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Among the elements of the federal government’s economic stimulus plan this year is a first-time homebuyer tax credit. This incentive is making it extremely attractive for new buyers in the real estate market – creating not only activity in the stagnant marketplace, but also providing assistance for consumers who are hoping to enter the marketplace. This can be a particularly attractive option for prospective buyers who have gone through the credit repair process and are working to re-establish a healthy and robust credit history.
But unfortunately, like so many programs, there is fraud occurring in relation to the homebuyer tax credit. As a consumer, it’s your responsibility to make sure you’re filing your taxes accurately and correctly, and that you verify you’re eligible for the credit.
First-time homebuyer tax credit basics
The first-time homebuyer credit began in 2008 but was modified in 2009. Homebuyers are eligible for this program as long as their home purchase closes by December 1, 2009 – this means the purchase must record with your county/city; just having a seller accept your offer by December 1 won’t count.
The government will give eligible buyers an $8,000 tax credit – not merely a deduction. This is significant, as many government programs offer just a deduction. But a credit quite literally reduces your tax burden. It is a particularly valuable benefit for taxpayers.
For this program, a “first-time homebuyer” counts as someone who hasn’t owned a home (a single-family home, condominium, any property) in three years. For married couples, this rule applies to both parties – it’s not like a husband can own a home, and his wife buys a second home and get the credit. Consider it a “one per family” rule.
To understand your complete eligibility, you can visit the IRS Web site, consult a licensed Realtor, or talk to an accountant.
Fraud targeted by IRS
In July, the Internal Revenue Service announced it was beginning to investigate and prosecute fraud associated with the first-time homebuyer tax credit program. The IRS has found fraudulent claims of credits on tax returns – as of early August, the government was investigating two-dozen such claims of fraud across the nation.
To protect yourself from fraud, the IRS recommends that you seek out the counsel of an accredited tax preparer, such as a Certified Public Accountant. But remember that the information filled out on your taxes is your responsibility – you must check it to make sure all the posted data are correct. If you have a tax preparer who fraudulently adds credits to your taxes, or mistakenly processes your paperwork, you could be in trouble with the IRS. Penalties for tax fraud of this nature could result in up to three years in jail, plus the possibility of up to $250,000 in fines.
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