Form 5695 processing error

[Slhpete]

Form 5695 line 32a requires an attached statement for unmarried joint occupants.  Not possible to provide for efile.   Looks like 3 options now.... 1-hope turbotax adds a comment section or statement option to form before filing deadline (is this even possible?), 2-efile without energy credit and amend by paper, or 3-add statement and paper file.  Option 2 would get some refund money faster?

Some ideas anyway!

[Slhpete]

Line 32a requires a written statement not possible if efiling.

[cjk420]

The other option is to read through IRS Form 5695 instructions and look at form. Decide whether or not box 32a really needs to be checked in your case based on this rather than TurboTax input process which appears oversimplified resulting in rejected returns.

[ac120374]

I believe yours is a valid reasoning.  In my case, I have joint occupancy but I paid for all the expenses of installing solar. The co-owner of the property has filed his taxes long time ago and didn’t claim any part of the credit. I live in NY state, where e-filing state taxes is mandatory. As long as federal return is rejected, state will always get rejected as well. So I have no choice but to e-file both. 

[cjk420]

Instead of one question on joint ownership, TurboTax could have asked a series of questions like:

1. Joint ownership/occupants?

2. Did more than one joint owners/occupants pay for energy improvement?

3. Is more than one joint/owner occupant claiming energy credit for energy improvment.

So if yes, yes, yes,then box 32a would be checked and a statement would be needed on allocation

But if yes, no, no then box 32a would not be checked as an allocation statement would not be needed..

But actually it is even more complicated than this depending on type of energy credit. Like a duplex with two owners that had an energy audit and/or some shared costs like insulation. More complex than just a single family home with an unmarried couple that installed a new furnace for example where one person paid for it and is claiming all credits on their return.

[AnnetteB6]

The IRS updated the system this week to start accepting e-filed tax returns with Form 5695 Joint Occupancy. However, a processing problem still exists. To ensure the accuracy of tax returns, TurboTax is working hard to eliminate the issue. The expected resolution date is April 4, 2025. On or after that date, please log back into your TurboTax account, fix any error messages and e-file your tax return. 

There is also an option to print and mail your return. If the special rule for joint occupants applies to you, please make sure that the box on line 32a of Form 5695 is checked. Then attach a statement to your printed return that explains how the special rule applies to your situation. 

This statement should include:

• The names and Social Security numbers of all joint occupants.
• A description of the property and the nature of the improvements made.
• An explanation of how the costs were shared among the joint occupants.

TurboTax does not automatically generate this statement, so you will need to create it yourself. Make sure to include this statement when you mail your tax return to the IRS. 

Here is a possible template that you can use:

Statement for Special Rule for Joint Occupants

Taxpayer Name: [Your Full Name]

Taxpayer Identification Number: [Your SSN or ITIN]

Tax Year: [Year]

Names and Social Security Numbers of Joint Occupants:

[Full Name of Joint Occupant 1], [SSN of Joint Occupant 1]

[Full Name of Joint Occupant 2], [SSN of Joint Occupant 2]

(Include additional names and SSNs if applicable.)

Description of Property and Improvements:

The property is located at [Property Address]. During the tax year, the following energy-efficient improvements were made to the property:

[Description of Improvement 1] (e.g., installation of solar panels, energy-efficient windows, etc.)

[Description of Improvement 2] (if applicable).

Explanation of Cost Sharing:

The total cost of the qualified energy-efficient improvements was $[Total Cost]. The costs were shared among the joint occupants as follows:

[Your Full Name]: $[Amount Paid by You]

[Joint Occupant 1's Full Name]: $[Amount Paid by Joint Occupant 1]

[Joint Occupant 2's Full Name]: $[Amount Paid by Joint Occupant 2]

Based on these contributions, I am claiming my allocable share of the energy-efficient home improvement credit. My share was calculated as follows:

Credit Allocable to Me = (Credit Limit for Property) × (Amount Paid by Me / Total Amount Paid by All Occupants)

[HaiQ]

How did you uncheck box 32a or override it? My case is I paid 100% solar energy and in this section, there is no requirement about joint owner.

