Update on First Time Homebuyer Credit and Tax Refunds


Notice: Historical Content

This is an archival or historical document and may not reflect current law, policies or procedures.

The IRS has updated information on processing issues that are impacting a small percentage of tax returns involving repayment of the First Time Homebuyer Credit, primarily involving 2008 home purchases. Claiming this credit on a 2008 return generally created a repayment liability (the 2008 credit functions as an interest-free loan) beginning with the tax year 2010 return. While most of the 2010 tax returns processed normally, a small percentage encountered delays. The IRS recognizes the hardship caused by delayed refunds, and it continues to devote extensive staff and resources to address the issues promptly.

It is important to note that taxpayer returns claiming a home purchase in 2010 are not affected, and those returns are being processed as are the vast majority of other homebuyer returns.

The IRS continues to work through homebuyer refund issues, primarily affecting those who made purchases in 2008. A number of issues have already been resolved that impacted a number of taxpayers earlier this year. However, the IRS is still encountering other issues for some homebuyer tax returns, and these tax returns are now being reviewed and  researched. We are using special handling procedures to get these processed as quickly as possible.

The IRS is seeing several issues on these tax returns, including mismatches related to the names or Social Security Numbers on either the 2008 or the 2010 tax return. These mismatches can involve either spouse listed on the tax return. Other problems relate to a repayment amount that does not match the expected repayment (typically $500, or $250 for each spouse in the case of a married filing joint 2008 return).

The IRS is performing manual research to resolve these mismatches so that the return can be processed and any appropriate refund issued. The IRS continues to process these refunds as quickly as possible. Many of these refunds have already gone out, and more will go out in the weeks ahead.

We are working hard to resolve the remaining issues and process all the remaining tax returns as quickly as possible. We appreciate the patience of affected taxpayers and deeply apologize for the inconvenience.

What should taxpayers do?

We appreciate that taxpayers affected by this issue are anxious to get the status of their refund. For those who have already filed, no action is necessary. They can check “Where’s My Refund” on this website for updates. Because the IRS is already aware of this issue and is taking corrective action, there is no need to call.

For those who have not yet filed and are making a repayment of a First Time Homebuyer Credit this year, there is a simple step taxpayers can take to help speed processing. Couples filing a joint return for tax year 2010 who received the credit on their jointly filed 2008 tax return should file two 5405 forms, one for each taxpayer. For couples filing a joint return for 2010 but who had a different filing status in 2008 and only one spouse received the credit, the IRS recommends filing one Form 5405 for the taxpayer who received the credit. For full details, see the March 18 Quick Alert. (NOTE: No longer available.)

Can other factors impact refunds besides the First Time Homebuyer Credit?

Yes, other factors can impact a taxpayer's refund, such as federally mandated offsets (reductions) to refunds. More information is available.

Other information

For other information on the 2011 tax filing season, including statistics on filings and refunds, please see 2011 and Prior Year Filing Season Statistics.