Delays, denials hit home-buyer tax credit filers TaxWatch - MarketWatch
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LOS ANGELES (MarketWatch) -- While TaxMama is being deluged with calls and emails from taxpayers wondering where their refund went, the IRS has been busy processing over 1.8 million claims for home-buyer tax credits, according to IRS data through February.
About $12.6 billion has been pumped back into the economy as taxpayer refunds, said Bruce Friedland, an IRS spokesman.
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Let's get this processing volume into perspective. IRS started processing claims for the first-time home-buyer credit when taxpayers started filing their 2008 tax returns in early 2009. That means IRS employees have processed about 150,000 claims per month.
It's a monumental task. Since discovering millions of dollars of fraudulent claims, the IRS has been reviewing a substantial portion of the claims instead of letting the computer process and pay.
That's where the delays start.
Steve B. said he feels he's being lied to about his tax-credit claim. He filed for his home- buyer credit in January, certain that everything the IRS requested was attached. It's now been over four months and IRS simply tells him "it is in the errors department" and they have no further information. Steve has tried calling the IRS "a million times," he said. He's even tried the Taxpayers Advocate Service, but they tell him they don't deal with this issue.
Steve isn't alone. Delays seem to run 25 weeks and more. When asked about the current expected processing time for the Form 5405 for claiming the tax credit, Friedland is as unable to get a definitive answer as any other taxpayer.
Rumors take root
When there are problems, rumors start. Steve B. said he heard thousands of these returns have been outsourced to third-party handlers to process the claims. The IRS's Friedland said no one outside the IRS is processing your tax returns. Relax.
There are rumors that the IRS is rejecting claims from people who have ITINs, the Individual Taxpayer Identification Numbers issued to aliens who do not qualify for real Social Security numbers. This rumor happens to be true. There's no credit for non-resident aliens.
Here's an excerpt from the Housing and Economic Recovery Act of 2008: "No credit under subsection (a) shall be allowed to any taxpayer for any taxable year with respect to the purchase of a residence if (3) the taxpayer is a nonresident alien."
The question is, are you automatically a non-resident alien because you have an ITIN? This is the kind of question stirring up strong emotions in Arizona and across the country these days, isn't it?
Without getting political, let's look at the law. There's a good possibility that many of these ITIN holders getting rejected should ask to have their claims re-examined. They may be resident aliens. The Recovery Act did not exclude resident aliens from the credit. The law was specific about nonresident aliens.
What is a resident alien? According to the IRS, you are considered a resident alien if you met one of the following two tests for the calendar year.
One, you have a green card. Two, you meet the "substantial presence test" -- meaning you have been physically present in the U.S. on at least 31 days during the current year, and 183 days during the three-year period that includes the current year and the two years immediately before. See Tax Topic 851 on the IRS site.
If you can prove that you have been living in this country all that time, and in all other ways you qualify, you should be entitled to the home-buyer tax credits.
Have unit number? Hit the road
Did you get a rejection because your new home has an apartment number? How odd is that? How many ways can you live in an owned residence in this country with a unit number? Let me count the ways:
Condominiums
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