While The Talon Group doesn't pretend to be an authority on giving tax advice, we can help first time home buyers in Washington get much of the back-up documentation associated with filing the IRS form 5405. Recent comments on various blogs around the country point to added scrutiny from the IRS in approving the lucrative tax credit. It also appears that refunds are being held up for several weeks waiting for additional documentation to validate eligibility.
The Treasury Inspector General for tax administration issued a report in late September reviewing widespread fraud and inaccuracies associated with IRS tax returns already filed:
The Internal Revenue Service faces significant challenges in verifying eligibility for the First-Time Homebuyer Credit
The IRS responded that any requirement to attach documentation to the filed returns would present a burden to both the IRS and taxpayers and would preclude many taxpayers from electronic filing.
According to concerned taxpayers, this has all resulted in tax credit refunds taking much longer than expected and additional requests from the IRS for back-up documentation.
The most commonly mentioned documentation is the HUD-1 Settlement Statement. For the typical residential transaction, buyers will see two different versions of the HUD-1. The one signed at escrow is referred to as the "estimated" while the HUD received in the mail after closing is considered "final". The difference between the two versions are substantial:
- The Estimated HUD-1 can be defined as a very close approximation of settlement figures based on a proposed closing date. The figures are subject to further change and in no way indicate that the transaction has been consummated.
- The Final HUD-1 is an accurate representation of all settlement figures based on the closed transaction. The escrow closer will often sign/stamp this HUD-1 as "Certified" and mail out to the lender, real estate agents, buyer and seller. Again, a final HUD-1 is only prepared by escrow after a transaction has been closed!
Talon provides both buyer and seller copies of the signed estimated HUD along with all other documents signed at escrow. If you were not provided with these copies or have misplaced them, your particular escrow company will be happy to send you what you need.
Two other important documents often mentioned when researching this post were the Deed and Real Estate Transfer Tax or commonly known as an Excise Tax Affidavit in Washington State.
Talon's Real Estate Information Manager, Chris Lodge, has prepared the following video presentations to illustrate just how easy it is to obtain these documents on-line from King County, WA. (many counties provide this same on-line service). If the IRS asks for a certified auditor's copy of the deed, this can be purchased for a nominal fee from the county auditor's office where the home is located.
Find your Excise Tax Affidavit
Find your last recorded deed
IRS CIRCULAR 230 DISCLOSURE: To ensure compliance with requirements imposed by the IRS, please be advised that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used or relied upon, and cannot be used or relied upon, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.


