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The Internal revenue Service made an announcement today that there are processing issues that may cause a delay in some taxpayers receiving their refunds. The delay is primarily affecting a small percentage of taxpayers who bought a home in 2008 and qualified for the First Time Homebuyer Credit, the IRS said.
The credit was actually an interest-free loan for 10% of the home’s purchase price, up to a maximum of $8000. The credit is to be repaid, at tax time, to the U.S. Treasury over the 15 equal annual installments beginning in the 2010 tax year.
Married Filing Joint taxpayers who received the First Time Homebuyer Credit on a 2008 purchase may find their refunds delayed, mostly taxpayers in this group who filed their returns before February 22. The IRS is manually entering these returns as quickly as possible and expects most of these refunds to be issued by April 5 as long as there are no other issues with the taxpayer’s return.
Others who may find their refunds delayed include taxpayers who received the First Time Homebuyer Credit and are attempting to pay back more than the amount required or those who are now reporting the sale or disposition of their home for which they received the tax credit.
The IRS is working on changing their core tax processing systems to enable them to process these types of returns, and doesn’t yet have a specific date for when the updates will be complete, but it will be some time in April.
“We appreciate that taxpayers affected by this issue are anxious to get the status of their refund,” the IRS said in a statement.
Taxpayers who have already filed can check “Where’s My Refund” at www.IRS.gov for updates. Because the IRS is already aware of this issue and is taking corrective action, there is no need to call. For those who have not yet filed and are making a repayment of a First Time Homebuyer Credit this year, there is a simple step taxpayers can take to help speed processing.
Couples filing a joint return for tax year 2010 who received the credit on their jointly filed 2008 tax return should file two 5405 forms, one for each taxpayer. For couples filing a joint return for 2010 but who had a different filing status in 2008 and only one spouse received the credit, the IRS recommends filing one Form 5405 for the taxpayer who received the credit.
The IRS said that taxpayers who bought a home in 2010 are not affected and that their tax returns should process normally.
Internal Revenue Service