When to Get Households to Complete Two Special Certification Forms

When certifying and recertifying low-income households at your tax credit site, you may encounter situations that require you to use special forms to get more information about household income. Sometimes, you’ll need to get household members to complete and sign these forms. These forms can be the right documentation to prove to your state housing agency and the IRS that a household meets the tax credit program’s income-eligibility requirements.

Without the correct information gleaned from these forms, you may miscalculate a household’s income. If this happens, you may either mistakenly turn away a household that you think isn’t income-eligible or mistakenly lease a low-income unit to a household that’s over-income. If your state housing agency discovers your mistake, the owner of your site will risk losing credits for the unit. And if you need to count the unit to meet your site’s minimum set-aside, all the owner’s credits may be in jeopardy.

With so much at stake, it’s important that you and any staff members who conduct certifications and recertifications recognize situations that call for special forms. Here are two situations that may arise during certification or recertification where you’ll need to get household members to complete and sign special forms.

Situation #1: Household’s Assets Total Less than $5,000

If a household’s net assets total less than $5,000, you can avoid the administrative burden of verifying these assets. IRS Revenue Procedure 94-65 allows the use of a tenant-signed affidavit to verify assets if the household total net value is lower than $5,000. It’s important to note that Revenue Procedure 94-65 explains this form may not be used to verify assets “if a reasonable person in the Owner’s position would conclude that the tenant’s income is higher than the tenant’s represented annual income.” Therefore, if an applicant or household clearly misrepresents their income, third-party verifications of all assets are required. Also, this form or affidavit can be used only if assets for all members combined are less than $5,000.

Form required. Have the household head sign an “under $5,000” affidavit. Ask your state housing agency whether it has its own affidavit form that you must use. If not, we’ve provided an updated Model Form: Under $5,000 Asset Certification. The form asks a household that claims less than $5,000 in household assets to:

• Swear that the household’s net assets total less than $5,000;
• Say whether the household sold any assets for less than fair market value within the past two years; and
• Specify the cash value of, and annual income from, each asset (including assets sold for less than fair market value within the past two years) or say that the household currently doesn’t have any assets.

Although you may not have to include the household’s assets if they total less than $5,000, you must still include any income from these assets [HUD Handbook 4350.3, par. 5-7].

Situation #2: Household Member Gets No Income

If a household member tells you that he or she has no income, you’re required to take an extra step even if you know that other members of the household have income.

Form required. Get all adult household members who claim that they have no income to sign a “zero income certification” form. Ask your state housing agency whether it has a special certification form you must use. If the agency doesn’t have a special form, we’ve provided a Model Form: Certification of Zero Income.

This zero-income certification should spell out the various possible sources of income a household member could have. This includes income from operating a business, interest or dividends from assets, and death benefits. It also should require household member to affirm that she expects no change in her financial status or employment status during the next 12 months, which is the length of a household’s certification year.

Finally, the certification should require the household member to state how her household will get the funds to pay for rent and other necessities. For instance, another household member may use her income to pay the rent. Or a generous relative who isn’t a household member may have arranged to pay the rent.