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Homebuyers still waiting on refunds

By Kay Bell · Bankrate.com
Tuesday, July 12, 2011
Posted: 9 am ET

Jane Chrissy Smith is one of the lucky ones. She claimed the first-time homebuyer credit on her 2010 tax return, was entitled to a refund and finally got her money last week.

"Got my money today with $30 interest attached and a reminder that I will have to claim the interest on next year's taxes! Thanks.....For nothing....IRS! But at least I got my money," Smith posted on the Facebook page, "2011 Tax Refund Delays," where folks in similar tax refund limbo have been commiserating for months.

That's right. Despite assurances in April by none other than the Internal Revenue Service commissioner himself that the homebuyer credit filing problem had been fixed, the agency still is processing returns claiming the troublesome tax break.

The problem primarily affects homebuyers who claimed the original 2008 tax year credit, which wasn't really a credit. It was an interest-free $7,500 loan, with payback beginning this filing season. Many of those folks made the payments, some even paid more than the minimum $500 repayment, and that complicated return processing even more.

In addition to sharing credit-related refund woes on the social network, some affected taxpayers also are trying more official channels to get their money. They've contacted the National Taxpayer Advocate Service.

Nina E. Olson, head of the office dedicated to helping taxpayers resolve IRS problems, earlier this year called the 2011 filing season the worst ever. Part of that ignominious designation comes from the first-time homebuyer credit claim issue, which she discussed further in her midyear report delivered June 29 to Congress. Olson wrote in her Fiscal Year 2012 Objectives Report to Congress:

The human drama of taxation and tax return filing was brought home to me this filing season during the First-Time Homebuyer Credit (FTHBC) debacle. ... The IRS's failure to program its systems with sufficient lead time for review and issuance of guidance led to a massive breakdown in the return filing process for these taxpayers. In short, as I write this preface in June, there are still taxpayers who filed in January 2011, reporting the repayment of the FTHBC, who have not received the balance of their refunds.

In addition to the economic problems that the refund delays have caused, the situation is undermining the Internal Revenue Service's already troubled public image and future taxpayer compliance.

Olson noted that taxpayers who have contacted her office say they are "tired of being lied to" by their government. "Several taxpayers speculated about what would happen if they took as long to pay a balance due on a tax return as the IRS was taking to pay them their refunds," Olson wrote. "All of this is out there on the web. None of this bodes well for the public’s confidence in the tax system."

The IRS obviously deserves a fair share of the blame, but let's not forget that the agency is dealing with an ill-advised tax law created and repeatedly altered by Congress. The tax agency then found itself in an uncomfortable situation that many employees often encounter: being forced to make good on promises that the boss made.

That, as the tax refund holdup makes clear, is generally a recipe for disaster.

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4 Comments
bumrocky
July 14, 2011 at 8:37 am

A little late to the party, there, bro. My rates went up 40% this year. Even WITH shopping around.

Homeless
July 13, 2011 at 8:10 am

Was that $30 interest payable at the same rate the IRS CHARGES late payers? Was it at 18+%....hmmm I wonder?

Kay, you are not really trying to make us feel bad for the IRS are you?? LOL

I will say again The Fair Tax would eliminate all this mess AND the IRS!!

The heart of the matter is the formerly Deomocrat run Congress never set forth a budget, because they were too chicken to show their true colors before elections were complete. If they had I can guarantee both the House AND the Senate would be run by Republicans! Through all this mess all they are doing is scaring the people and saying no to the only plans that have been brought to the table. They are not offering any solutions...just continuing to be the problem!