How can your Seller keep the earnest money? Well, they can sign a statement denying permission for whomever is holding it to release it, then they can defend themselves to an arbitrator or judge. But you know your contracts better than I do, and you probably have an office attorney or counsel you can refer your seller to.
My guess it that the buyer's "good faith effort" doesn't include having their taxes done properly.
I feel for you, Silvia.
The initial objective was to sell the house.
Probably time to move on, maybe keep $400 for the fees the Title Company will be charging,
and find another set of buyers.
Good luck and may God bless