According to a recent article in the Washington Post, the Internal Revenue Service has clarified which documentation the taxpayers need to submit to claim their first-time and move-up homebuyer tax credit.
While the IRS is still requiring the filing of Form 5405, it is not demanding that all parties' signatures be on the HUD-1 settlement document in areas where requiring both the buyer and the seller to sign the document isn't common.
This is what the IRS clarification states: "In areas where signatures are not required on the settlement document, the IRS has clarified that it will accept a settlement statement if it is completed and valid according to local law. ... The IRS encourages those buyers to sign the settlement statement prior to attaching it to the tax return."
For home buyers who have previously owned property, the IRS is seeking documentation that they have lived in their previous home for a consecutive 5 of the past 8 years. Proof can include mortgage interest statements, property tax records or home owner insurance records.
Source: Washington Post (02/20/2010)