Ok, this one's a doozy

[joanmcq]

Got a reject of a simple return today. Why you may ask?

Client buys a house with then girlfriend in 2008 & took the first time homebuyers credit. Remember that one? Yeah, that one. The one ya gotta pay back. How'd they split it, or did they split it? Not sure at this point. Maybe they both took the whole damn thing; that's the year you didn't have to send in supporting docs. Taxpayers marry, and now they are really badly separated. For two years, fighting over that same damn house.

Taxpayer couldn't even bring me last years return; apparently Liberty gave him all the boilerplate docs but no return. I do have most of 2012, when they last filed joint, ex always did the taxes. Guess it's time for a POA and call to the IRS. Blech.

[Lynn EA USTCP in Louisiana]

The IRS has a glitch in their system re the homebuyer credit. Expected 'fix' date is 3/23.

[JohnH]

Sounds like a good candidate for an extension.  Any time I can extend a return that is expected to take a long time to prepare, that means I can complete 2 or 3 others in that time slot and still prepare the extended return when things slow down. 

[schirallicpa]

I had separating clients for 2 years and they fought and fought and dragged their feet so long just to be vindictive, i was a stressed out mess.  the 3rd year they came back, still not divorced i told them to go somewhere else.  Its not worth the mess or stress.  I say "fire" them now.

[joanmcq]

I'm only doing one of them. Friend of mine, and when I was explaining the return to him, I watched his eyes glaze over, and he said 'ask me anything about electricity' (he's an electrician) and spouted some electrical gobbledygook that made as much sense to me as the tax return did to him. It's actually a straightforward return except for that damned credit.

And so easygoing he just told me 'take it all on my return, who knows'. I'm going to advise him to just agree to sell the damned house; when we were talking, he said he already found a place he'd like to buy that is much closer to work. Has a hellish commute from the house he has now.

[MsTabbyKats]

Stupid question....but how long do they have to live in the house to "not have to pay back the credit"?

 

Wasn't that in 2007?

[SaraEA]

Remember that you only pay back the credit if it equals or exceeds your gain. If he still owes $11k for the credit and makes a $10k profit on the sale, he pays back $10k. If he sells at a loss, no repayment required. I think the instructions to the form tell how to work it when couples split.

[joanmcq]

The max credit was $7500. He's already paid 2500 if you count this year.

[Cathy]

Joan,

I had a similar situation last year although not rejected. Client paid $500 on the return for the repayment. He and former wife had split but he agreed to pay the "loan".

Here's the kicker: refund delayed but finally issued LESS $250 (in addition to the $500 he already paid with the return). In the written explanation to him of the reduction, IRS told him he forgot his homebuyer's credit repayment on his return.

If client is in desperate need if his refund, change the payment to $250 and it should be accepted...then file 1040x to pay the additional $250.

Charge accordingly!

[Kea]

I just used this IRS calculator for a client who bought a house in 2007.  It may be able to help you, but it says it is down for maintenance today (3/8/15):

http://www.irs.gov/Individuals/First-Time-Homebuyer-Credit-Account-Look-up

 

The credit is split 50 / 50 for each spouse & each is required to pay back their half regardless of future filing status.  In my case, clients are still married, so I looked up husband and wife - each showed half the original amount.

[joanmcq]

Thank you Kea!

[Kea]

Glad to help!