More FTHBC - I prob need to amend

[jklcpa]

Clients picked up return about a week ago. They most likely have mailed it already.

I claimed the long time resident home buyer credit of $6,500. Husband purchased former home with first wife in the mid 80s, then divorced her mid 90s and married current wife. Current wife has lived in this home since their marriage, but she was never put on the deed. UGH! They purchased the new home together. They don't qualify for either credit, right? And MFS won't help either, right?

If they haven't filed, I'll correct the return.

If they have filed, how long to wait before sending the amended? Taking the credit off, they will owe about $3,750.

This has been the worst year ever. I hate this kind of cr@p!

TIA for any advice.

[Don in Upstate NY]

I claimed the long time resident home buyer credit of $6,500. Husband purchased former home with first wife in the mid 80s, then divorced her mid 90s and married current wife. Current wife has lived in this home since their marriage, but she was never put on the deed. They purchased the new home together. They don't qualify for either credit, right?

I'm not sure they don't qualify. From Tax Tips 2010-27

3. To be considered a long-time resident homebuyer you and your spouse – if you are married – must have lived in the same principal residence for any consecutive five-year period during the eight-year period that ended on the date the new home is purchased. Additionally, your settlement date must be after November 6, 2009.

[jklcpa]

Don, thanks for the reply. The sale of old and purchase of new were both in Dec 2009. The reason I'm saying they don't qualify is that husband = long term resident, wife = first time owner. Jainen posted a link earlier this season to the IRS Q & A on another scenario. I was rereading some of the older posts last night on the subject. Here is a portion from that Q & A :

Q. I am a long-time resident and current homeowner and my spouse is a first-time homebuyer (has had no ownership interest in a principal residence during the three-year period ending on the date of purchase of a new principal residence) and we purchased a new principal residence. Can we qualify for either the first-time homebuyer credit or the long-time resident homebuyer credit if we purchase a new principal residence?

A. No. Both you and your spouse must be first-time homebuyers in order to qualify for the first-time homebuyer tax credit. Since you had an ownership interest in a principal residence during the three-year period ending on the date of purchase, neither you nor your spouse qualifies for the credit. Similarly, both you and your spouse must be long-time homeowners of the same previous principal residence in order to qualify for the long-time resident homebuyer credit. Since your spouse is not a long-time homeowner of your current principal residence, neither of you qualify for the credit. (12/14/09)

[jklcpa]

I'm trying to decide how long to wait before amending. Return showed a refund of $2,750. Without the credit, this couple would owe $3,750. At least they met an exception to the 2210 penalty.

Is IRS sending the refunds on returns claiming this credit and later checking the credit documentation, or are they verifying that the TPs actually qualify for this credit before issuing the refunds?

[grandmabee]

I'm trying to decide how long to wait before amending. Return showed a refund of $2,750. Without the credit, this couple would owe $3,750. At least they met an exception to the 2210 penalty.

Is IRS sending the refunds on returns claiming this credit and later checking the credit documentation, or are they verifying that the TPs actually qualify for this credit before issuing the refunds?

I would amend before the 15th so they won't owe any interest. If they do get a refund check I would have them void the check and return it. If it is electonic deposit....hmmmm they will owe interest from when in bank until paid back.

[JohnH]

Another reason I've refused to do FTHB credits during tax season. Too many land mines.