No Bull Agent
President Obama is expected to sign an extension, approved by the House and Senate, to the June 30 first-time home buyer tax credit deadline. Why is this extension important and is it necessary? The simple answer is “yes” to both questions.
The original timeline for the first-time home buyer tax credit, as detailed in our previous post, stated that a home buyer must be in contract by April 30, 2010 and close by June 30, 2010 to be eligible for the credit. Many first-time buyers positioned themselves to take advantage of this credit which is evident by the increase in sales during the month of April. The current challenge is getting some of these transactions done in the 60 days previously given between the two deadlines. This timeline can be especially short considering short sales are still taking, on average, from four to six months to process.
There are many opinions as to why short sales take so long. The general consensus is that lenders are playing “catch-up” to the mass influx of these transactions, are short staffed and are reworking their processing procedures on the fly. This extension is important and necessary for these buyers who need the additional time, for no fault of their own, to complete their transactions. The extension, if signed by the President, will allow home buyers until September 30, 2010 to close their transaction. It is important to note this extension is only for buyers who signed a contract by April 30 and not for home buyers who entered into contract after this date. Please consult a tax professional to confirm eligibility. There is, however, another reason that is a little closer to the government’s heart and that has to do with the IRS.
Approximately 1,300 prison inmates have improperly received over $9 million in home buyer tax credits while they were incarcerated. The IRS and state prison officials require additional time to investigate this situation and share information about the suspected inmates. These inmates were not the only people to fraud the system. According to a report from J. Russell George, the Treasury Department’s inspector general for tax administration, more than 14,100 tax filers wrongly received approximately $26.7 million in home buyer tax credits. Clearly there are some loop holes that need to be closed and the hope is the extension will provide enough time to do so.