First Time Home Buyers
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First-Time Homebuyer Tax Credit Fraud Detailed;
Taxpayers Advised to Expect Long Delays in Tax Returns

(10-29-09) While thousands of first-time homebuyers have pounced on the tax credit announced this year, and Congress determines whether to extend the deadline for claiming the benefit, a new report reveals that thousands of ineligible taxpayers have received millions under the program.

A report by the Treasury Inspector General for Tax Administration (TIGTA), the agency that monitors the Internal Revenue Service (IRS), says several major violations have occurred:

• About 19,350 taxpayers claimed $139 million worth of tax credits for homes they had not yet purchased.
• About 70,000 taxpayers claimed more than $479 million in credits despite owning homes previously.
• Almost 600 people who claimed about $4 million in credits were not yet 18 years old.
• The youngest “taxpayer” claiming the tax benefit? Four years old.
In total, the report indicated approximately 90,000 erroneous claims totaling $622 million have been filed.
The IRS has recently implemented strategies to prevent fraud, and will continue to use them to weed out those manipulating the system. Also, the report did indicate that some of the apparently fraudulent claims will turn out to be correct.

But overall, the TIGTA is hesitant to declare a job well done in the past and future.
"Based on the administration of the credit to date, I am concerned about the IRS's ability to effectively administer the credits claimed within the original deadline, let alone within an extended deadline for certain taxpayers," said J. Russell George, Treasury Inspector General for Tax Administration. The statement was made as part of testimony before a House Ways and Means subcommittee hearing looking at administration of the tax credit on Thursday.

As a result of the increasing problems with fraud, and this report, the IRS is now carefully and manually checking every tax return for those claiming the credit. That means taxpayers claiming this credit should expect long delays in receiving tax refunds next year.

For Further Reading:
http://www.marketwatch.com/story/fraud-found-in-home-buyer-tax-credit-claims-2009-10-22
http://www.marketwatch.com/story/home-buyer-tax-credit-refunds-delayed-for-months-2009-10-26