Tuesday, February 09, 2010

IRS and the HUD-1 and the tax credit...what do you think?

Here's a little e-mail chat with a reader trying to help her client.  I am very interested to hear your thoughts on this issue of the IRS requiring that all signatures must be on one piece of paper.

Diane,

I have a client that is filing the IRS Form 5405 to claim the First Time Homebuyers Credit.   She has a HUD1 that is lacking the seller’s signature.  She has contacted the settlement agent’s office.  They do not have a copy with all signatures on it.  The seller was a bank in NJ.  We are not having any luck contacting it.  IRS advises that in the absence of the signature documentation must be submitted to show that PA State does not require signatures on the HUD1. 

Please forward information where I can obtain documentation to send with the HUD1 and 5405.

Thank you,  Deborah

Hi, Deborah:

It is possible there is just a simple communication issue.  They will likely not have ONE copy with ALL signatures on it but I'll bet they have at least ONE copy with the seller signature.  That's usually the way these types of transaction flow, You have one set signed by the seller and another signed by the buyer, so you just staple them together and that will work because the figures on both sets are the same.  BTW- The seller signed HUD is normally a crappy faxed copy but it's legal. ;)

If your client obtained a mortgage, their mortgage lender should have a copy with a seller signature - even if it was the real estate agent's signature affixed with authority from the seller.

If not, then you can try to find the attorney who handled the sale.  They normally referee getting the seller signature on the HUD in these kinds of transactions.

Good luck!
Diane

Thanks, Diane,

But in this case the IRS is not accepting that reasoning.  And neither the attorney or settling agent can provide a HUD1 with all signatures. It wants documentation.  There are many sources on the internet talking about the “fact” that the HUD1 signatures are not required.  However, so far no one can provide a written legal source that verifies that “fact”.

Deborah

Hmm, well if the IRS is unwilling to accept two matching HUD-1s - one signed by the seller and the other by the buyer, then they are sure being unreasonable as much of the country does their closings this way.  I would raise holy hell with my senator and representative.  I can understand the IRS having issues with having NO seller signatures, but having a requirement that all signatures be on the same piece of paper?  Many people will be cut out of the benefits by local custom and that's a shame.

Diane

1 comment:

Diane Cipa said...

I have reviewed the IRS instructions and do not see anything that would cause me to believe having a seller signature on a separate matching HUD-1 is a problem. If anyone has a link to additional IRS advise concerning this matter, please post a comment. Thank you!