Did you find filing your 2010 tax returns particularly troublesome? You’re not alone.
National Taxpayer Advocate Nina Olson, speaking to a recent session of the American Bar Association Section of Taxation meeting in Washington, D.C., thinks so, too.
What made it so bad for the woman in charge of making sure the Internal Revenue Service is more responsive to taxpayers? The first-time homebuyer tax credit.
“I have to say this has been my worst filing season because the stories are heartbreaking,” Olson told the tax attorneys. “You see this whole debacle that came from this provision that in my estimation had no business being in the Internal Revenue Code in the first place.”
The tax credit didn’t affect me personally, but I agree with Olson. Congress’ insistence, following much pressure from the housing industry, to extend and expand this tax has been an administrative nightmare, both for taxpayers and the IRS.
The tax break was plagued by fraud, which prompted tougher verification standards, which made filing harder (no e-filing allowed for first-time homebuyer credit claimants), which produced IRS processing problems, which has left taxpayers waiting months for refunds.
Olson said she gets daily emails from folks who need the tax credit so they don’t get evicted or because they have military spouses deployed abroad.
And speaking of the armed services, the tax break is not quite dead yet.
Members of the military and some federal employees serving outside the United States who signed a contract on a qualifying home by April 30 can claim the first-time homebuyer credit on their 2011 taxes if they close on the residence by June 30.
In addition to members of the uniformed services, individuals serving with the U.S. foreign service and employees of the intelligence community are eligible for this special rule.
It applies to any home purchaser in those fields who was on official extended duty service outside of the United States for at least 90 days from Jan. 1, 2009, through April 30, 2010.
If you qualify for this extended opportunity to claim the first-time homebuyer tax credit, good for you. But I, along with Olson, the IRS and lots of frustrated taxpayers, will be glad when this tax break finally ends.
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