elfling Posted January 15, 2010 Report Share Posted January 15, 2010 A former client contacted me today to ask a question. Not having an immediate answer, I assured him I would research it. But I'm not finding the answer just yet. Bill has not worked in several years. He was injured on a job site, collected workman's comp for a time, and eventually accepted a settlement. Since then he has gotten by on savings which does not garner enough interest to warrant filing an income tax return. On 6/2/09, using money he had in savings, Bill bought a home at a rather low price of $57K. It is in a somewhat depressed area of the PA coal region and needs work. This is now Bill's primary home. He has not owned a home in more than 20 years having lived with his mother during that time. So, can one receive the First Time Home Buyer's credit if there is no income to show on Form 1040? Websites seem to address nearly every quetion but this. Curious, I asked Bill what he plans to live on in the future, especially now that he has expenses as a home owner. Turns out he has bonds that were purchased by both himself and his father many years back that he will cash when needed plus he is not too far from reaching SS retirement age. (Tried, but was denied SS disability. Details unknown to me.) Elfling Quote Link to comment Share on other sites More sharing options...
Booger Posted January 15, 2010 Report Share Posted January 15, 2010 Elfling, it is a refundable credit, so I believe he can still take the credit even if income = zero. Booger Quote Link to comment Share on other sites More sharing options...
mcb39 Posted January 15, 2010 Report Share Posted January 15, 2010 He does not have to have income in order to receive the credit if all of the first time homebuyer rules apply. Quote Link to comment Share on other sites More sharing options...
elfling Posted January 15, 2010 Author Report Share Posted January 15, 2010 Well, mcb39 & Booger . . . that's what I think, too, but am unable to find a rule to assure I'm on the right track. Can someone come up with a cite or definitive answer? Elfling Quote Link to comment Share on other sites More sharing options...
ILLMAS Posted January 15, 2010 Report Share Posted January 15, 2010 Homebuyers who purchased a home in 2008, 2009 or 2010 may be able to take advantage of the first-time homebuyer credit. The credit: Applies only to homes used as a taxpayer's principal residence. Reduces a taxpayer's tax bill or increases his or her refund, dollar for dollar. Is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed Source http://www.irs.gov/newsroom/article/0,,id=204671,00.html Quote Link to comment Share on other sites More sharing options...
mcb39 Posted January 15, 2010 Report Share Posted January 15, 2010 Thanks, MAS, I knew I had read it, but couldn't find it and don't have my research materials with me. Quote Link to comment Share on other sites More sharing options...
TAXBILLY Posted January 15, 2010 Report Share Posted January 15, 2010 IRC SEC. 36. taxbilly Quote Link to comment Share on other sites More sharing options...
elfling Posted January 15, 2010 Author Report Share Posted January 15, 2010 Thanks, MAS, I knew I had read it, but couldn't find it and don't have my research materials with me. Woohoo! Exactly what I was looking for. I echo Marilyn's "thanks" to MAS!!! I, too, thought I read something somewhere but just couldn't come across it now that I needed it. Thanks again! > Elfling < Quote Link to comment Share on other sites More sharing options...
joanmcq Posted January 15, 2010 Report Share Posted January 15, 2010 Woohoo! Exactly what I was looking for. I echo Marilyn's "thanks" to MAS!!! I, too, thought I read something somewhere but just couldn't come across it now that I needed it. Thanks again! > Elfling < May want to be prepared for an audit, based on what I've seen so far as to the scrutiny these are getting. but if he can show assets enough to support himself, and no excess cash or lifestyle... Quote Link to comment Share on other sites More sharing options...
elfling Posted January 16, 2010 Author Report Share Posted January 16, 2010 May want to be prepared for an audit, based on what I've seen so far as to the scrutiny these are getting. but if he can show assets enough to support himself, and no excess cash or lifestyle... Absolutely no excessive lifestyle for Bill. He was widowed many years back and never went back into the dating world. Lives very simply and very plainly. Chooses not to have a telephone. Owns neither a tv nor a computer; no cable service up in the mountains anyway. He loves to read and garden. Recylces/reuses anything he can. It is not surprising to me that he has managed to live off savings for so long. Still stops by to see his mother nearly every day and helps her care for his neice and nephew who live with her. He feels that's both excitement and entertainment enough. As for an audit, no problem. Bill has provided all the proper documents and I've scanned them into my files for easy reference. On that note, just heard back from the auditor I worked with on behalf of another client (Sch C, pool installer) and everything is clear with no changes. Great! Only one item the auditor asked for last Thursday had to be located. We turned it over on Saturday morning. So it took only a few days for the final determination to come. Cool beans!!! Elfling Quote Link to comment Share on other sites More sharing options...
mcb39 Posted January 16, 2010 Report Share Posted January 16, 2010 Good for you elfing! If our clients are documenting their income and deductions, there should be no reason to fear an audit. Often they are just questioning something out of the ordinary, such as too much mileage for the amount of income. However, if the client has logged and can justify that mileage, the IRS will accept it. This has been my experience anyway. In any case, I would never worry about an audit in your client's case. If he is questioned, you just tell the story as you have done here. Believe it or not, there are more frugal people out there than one would expect. Quote Link to comment Share on other sites More sharing options...
TAXBILLY Posted January 16, 2010 Report Share Posted January 16, 2010 The new form is out. taxbilly Quote Link to comment Share on other sites More sharing options...
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