IRS tax credit rejections
WASHINGTON – June 18, 2010 – The IRS has been rejecting first-time homebuyer claims from anyone who shows a Form 1098 Mortgage Interest Expense in their prior year files.
In many cases, the applicants are entitled to the credit because their previous mortgage interest deduction is for a timeshare, mobile home, boat or other recreational property.
If you have a client in this unfortunate position, here is some advice from Enrolled Agent Eva Rosenberg, who authors the Web site 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 residence. First-time homebuyers are entitled to own other types of real estate and still get the homebuyers 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 last three years, an old driver’s license showing that address, utility bills, etc.
• Homebuyers 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 begin_of_the_skype_highlighting (877) 777-4778 end_of_the_skype_highlighting, their Congressman, and their Senator, Rosenberg advises.
Source: TaxMama.com, Eva Rosenberg, EA (06/16/2010)
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