Thousands of people who took advantage of federal tax credits to buy a home in 2008 or 2009 have received notices from the IRS incorrectly stating they either owe money or they’re due money back.
Syndicated real estate writer Kenneth Harney reports that the IRS has basically had a nervous breakdown trying to deal with the complicated tax credit programs that four million people took advantage of.
Part of the problem is the multiplicity of flavors the program came in. In one situation, you had to pay the money back. In another, you just got the money. Another was only for true first-time homebuyers. Yet another was for both first-time and subsequent home buyers.
Here’s what’s going on now, according to Harney:
- More than 27,000 homeowners who got money with no strings attached are being told to send in payments.
- More than 12,000 who are due to repay the money under the terms of what’s basically an interest-free loan are being told no repayments are due.
- More than 800 people who died after they took out the credits are having their estates told to pay up. Yet there is a specific provision in place that waives any repayment requirements for deceased taxpayers.
Here’s what you need to know: Keep your records of your home purchase for decades to come. At a minimum, you should keep those records for 15 years from when you purchase your home. It’s normal in America to toss your tax records out after a few years. Do not do that in this case.
You never know when you’ll need to prove what the terms of your purchase and the tax credit you were told you would get.