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IRS refund delays frustrate, worry some Crossroads homebuyers

By Gabe Semenza
April 3, 2011 at 10:05 p.m.
Updated April 2, 2011 at 11:03 p.m.


WHAT CAN YOU DO?If you already filed your taxes:If you have not filed your taxes:

If you bought a home in 2008 and used the First-Time Homebuyer Tax Credit, follow these suggestions.

No additional action is required. All you can do is wait and visit www.IRS.gov for refund updates. Click "Where's My Refund?"

"Married filing jointly" couples - in which only one spouse received the tax credit for 2008 - should file one Form 5405 showing the Social Security number for the taxpayer who received the credit.

When a joint-filing married couple is repaying the homebuyer credit that both partners claimed for their purchase in 2008, file two Forms 5405, one for each taxpayer Social Security number. Then, make a repayment for each form based on half of the total credit received by the spouses.

SOURCE: IRS

Maria and Mychal Hamilton enjoy their Victoria home.

The house has three bedrooms, character and a big yard for the kiddos, the 28-year-old mother said.

The couple bought the property in June 2008 after years of renting or living in cramped conditions with family.

To help fund repairs and the down payment, the Hamiltons used the federal First Time Homebuyer Tax Credit, a government incentive in the form of a $5,900, 15-year, interest-free loan.

Now, an Internal Revenue System software glitch, which is linked to the 2008 tax credit, is causing massive tax refund delays for the Hamiltons and hordes of other U.S. taxpayers.

"I appreciate the homebuyer tax credit, but if I'd known it would be this much trouble, confusion and delay, I wouldn't have used it," Maria Hamilton said.

The family of five is owed a tax refund this year that would cover the mortgage for 10 months, Hamilton said. But the refund is already about two months late.

Hamilton filed her taxes in early February expecting a refund a few weeks later, she said. When the deadline rolled around, the refund check was not deposited.

She received follow-up letters from the IRS promising near-future deposit dates, but each time, the money failed to appear.

The IRS acknowledges refund processing issues exist.

"The IRS regrets this delay for impacted taxpayers," Lea Crusber, a Houston-based IRS spokeswoman, said via email. "We are working quickly to resolve this issue and update our systems within the next few weeks, which will allow us to process these impacted returns."

The IRS says the glitches affect a small percentage of tax returns, primarily involving repayment of the 2008 tax credit. This is the first year homeowners are required to begin repayment.

The following people are those most affected:

"Married Filing Jointly" taxpayers who received the tax credit on a 2008 home purchase.

Taxpayers who received the credit and are now reporting the sale or disposition of their home.

Taxpayers who received the credit and are trying to pay back more than the amount required, which is typically $500 per year.

Each year, the IRS routinely struggles with processing issues that affect some refunds. Even so, Crusber said, the agency through mid-March processed more than 66 million returns and issued 59 million refunds. The refunds total $178 billion.

"The IRS does not currently have a definitive date for when these changes will be complete, although it will be in April," Crusber said.

This promise likely offers little solace to the Hamiltons, who have watched other refund timetables come and pass.

Additionally, the refund delay adds salt to fresh frustrations. Many of those who must pay back the 2008 tax credit were irked when Congress, a year later, increased the tax break amount and removed the requirement that first-time homeowners pay it back.

"When we had the opportunity to buy a house, it was like, 'Oh, God, thank you.' This was going to be our home," Hamilton said. "Now I wonder: 'Are we going to have this same problem again next year?'"

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