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Homebuyer credit refund delays

By Kay Bell ·
Monday, March 21, 2011
Posted: 2 pm ET

Some homeowners who this year began paying back their first-time homebuyer credit are still waiting for their refunds because of an Internal Revenue Service computer glitch associated with that tax break.

The affected taxpayers are those who took the original homebuyer credit on a residence purchased in 2008. That $7,500 tax credit wasn't really a credit at all. It was a no-interest loan from Uncle Sam to help them get into the house.

But like all loans, it has to be repaid and that process began with the filing this year of 2010 tax returns. The payments were reported on Form 5405.

These taxpayers already were unhappy because they didn't get as good a tax deal as homebuyers in subsequent years. When Congress extended this homebuyer tax break, it upped the amount to $8,000 and made it a true credit that doesn't have to be repaid.

So this filing season's holdup of their returns is the proverbial insult to injury.

The IRS says a computer programming issue has delayed the processing of a "small percentage" of returns filed by taxpayers repaying the $7,500 credit.

Many of the affected filers are those reporting a sale or other disposition of the home that qualified for the credit. This means the taxpayer has to repay the credit in full.

Other taxpayers who bought a home in 2008 and now are making a repayment higher than the required annual amount (the minimum annual repayment for the next 15 years is $500) also are seeing delays in the processing of their returns.

And processing delays mean longer waits for any refunds.

If your return and refund are being held up because of the homebuyer credit computer glitch, the only thing you can do is wait. The IRS says it's working on the glitch and things should be smoothed out soon.

Wait, no pun intended, I take that back. You also can go to the special Facebook page to vent your frustration with taxpayers who are in the same boat.

If you haven't filed your return yet, you can expedite the processing of your first-time homebuyer payback filing by taking a couple of extra steps.

Married filing jointly couples where only one spouse received the homebuyer credit for tax year 2008 should file one Form 5405 showing the Social Security number for the taxpayer who received the credit and is making a repayment. For example, a woman bought a house in 2008 and claimed the credit. She got married after the purchase and now files jointly. When the couple files, they need to put her Social Security number on Form 5405.

When a joint-filing married couple is repaying the homebuyer credit that they claimed for their home purchase in 2008, the IRS recommends filing two Forms 5405, one for each taxpayer Social Security number, and making a repayment for each form based on half of the total credit received by the spouses.

And remember that every taxpayer can check return and refund status online.

Make sure you get all the latest tax news and tips this filing season by subscribing to Bankrate's free Daily Tax Tip newsletter.

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May 04, 2011 at 9:52 am

My husband filed thru Turbo Tax on 1/27; told IRS would start processing 2/14 ... the 21 days passed and still no direct deposit in sight. Talked to IRS on 3/9 -- all is ok with return and could be up to 30 days. Updated status dated 4/6/11 on "Where's My Refund" that refund should be available no later than 4/19. Checked again on 4/15/11 and status had changed again to delay in processing. Called IRS again on 4/20/11 and said nothing wrong with return and should be available 5/10 (with direct deposit on 5/13) and this was also reflected on Where's My Refund. Just checked on 5/4/11 on Where's My Refund to see if status had changed again and guess what? It changed from being available for refund on 5/10 back to delay in processing. Can anyone confirm that the IRS is going to have to pay interest to those taxpayers who are going through this ridiculous delay period because of their computer glitch(es)?

Cara B
March 28, 2011 at 6:03 pm

This is not only primarily affecting people whom are no longer in there homes, or attempting to pay back more than the minimus annual payment required. Many of us, myself included, are still in my home, and are only paying back the required amount. Yet, here I sit since 2/25, my original tentative DD date, with no CLEAR answers.
What does it matter the amount of people, minimal or not whom are affected. Is the Government now deciding that certain groups of people are more important than others? How sad.

March 24, 2011 at 9:21 pm

This is a joke I have to say. I am due in two weeks if I do not go early and was waiting on the money to purchase items for the baby. We did not try saving any because we figured our taxes would be back. I am beyond upset at the whole situation and hope that they can figure it all out so that we do not have to deal with it next year.
they are a joke and do not know what they are doing. It is not that they have not been informed they are just stupid.
I do know that they say that they got it all figured out and if you have direct deposit that it will be deposited by the 5th of April. Funny thing is when you do call the IRS they themselves do not inform you of this. I wonder if anyone honestly knows what is going on.

mike brewer
March 23, 2011 at 5:59 am

The no interest loan or credit, whichever we would refer to it as is a joke. Another example of representation by crisis which exists in Washington. If I had known about the $8000 credit I would have waited to buy my house. the $7500 "loan" should have been a true credit and should be repealed That's right I said it. REPEALED

March 22, 2011 at 4:06 pm

This article is misleading! It's not a "small percentage" of the people that filed the 5405 form whose taxes are being delayed. It's almost all, if not all of them. Every time I've called the IRS to check on the status of my refund(now 1 month late), they have told me there is a glitch and no one who has filed this particular form is receiving there's on time. Some are delayed in errors, some in processing, and some are being done by hand. But the IRS themselves told me that ALL of the people filing this form have been delayed. There are so many people who are having this issue and the IRS is doing nothing to fix it in a timely fashion.

March 22, 2011 at 8:20 am

This makes me very happy I was one of the ones who bought a home in 2009. And, I take back any complaints I made while waiting the 6 months or so it took the IRS to return the credit!

Lucas Smith
March 21, 2011 at 8:04 pm

This definitly hit me, and H&R block who i was trying to efile through had no clue what was going on. Guess the IRS decided not to inform them. I ended up sending mine in by mail instead, which was a bit of a hassle as it ment i had to paper file my state returns as well.

I will point out though that those of use who are having to pay back the $7500 credit are unlikely to get a refund :-p I saw first hand how quickly the IRS will process returns when you are paying them. Normal mail filing takes weeks if not months for a refund to get to you. It was about 48 hours after it arrived (tracking the envelope) that my check to them was deposited :-p