Homebuyer credit repayment

[unknowncity]

I can't find the field to input my 2008 homebuyer credit repayment installment. There's a field asking me if I got the credit, but nothing to add my annual repayment.

[Opus 17]

Did you stop living in the house as your main home, and when?

[unknowncity]

Yes, in 2009. And I've been repaying the credit in installments since, but there's no obvious place to add that information in the form.

[Critter]

If you say yes to this screen there are several more in this interview path to complete ... do you see this page and can you not move forward ?

[Opus 17]

@Critter#2 if you say yes you got the credit, but then give a date before 2016 when you moved out, the program knows no payment is due so it kicks you out of the interview.  But it doesn't tell you that you may need to go back and file a form 5405 for a prior year.  "I can't enter my payment" is a key symptom of having moved out before 2016.

[Critter]

True ... but my answer was posted before OP said 2009 ... and I say you were responding so I waited for your SOL answer that I knew was coming.   Not sure how he could have possibly made all those payments all those years in any tax program unless he lied and said he still lived there.  A note in the program to alert users to their errors is not a bad idea but again the program can't do everything for every one all the time.

[Opus 17]

If I recall, In previous years, turbotax did not ask when you moved out so it allowed people to make repayments they shouldn't have.  I believe that change was added mid-2015 season after I reported it as an issue.  So people who filed with TT in the first half of the 2015 season would only be encountering the issue when they prepare their 2016 return.  And I don't know how other companies handle the situation.

[Opus 17 · Accepted solution]

You're screwed (sorry).

You've been making excess payments for years that you didn't owe, and there's no way to get that money back.

If you stopped living in the home before 2016, you were supposed to file a form 5405 in the year you sold or moved out.  Your credit balance would have been immediately due in full, or forgiven, or a partial payment was owed, depending on the circumstances.  That would have ended your responsibility for repayment and you owe nothing after that.

So, you should have filed form 5405 in 2009.  If you made a gain on the sale, you would have owed full repayment (up to the amount of the gain).  If you had a loss on the sale, or you were foreclosed, you owed nothing, and filing the form would have canceled all remaining payments.

The only exception is if you were forced to leave the home due to fire or condemnation ("involuntary conversion").  If you had a loss on the involuntary conversion, you can file form 5405 and the remaining credit balance is forgiven. If you moved into a replacement home and broke even or had a gain, you can continue to make installment payments for the rest of the 15 years.  If this is what happened, answer "yes" you are still living in the home, since you are living in the replacement home.

You will need to file an amended tax return for 2009 that includes form 5405, to report the circumstances and determine what you owe.  Turbotax is no longer supported for 2009, you will need to do the amended return by hand using the 2009 versions of the tax forms and instructions downloaded from the IRS web site, or see a tax professional.

Then for 2016, you owe no payment, but the IRS thinks you do, so you will need to print your 2016 return and mail it in.  

You can also file amended returns for 2014 and 2015 to get back the payments you made in those years.  Unfortunately it is too late to file amended returns to get refunds for 2013 or before, so that money is just gone.

Amend https://ttlc.intuit.com/replies/3288565

[Critter]

Could the poster just include all the payments made in error on the 2009 form 5405 to get credit for them ?  It would not hurt to try ... make sure to explain your erroneous filings from 2010 to 2015 to support the amount repaid line.

[unknowncity]

Thanks for the advice. I just talked to an IRS agent about it, and they're going to review it. There's a good chance that I won't have to repay it at all.

[Opus 17]

@Critter#2 I have never heard of that.  Not sure how you include payments for 2010+ on a 2009 form.  It would be interesting to see a ruling or court case on this.

[Critter]

It is reasonable and I could defend that in an audit ... would I win ??? who knows but it is worth a try ... and since the return must be mailed a letter of explanation can be added.

[Opus 17]

I think it matters if the repayment is owed or they sold at a loss.

If payment is owed, I would certainly try to get credit for the $3000 already paid.  But if the payment owed is less than $3000, they won't get a refund, and then using the $3000 here would stop them from claiming a refund by amending 2014 and 2015.  

If they sold at a loss (which seems more likely since they sold after just one year, once you add in the closing costs and subtract the commission) then claiming the payments won't get them a refund since it's over the 3 year limit.