I recently closed on a new house (new builder/community). When I initially walked-through the model house, I was interested in the house but had no checks on me, so my mother submitted a deposit check to hold the house; which the builder cashed. When I went into the process for the house, the builder realized that was an error and the check should've been made by me/from my account. I corrected this by issuing them a new check from my account, which they cashed; therefore, the original deposit from my mother should be fully refunded. The builder is requiring a W-9 be completed in order to issue the refund. The only reason for a W-9 is to get someone’s tax ID because the amount being paid to them is going to be reported as some kind of income. And this is 100% not that because it’s just a refund of a deposit on a purchase price – not any kind of compensation for anything done. I need to confirm this is indeed the case, so that I can push back on the builder.
I suggest you a) discuss with builder which may clear up error if there is one; or b) ask your cpa; c) have contract and docs reviewed by attorney.
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I have changed this from "Real Estate" to "Tax Fraud & Tax Evasion" so that you will get better answers.
Why? B/c I am NOT a Tax Expert and you are asking a TAX Question!
Sounds like you are asking if 'there is not return consideration, what Tax may be due?" Dunno, and truly have No Idea. But hopefully this change helps to move along you getting an answer!
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The simple answer is that people don't understand the tax laws and rules and are very afraid of the IRS. Another answer may be that some interest is going to be paid with the refund. The interest would be taxable income. Ask the builder to show you the law he is relying on.
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