anyhow.

  5. wilderboar says:

    Of course, the IRS sent me a FTHBR check for only PART of what they owe me. A check for odd dollars and odd cents.
    Of course, I see they had made mistake after mistake presumtively regarding my filing, eligibility, refund amount.
    Of course, it will take seven more months, maybe allot more, pounding them for over $200 they still owe me.
    Of course, I believe they arbitrarily re-assigned my legitimate rebate calculation to another rebate program unknown to me.
    Of course, I will be taking more of any actions or new actions(oh so resourceful here) to make them pay me what they owe me under the advertised program for my purchase of a home in early November, 2009.They even ignored the actual date of closing and posted the County registration of documentation date!

  6. Leigh Vion says:

    I’m anthor statistic that falls into the category of being rejected for the first time homebuyers credit. There is no doubt that I qualify for the credit. The escrow closed on my home on September 7th, 2009 and I have never owned a home or property before. My income is well below the $75,000 maximum, and I continue to reside in the home. I have been dealing with these crooks for six months. I have sent them every required document, and then some, in order to prove that I reside in the home and that I am on title. Even after all the supporting documentation I sent they had the nerve to send me a Notice of Deficiency without an explination as to why I had been denied the credit. I figured that I was not the only one being treated in such a unjust manner. I was not suprised to see other people in the same boat. I fully intend on filing a petition with the tax court and appealing that ruling if it does not bring me justice. I will fight this all the way, even if it takes 20 years. This is a matter of principal, not to mention the fact that I was counting on the money. It makes me sick when these crooked banks that ran our economy into the ground get bailed out with billions of tax payers hard earned dollars no questions asked, but when it comes to paying the tax credit they promised you have to be interogated and denied. The IRS is nothing but a bunch of thugs. If anyone knows of a class action lawsuit against them please let me know, or if there isnt one, maybe there are enough people to start one. My regards to those who are going through the same thing. Dont give up until justice prevails.

  7. James says:

    I also bought a house last year. I filed for the credit,sent them every piece of information they wanted from a copy of the settlement to proof i lived there. Then i also got a letter of deficiency from them.

    I’m not sure what that means? But i’m going to fight them tooth and nail.

  8. Tyler says:

    I’m dealing with the same thing! Notice of deficiency even though I have given them all the proof possible. I’m actually on hold right now with the IRS. This will be the 7th time I have called in the past 3 weeks. They keep telling me that my information was never reviewed. HA! So it takes 5 months to review it? I sent my stuff back in September of ’10. It is absolutley ridiculous. Anyone have any luck?

    Oh and I’m still on hold…

  9. Carole says:

    I am in the same boat. I am a former by-the-book Real Estate closing agent and licensed title examiner, so I thought I would overwhelm the IRS with way more documentation than they could think to ask for and there would be no problem getting my rebate in a timely manner. Silly me! They waited four months to send me a request for proof that I live in the house. I sent all that with my return–I gave them change of address with DMV, social security, the post office and my banks. They wanted it again because it had been more than two months since I had submitted the info–whose fault is that? They also wanted copies of my payments/receipts, plus a copy of front and back of the check, copy of quarterly mortgage statement, most recent bank statement, copy of driver’s license and registration, recent pay statement and on and on. Again, I provided more than asked for, like copy of voter’s card. I sent all that back six weeks ago and nothing. I am going to involve my senator and congressman. Probably won’t do any good.

  10. Carole says:

    I just went online to check “Where’s My Refund” and got a shock. All of a sudden they show no record of my tax file! I called the number they gave me the last time they requested info, and the examiner was able to tell me that they do still have my file, but the bad news is that it could take months for them to assign my file to an examiner for review! And it will probably be a wait of nine months (total) before I get my tax credit! How can we put the money back into the economy if it takes this long to get the credit? Gaaaaaaaaaaa!

  11. Carole says:

    I just got another letter–they need another 30 days to review my latest proof of residence and if another 30 days is not enough, they will send me another letter. Still yanking my chain.

  12. Mike says:

    I bought a house in march of 2010, For $100,000 Cash. I attached a copy of the closing statement, copies of the certified band check, a copy of the newly registered deed in my name, a copy of my paid in full property tax bill, etc. etc. And these lazy dishonest bums, reject my $8,000 credit. No wonder nobody trusts the government. If anyone knows of a class action suit against these theives, please e mail me. Thanks, Mike

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