Phil and I are down in the dumps lately. Since Thursday night to be specific. That was when I opened the mail to find a letter from the IRS. Of course, my heart started pounding just seeing a letter from them, and when I opened it, I think my heart stopped for a second.
They say we owe them $10,000.
Back when we purchased our home from my parents, we qualified (or so we thought) for the First Homebuyer's Credit of $8000. That credit was put in place for people just like us, who needed a little help to buy their first home, which would in turn help stimulate the economy. We bought our house specifically at the time the credit was offered because we knew that without that money, we wouldn't be able to afford closing costs/taxes/insurance.
Well, the little hitch at the time was that you couldn't buy a house from your descendants. So I couldn't buy the house from my parents. However, we talked to a CPA and friend who advised us to put the house in Phil's name only, and that way, he would not be buying the house from a descendant. Legally and morally we would be able to get the credit. And we did get the credit when we filed our taxes earlier this year.
So imagine our surprise when they asked for the $8000 credit back, plus $1600 in penalties and a few hundred dollars in interest...totalling $10,000.
We looked into the laws, made some calls to the IRS, and discovered that they had changed the law in November 2009 (we bought in Feb. 2010) to say that you couldn't get the credit if you bought from your in-laws. Ironically, you can buy from your brother or sister, but not your in-laws. Hmmmm.
Right now, we are sending emails to our Congressman, and still trying to figure out if/how to fight this. I'm not sure if we have any grounds to stand on, since it was a law, we just didn't know about it.
It hurts because financially, we don't have that kind of money (that's about 18 weeks of Phil's take home pay), and because we feel unfairly targeted. Huge corporations can find loopholes to get out of paying millions in taxes, and then they come after the poor guys who used their credit for it's intended purpose.
Please pray for us, I've gone through three stages of grief...Denial, Anger, Bargaining, and now I'm just in Depression. Next comes Acceptance, and hopefully I'll get there.