Homebuyer Credit Confusion

Today TaxMama  hears from Timothy in the TaxQuips Forum. He filed for his Homebuyers Credit over 4 and half months ago, hearing nothing. When he called in, he learned they may have a problem because his 2007 tax return showed a deduction for mortgage interest. But it wasn’t his home – it was his ex-wife’s. How should he handle this?

Well Timothy and TaxMama family,

We’ve seen this situation several times. In my experience, IRS has typically sent out a rejection letter.

In our cases, we were able to prove that our buyer was never on title to the home, and did not live in a community property state. We were also able to include a copy of the divorce agreement showing our buyer did not get the home in question. It belonged to the ex before, during and after marriage.

So, my advice to Timothy and anyone else who gets a rejection like this? As soon as you get it, respond with the explanation and you will be fine. It may take two rounds of letters before IRS accepts your explanation.  But, in the end, they will.

To shorten the time span, call the phone number on the letter, if there is one, and talk to someone specific. See if you can fax them your response in the way they want the information. That sometimes helps.

And remember, you can find answers to all kinds of questions about First Time Homebuyers tax credits and other tax issues, free. Where? Where else? At www.TaxMama.com.

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