Posted on 10/19/2009 7:48:45 PM PDT by Praxeologue
John Mckinnon at the WSJ reports: Home-Buyer Credit Is Focus of Inquiry
The Internal Revenue Service is examining more than 100,000 suspicious claims for the first-time home-buyer tax break ...
The tax credit is completely refundable, even if the homebuyer has no tax liability - and this makes it a target for fraud. From the IRS:
"[The tax credit is] fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed."
Also, the credit is separate from the closing, and the WSJ article suggests this is contributing to the "widespread" fraud.
Bonnie Speedy, national director of AARP Tax-Aide ... suggested that abuse of the home-purchase credit appeared to be widespread ...
And - not mentioned in the article - the homebuyers are required to pay back the tax credit if they do not own and live in the home for three years ... so there will probably be more fraud in the future. More IRS:
The obligation to repay the credit on a home purchased in 2009 arises only if the home ceases to be your principal residence within 36 months from the date of purchase. The full amount of the credit received becomes due on the return for the year the home ceased being your principal residence. emphasis added
I hope these people stretching to buy - like the buyer mentioned in the previous post paying 54% of her income for her house, including multiple jobs - realize they have to pay back the entire credit if they don't own and occupy the home for three years.
Posted by CalculatedRisk on 10/19/2009 08:48:00 PM WSJ: IRS Examining Many Suspicious First-Time Homebuyer Tax Credit Claims
(Excerpt) Read more at calculatedriskblog.com ...
And a person could show income qualifying for a home loan...without paying taxes...how?
I ran into a forum the other day and it seemed like the posts were from legitimate buyers (who did indeed qualify for the credit) but were frustrated that they had waited (some of them up to 25 weeks) a long time and still no rebate check, just excuses from the IRS.
Sort of reminded me of the auto dealers who are probably still waiting to see their money from cash for clunkers program.
It is a credit; not a deduction.
If you owe $0 in taxes, you get a check for $8,000 if you spent at least $80,000 on a home as first time home buyer.
Someone would have to really stupid to try to falsely claim this.
The IRS will be watching this program very closely.
There is no requirement to take out a loan. Some people still pay cash for homes.
They.Haven’t.Got.The.Cash.
Why do you think Cash for Clunkers was trashed within weeks of passage? they realized they could’nt pay.
I fear we'll ALL be getting IOUs instead of tax refunds.
for the good of the worlds "community"
Seems to me the buying bit would be easy to check...you can go to almost any property appraiser’s database and search for the owner of a property. So if the IRS went to the county site, plugged in the address of the purchased property, it’d be pretty easy to check if the person buying the home was indeed on the title.
The way I understand it, you could have joint owners with right of survivorship who were unmarried, and if one of them was a first time buyer, they could claim the credit, or more than one was first time buyer, they could split the credit. But the weird part to me, is if you have joint owners (who are married) and one of them has owned a home in the past, then they didn’t qualify. I reread the rules a couple times, and it seemed like it was prejudiced against married couples...JMO.
I’d have to do some digging, but I think i read some banks took the “tax rebate credit” in lieu of closing costs or part of the down. So now we have individuals, car dealers, and some banks waiting for the gov’t to pay up.
Remember kids - abandon private property altogether and rely on Uncle Sam! That way the mail you get from the government will be the ‘good’ kind and you’ll never hear from the IRS since you earn nothing!
Money for nothin and the chicks are free.
What are the odds that ACORN is involved? I’m guessing even money, perhaps 70/30. They probably did the counseling of the perps.
.....Bob
I’m willing to bet that ACORN is involved. In fact, the IRS was using ACORN as an adviser that they recommended to people, until the recent embarrassment.
This whole idea is stupid, stupid, stupid. Special credits for special people at a special time. Tax laws should be long term.
And how much is it going to cost for the IRS to investigate all these claims? It’s just asking for trouble. It’s effectively inviting people to make fraudulent claims.
Let me guess, they are not scrutinizing those ez FHA loans that are going to just about anyone who wants one who might never pay it back?
If a parent puts the kids on the deed on property that the child will be living in at college....is what a lawyer told me the other day
co-owners in above post
Pefectly understood. Theoretically, though, one needs to show income that can service a debt, or, pay cash.
Anecdotally only, I’ve heard many new homebuyers are using the $8K credit to help them with their down payment. Fine. They still have to service a debt and to do that they need to show income and if they show AGI of about $8.3K or more they pretty much have a 10% tax liability. That is inclusive of exemptions. If I now say that an $8.3K AGI results from a gross of a tad over $12K, my question morphs into: What price home; or, what amount of mortgage can one afford with a $12K annual income? It’s about $46-47K @ 5.5% at 26% front end. OK, I guess somebody’s got to buy ‘em.
Who would have ever thought that the government handing out buckets of borrowed money would encourage fraud?
um..all return addresses are from Detroit ?
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