Form 5405 missing from e-file submission.

[smandel1980]

I received a letter from the IRS stating that I needed to send in for 5405.  I  do not see that form included in my downloaded return and I am unsure of where to get it now.  

[Opus 17]

Form 5405 is used to report the sale or disposal of a home if you purchased the home in 2008 and received the first time home buyers tax credit that must be repaid.  You are supposed to file this form in the year you stop using that home as your main home (because you sold, moved out, converted to rental, transferred to a spouse in a divorce, etc.).  Depending on the circumstances, you will owe full, partial or no repayment of the credit at that time.  Then you owe no repayments in the following years.

This form is only created if you tell Turbotax that you received the credit in 2008 and that you sold or moved out of the home in 2020 (for a 2020 tax return).

If you are still living in the home, you may need to make a repayment if you forgot, but that does not require including the form.

If you moved out prior to 2020, you need to fill out a form 5405 for that year, report the sale, and calculate and repay your credit.  It sounds like you can probably download just the form, fill it out, and mail it to the IRS with a check (if you owe money) to the office that sent the notice, rather than sending an entire amended tax return.  

[smandel1980]

That is where I am confused.  I still live in the home as my primary/only residence and turbotax estimated my repayment amount.  However form 5405 is not included in the e-file submission that I downloaded and the IRS says they need it.  If it isn't required since I still live in the home, how to I resolve this?

[Opus 17]

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@smandel1980 wrote:

That is where I am confused.  I still live in the home as my primary/only residence and turbotax estimated my repayment amount.  However form 5405 is not included in the e-file submission that I downloaded and the IRS says they need it.  If it isn't required since I still live in the home, how to I resolve this?

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I don't know what your letter exactly says.  If you still live in the home where you got the credit in 2008, your repayment of the credit should be included on schedule 2, line 7b.  Is your payment there?

Maybe the IRS got the idea you moved out?  Did you use a different address this year, send them a change of address form, or something like that?  Did you get divorced, maybe your spouse submitted a 5405 so the IRS thinks you need to submit one too, if you disposed of the home. 

Does the letter say you must have form 5405, or does it say you must have form 5405 or make a payment on schedule 2?

If you did not make a payment, you need to do that now instead of including the form.  You would prepare an amended return, but send the amended return and the check to the office that sent the letter, don't e-file the amended return.  If you did make a payment and are still living in the home, I would send the IRS office a letter explaining that you still live in the home, and that form 5405 is not required, and include a copy of schedule 2 showing you made your payment on time. 

[smandel1980]

No change in marital status or address. The letter reads.

"Form 5405 is incomplete or missing from your return.  Complete the form with the information that supports $267.00 on line 7b, Schedule 2.  Also attach all supporting forms or schedules, as required."

[Opus 17]

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@smandel1980 wrote:

No change in marital status or address. The letter reads.

"Form 5405 is incomplete or missing from your return.  Complete the form with the information that supports $267.00 on line 7b, Schedule 2.  Also attach all supporting forms or schedules, as required."

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OK, so the IRS wants to know why your credit repayment is only $267.  They must think you owe more.  Do you? How much credit did you receive in 2008, and did you buy the house with a spouse or another person?

The credit was 10% of the price of the house, up to $75,000, and repayable over 15 years.  So most people will have a $7500 credit that is payable at $500 per year.  The IRS wants to know why you are paying less.

[smandel1980]

Ok.  That makes more sense.  Honestly, I have no idea why I am paying less.  I did not generate that number.

[Opus 17]

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@smandel1980 wrote:

Ok.  That makes more sense.  Honestly, I have no idea why I am paying less.  I did not generate that number.

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Well, when you reported that you bought a house and owe repayment, Turbotax asked you some questions to calculate what you owed.  You may have entered the numbers incorrectly. 

I suggest you prepare an amended return, fix your numbers, print the amended return, and send it to the office that sent the notice, along with a check, and a brief letter explaining that you still live in the home, that you owe the full $500 repayment, and you made an error in your tax software causing it to under-calculate the payment, and that you are including an amended return and correct payment.

If you have other tax forms, you only need to mail the main 1040 and schedule 2, you don't need to mail all the other forms that won't have changes. 

If this is for 2020 tax season (this year), then you won't owe a late fee as long as you send the check by May 17. 

[Xander1588]

I received the same letter from the IRS ("Form 5405 is incomplete or missing..."). I am still living in the same house with no change in any status. TurboTax automatically listed $488 in Schedule 2, line 7b as it has done for the past 10ish years.

When I click on "Forms", 5405 is in the list, but is blank, despite the associated "smart worksheet" being filled in correctly ("Amount of Credit received = $7321", ..., "Repayment due for 2020 = $488").

How can I get TurboTax to fill in form 5405 so that I can send it in to the IRS as they requested?

Thanks in advance for any help.

[Opus 17]

@Xander1588 

You can’t send form 5405, it is only used if you sold the house or stopped using it as your main home for some other reason.  

The IRS is asking for form 5405 because they think your line 7b amount is incorrect, you paid more or less than they expected so they think you sold the house (or their computer thinks so, the letter is automatically generated).  You need to send a letter explaining your situation, that you still live in the house and how you calculated the repayment amount, and the amount was correct.  

[langevib]

I have received these exact same letters 3 years in a row.  I got a $7,500 credit and have been paying back $500/year ever since.  EVERY YEAR (lately), the IRS asks me to send in this form and it delays my refund MONTHS!

[DaveF1006]

Unfortunately you must send that in when requested. Meanwhile the IR has a backlog of paper returns and forms filed thus the delay in processing them.

@langevib