Help! Do I Have to Pay Back My First Time Home Buyer Credit

I recently received the following question from Brian on my post that detailed the many versions of the first time home buyer tax credit:

I purchased a home in January 2009. This is my primary residence after having purchased my first home in March 2002. My CPA put me in for the $6500 tax credit, which I now believe I was eligible for the $8000 tax credit after having researched it a bit. Just last month I received a notice from the IRS telling me I owe them $6500 and over $500 in interest. How can this be? I use the new home as my primary residence and lived in my first home for almost seven years. Of course now the CPA is avoiding my calls and emails. What can I do? I also feel that according to the IRS website I should have been eligible for the $8000 credit. Please help!

Unfortunately Brian is in a pretty tough spot. But he does have a way to solve this and apart from having to find a new CPA, all is not lost. First, here is a quick summary of the various incarnations of the home buyer credit:

• 2008 Credit: First-time homebuyers who met the qualification criteria, were eligible for a maximum credit of $7,500, which had to be repaid over a 15-year period starting in the subsequent tax year.
• 2009 Credit: First-time homebuyers who purchased new homes in 2009, subject to certain criteria, were eligible for a maximum credit of $8,000, which did not have to be repaid. Long-time residents who purchased homes after November 6, 2009, subject to certain criteria, were eligible for a maximum credit of $6,500, which did not have to be repaid.
• 2010 Credit – First-time homebuyers and long-time residents who purchase new homes in 2010 before May 1, 2010, subject to certain criteria, are eligible for a maximum credit of $8,000 or $6,500, respectively, which did not have to be repaid

Based on the information in the comment, Brian would have been eligible for the 2008 or 2009 credit. But since he, on the advice of his CPA, put in for the 2008 credit he has to pay it back.  Because details of the new 2009/2010 credits were not known at this time a lot of home buyers would have been in a similar spot to Brian.

However there is a solution to this dilemma based on the IRS’ faqs on this credit. Since Brian bought his home in early 2009, before the non-repayable $8,000 credit was enacted, but filed his 2008 return claiming the old $7,500, he will have to file an amended return to claim the non-repayable $8,000 credit. Though he will still have to pay back the original $7,500 credit.

As I also mentioned in my reply to his comment, due to the complexity and paperwork surrounding this credit he should try and find an accountant to process the above amendment and even possibly ask for the IRS to forgive his interest payment.