How to Deal with IRS Tax Credit Rejections

YES, the IRS has been rejecting first-time buyer claims from anyone who shows as Form 1098 Mortgage Interest Expense in their prior years. Many of these rejected first timers are entitled to the credit because their previous mortgage interest deduction is for a timeshare, mobile home, boat or other recreational property.

Here is some advice from Enrolled Agent Eva Rosenberg of TaxMama.com

• Respond to the IRS immediately and tell them why their rejection is wrong. Be prepared to prove that the mortgage the IRS is seeing isn't on a personal resisdence. First-time home buyers are entitled to own other types of real estate and still get the home buyers credit, so provide proof that the previous mortgage was on something else.

• Send a letter explaining the situation and providing proof of a previous rental or other non ownership living situation, including copies of rental contracts for the past three years, an old driver's license showing that address, utility bills, etc.

• Home buyers who believe the IRS may view their situation in this way should be proactive, providing proof that they are a first time buyer when they initially file for the credit.

• Anyone who is rejected after two attempts to explain the problem to the IRS should call the Taxpayers Advocate Service toll free, (877) 777-4778, their Congressman, and their Senator, Rosenberg advises.

BUYERS VS SELLERS

Buyers are killing deals in this tough market by requesting over the top concessions of sellers after home inspections!!!

According to Glen Kelman, CEO of Redfin, "We see buyers who must have learned their moves from The World Wrestling Federeration. They think the final smack-down occurs at the inspection, where the seller will be reluctant to refuse any demand because the altenative is putting the house back on the market as damaged goods."

Questions? Comments? Advice?

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FORECLOSURE CRISIS IS ENDING

THE END IS NEAR, according to Barclay's Capital the number of foreclosures available fell to 617,000 in December, down from 845,000 in November 2008. Buyers hoping to find a "steal" on a foreclosed home are finding it more difficult because the supply is decreasing. Remember when DEMAND exceeds SUPPLY = PRICE INCREASE!!!

On a related topic, the Mortgage Bankers Association announced that there are signs that the foreclosure crisis is ending. According to Jay Brinkmann, MBA's chief economist, "The continued and sizable drop in the thirty -day delinquency rate is a concrete sign the end may be in sight..."

30-day delinquencies have been a leading indicator of foreclosures

"...[This] gives us growing confidence that the size of the problem now is about as bad as it will get."

and more good news, The Fed announced that interest rates will remain low, the Federal Reserve chair Bob Bernanke told Congress that the rates are likely to remain low for an extended period. He also stated that the economy "still requires support for recovery."

Now for those of you smart and savvy. Buyers that have purchased and qualify for the TAX CREDIT, here is what the IRS requires when filing your income tax r

eturn. You will still need to file Form 5405, however they are not demanding that all parties' signatures be on the HUD-1 settlement statement in areas where both

the buyer and seller signatures isn't common. They also ask that the buyer sign the statement before attaching to the tax return.

Now for you fortunate repeat Buyers, the IRS is seeking documentation proving residency in the previous property for five consecutive years of the the past eight years. Proof can be property tax records, home owner insurance records, or mortgage interest statements.

Please contact me for all your REAL ESTATE NEEDS

RealEstatewithRuben@gmail.com

SEE YOU AROUND THE NEIGHBORHOOD!!!