IRS clarifies settlement statement requirements for homebuyer credit

The IRS has clarified the documentation requirements for settlement statements for the first-time homebuyer credit on its website. Additionally, the IRS is also providing information to purchasers of newly constructed homes about their documentation requirements.

Settlement statement

The Worker, Homeownership and Business Assistance Act of 2009 (2009 Worker Act) imposed new documentation requirements for the first-time homebuyer credit claimed on a 2009 or later federal income tax return. The 2009 Worker Act requires purchasers of conventional homes to attach a properly executed settlement statement. A properly executed settlement statement generally shows all parties' names and signatures, property address, sales price and date of purchase.

Note. Taxpayers claiming the homebuyer credit on a 2009 or later return must file a paper return because the IRS is not currently able to process Forms 5405, First-Time Homebuyer Credit and Repayment of the Credit, electronically.

The instructions to Form 5405 indicate that a properly executed settlement statement should show the signatures of all parties. The IRS has recognized that the signature requirements for settlement statements vary among local jurisdictions. According to the IRS, the agency will accept a settlement statement if it is completed and valid according to local law. However, in jurisdictions where signatures are not required on the settlement document, the IRS advises that taxpayers sign the settlement statement when they file their tax return, even in cases where the settlement form does not include a signature line.

Taxpayers who purchase a newly constructed home should attach a copy of the certificate of occupancy showing the owner's name, property address and date of the certificate where a settlement statement is unavailable.