Understanding Error (349) on Form 5405
Error (349) typically arises when a taxpayer is repaying the First-Time Homebuyer Credit claimed in 2008. The error message indicates:
"If you are paying an installment of the first-time homebuyer credit claimed in 2008, the amount on line 6 on Form 5405 must be greater than zero and the amount you are paying on line 8 cannot be less than the minimum payment required."
In simpler terms, TaxWise is flagging that you've indicated a repayment is due, but either:
Line 6 of Form 5405 (the total amount of the credit) is zero, OR
Line 8 (the amount you're actually paying this year) is less than the IRS-required minimum payment.
Resolving the Error: A Step-by-Step Guide
Here's how to correct this error within TaxWise:
Access Form 5405: Navigate to Form 5405 within the TaxWise software.
Verify Line 6 (Total Credit): Ensure that Line 6, "Total amount of credit," accurately reflects the original First-Time Homebuyer Credit received in 2008. This amount must be greater than zero if a repayment is due. If this line is blank or incorrect, locate the original tax records from 2008 when the credit was claimed.
Calculate and Input Minimum Payment: The IRS mandates a minimum repayment amount each year. This is generally 1/15th of the original credit amount.
Verify Line 8 (Amount You're Paying): Check Line 8, "Amount you are paying." The amount entered must be equal to or greater than the minimum payment calculated in step 3. If the taxpayer is facing financial hardship and cannot afford the minimum payment, they should consult IRS Publication 523, Selling Your Home.
Crucially: Schedule 2, Line 10: The repayment amount must also be reflected on Schedule 2 (Form 1040), page 1, line 10.
TaxWise Navigation: In TaxWise, navigate to Schedule 2 (Form 1040). Ensure that line 10, "First-time homebuyer credit repayment," accurately reflects the repayment amount entered on Form 5405, line 8. TaxWise should automatically populate this field from Form 5405; however, it's vital to verify.
Review and Recalculate: After making these corrections, thoroughly review Form 5405 and Schedule 2. Recalculate the return within TaxWise to ensure the error is cleared and all calculations are accurate.
E-File or Print: Once you've confirmed that Error (349) is resolved and the return is accurate, you can proceed with e-filing or printing the return.
Important Considerations
IRS Notices: If the taxpayer has received any notices from the IRS regarding the First-Time Homebuyer Credit, carefully review those notices for specific instructions or amounts.
Record Keeping: Maintain accurate records of all First-Time Homebuyer Credit information, including the original credit amount, repayment schedule, and any correspondence with the IRS.
Professional Assistance: If you or your client are unsure about the correct repayment amount or are facing difficulties resolving Error (349), consult with a qualified tax professional.