E-File Reject

[Sljones1102]

My client's tax returned rejected due to the 2008 first time home buyer credit. The client says she sold the house in 2020 and there was no gain. However, the IRS is saying she still owes $2000. How do I fix this so that I can submit her return. Should I mail the return in to the IRS.

[TaxGuyBill]

Was the sale of her home reported on the 5405 in 2020?

[Sljones1102]

Sorry for the late response. I was just now able to get a copy of the client's last year tax return as I did not process her taxes last year. No the sale of the house was not reported on the 5405 on the 2020 return. Should I amend last year's taxes?

[Sljones1102]

Sorry for the late response. I was just now able to get a copy of the client's last year tax return as I did not process her taxes last year. No the sale of the house was not reported on the 5405 on the 2020 return. Should I amend last year's taxes?

[dkh]

Yes you will need to amend 2020 return, the unpaid portion of the first-time home buyer credit was due in the year the home was sold.   Ask the client if by chance IRS caught this problem and sent a notice.

https://www.irs.gov/taxtopics/tc611

Good thing your client has switched to you as their preparer, last one missed something important.

As a side note, I never prepare a new clients return without a copy of the prior year return.  

[Sljones1102]

Thank you so much for the response. I will work on amending her 2020 tax return. 

Lesson learned. Will definitely request prior year's return for all new clients.

Thanks!!