The Internal Revenue Service (IRS) has finally announced two important clarifications regarding the documentation required for taxpayers seeking to claim the first-time and move-up homebuyer tax credits. Local guidelines, especially for closing statements have caused a lot of confusion for both claimants and their tax preparers.

The IRS announcement said that while they still are requiring the filing of Form 5405, they are no longer demanding that all parties’ signatures be on the HUD-1 settlement statement in areas where the buyer and the seller signatures are not common practice. However, they are encouraging all buyers to sign the settlement statement prior to attaching it to the tax return.

For repeat buyers, the IRS is seeking documentation that proves they lived in their previous property for a consecutive five of the past eight years. Such proof can include property tax receipts, homeowner insurance records, or mortgage statements.

Tags: buyers, IRS, taxes