The new form and instructions follow major changes in November that extended the credit to a broader range of home purchasers and added new documentation requirements to deter fraud and ensure taxpayers properly claim the credit.
The IRS expects to start processing 2009 tax returns claiming the homebuyer credit in mid-February, after it completes the updating and testing of critical systemic checks to deter fraud related to the homebuyer credit.
Some of these early taxpayers claiming the homebuyer credit may see tax refunds take an additional two to three weeks.
In addition to filling out a Form 5405, and filing a paper tax return because of the added documentation requirements, all eligible homebuyers must include with their 2009 tax returns one of the following documents in order to receive the credit:
A copy of the settlement statement showing all parties’ names and signatures, property address, sales price, and date of purchase. Normally, this is the properly executed Form HUD-1, Settlement Statement.
For mobile home purchasers who are unable to get a settlement statement, a copy of the executed retail sales contract showing all parties’ names and signatures, property address, purchase price, and date of purchase.
For a newly constructed home where a settlement statement is not available, a copy of the certificate of occupancy showing the owner’s name, property address, and date of the certificate.
In addition, the new law allows a long-time resident of the same main home to claim the homebuyer credit if they purchase a new principal residence. To qualify, eligible taxpayers must show that they lived in their old homes for a five-consecutive-year period during the eight-year period ending on the purchase date of the new home.
The IRS has stepped up compliance checks involving the homebuyer credit, and it encouraged homebuyers claiming this part of the credit to avoid refund delays by attaching documentation covering the five-consecutive-year period such as Form 1098, Mortgage Interest Statements or substitute mortgage interest statements, property tax records, or homeowner’s insurance records.
Normally, it takes about four to eight weeks to get a refund claimed on a complete and accurate paper return where all required documents are attached. For those homebuyers filing early, the IRS expects the first refunds based on the homebuyer credit will be issued toward the end of March.