[Slhpete]

Deleted form and started over might work.

[Slhpete]

I removed form and redid without any references to joint occupant and submitted and then doing amended return with statement clarifying changes.

[ac120374]

Just wanted to thank you. You are absolutely right that TT should have structured the question differently. The box (7c in my case) doesn’t say if you co-own the property with someone else, check here. Like the TT asks. It says, If the special rule for joint occupants applies, check here. And by special rule, they mean the scenario where occupants shared the expense and will each claim parts of it. 

[Slhpete]

I removed and redid form 5695 and removed joint occupant status but kept credit and submitted.   I will get my refund now quickly and returns already accepted.   I am just doing an amended return now with the occupancy correction and added a required statement (on line 32) which was missing in the rejected return...showing no change in tax liability.   Mailing the amended paper return but it only includes the original 1040 and changed form 5695 with a statement.

[HaiQ]

I thought the joint owner and 32a check only applied for Fuel cells section and Residence Energy Property Expenditures, nothing to do with Solar Energy Credit on the existing home?

Although your method to file without joint owner worked and amend it later but I don't want to do it with IRS at this time.

I wait until April 5 and I may file without Solar Energy Credit and amend later. Someone told me they filed with HR Block software and no problem, is it true?

[Dav Hank]

32a was automatically "X" by TurboTax and would not un-X. I override the this and my e-file was finally approved by Fed/State. 

[HaiQ]

Thanks. You override 32a and still kept joint owner mark?

[cjk420]

It does certainly appear that ownership and occupancy are used interchangeably without distinction.

A the bottom of this is an excerpt for IRS from 5695 instructions. There is a wide range of home types that are covered.  While it might be implied or assumed, I don't actually read anything where it is specifically states (or defines home as such that) one must own the home to claim the credit - it just states you have to live there. Perhaps that definition is elsewhere?  Or perhaps that is why the term (joint) occupancy is used instead of ownership?

Looking at the various types of homes in combination with owner occupancy possibilities, a few (of many possible) scenarios come to mind :

1. A large 3-story house that is split into 3 co-op type units that share a boiler that needs to be replaced or where exterior insulation is installed on common walls, etc., where costs are split by owner-occupants of each unit.  Joint occupancy of the entire house where the improvments are made and apportionment of credit is useful and applicable I would think.

2. Where one domestic partner owns and occupies a house with a non-owner domestic partner and they share the cost of a new furnace 75/25, respectively (assuming a person has to live in the home and not own it to qualify for credit) . Joint occupancy and apportionment of credit is useful and applicable I would think allowing the non-owner occupant to claim some credit if this is the intent.

3. Two domestic partners own and occupy a single family home and one arranges and pays for a new furnace (only her name is on the invoice) and simply fills out 5695 and claims the entire credit on her return and the other partner does not file 5695 and takes no credit as there is no applicable need for apportionment because only one occupant is claiming credit.

Scenarios are perhaps only limited by imagination. But It seems like general intent of the form and instructions is to allow flexibility for various ownership and occupancy scenarios and to prevent multiple-dipping for the entire credit when it should be apportioned appropriately depending on specific circumstances.

Feel free to criticize this - it is just what I see when I read it and try to apply logic and reason.

===========================================================================

Who Can Take the Credits

You may be able to take the credits if you made energy saving improvements to your home located in the United States in 2024.

Home.

 A home is where you lived in 2024 and can include a house, houseboat, mobile home, cooperative apartment, condominium, and a manufactured home that conforms to Federal Manufactured Home Construction and Safety Standards.

You must reduce the cost basis of your home if a residential energy credit is allowed for any expense for any property. The increase in the basis of the property that would result from the expenses will be reduced by the amount of the allowed credit.

Main home.

 Your main home is generally the home where you live most of the time. A temporary absence due to special circumstances, such as illness, education, business, military service, or vacation, won't change your main home.