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WSJ: IRS Examining Many Suspicious First-Time Homebuyer Tax Credit Claims
WSJ via Clculated Risk Blog ^ | Monday, October 19, 2009 | CalculatedRisk

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 ...


TOPICS: Business/Economy
KEYWORDS: bloggersandpersonal; buyers; credit; dodd; frank; fraud; home; irs; tax
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The composition of the 100,000 who (probably) scammed $8,000 each: ... any guesses? It looks like a reward programm for Obama supporters. Is the IRS actually going to determine if anyone ever bought a house, much less lived in it for three years?
1 posted on 10/19/2009 7:48:46 PM PDT by Praxeologue
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To: Kennard

And a person could show income qualifying for a home loan...without paying taxes...how?


2 posted on 10/19/2009 7:50:24 PM PDT by Attention Surplus Disorder (It's better to give a Ford to the Kidney Foundation than a kidney to the Ford Foundation.)
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To: Kennard
I have often strayed from the ways of the Lord during my sinful life, but one thing I have never tried to do is defraud the IRS. They have a much bigger team than I do.
3 posted on 10/19/2009 7:53:08 PM PDT by hinckley buzzard (Truth--The liberal's Kryptonite)
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To: Kennard

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.


4 posted on 10/19/2009 7:54:43 PM PDT by dawn53
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To: Attention Surplus Disorder
“And a person could show income qualifying for a home loan...without paying taxes...how?”

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.

5 posted on 10/19/2009 7:55:30 PM PDT by HereInTheHeartland (Just say no to Soylent Green health care)
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To: Attention Surplus Disorder

There is no requirement to take out a loan. Some people still pay cash for homes.


6 posted on 10/19/2009 7:56:22 PM PDT by wrench
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To: Kennard

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.


7 posted on 10/19/2009 7:57:19 PM PDT by mo
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To: dawn53
Would YOU want to be holding an IOU from this bunch?

I fear we'll ALL be getting IOUs instead of tax refunds.

for the good of the worlds "community"

8 posted on 10/19/2009 7:58:39 PM PDT by digger48
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To: Kennard

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.


9 posted on 10/19/2009 8:00:41 PM PDT by dawn53
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To: digger48

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.


10 posted on 10/19/2009 8:01:59 PM PDT by dawn53
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To: Kennard

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!


11 posted on 10/19/2009 8:02:09 PM PDT by relictele
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To: relictele

Money for nothin and the chicks are free.


12 posted on 10/19/2009 8:04:09 PM PDT by Oldexpat
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To: Kennard

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


13 posted on 10/19/2009 8:06:11 PM PDT by Lokibob (When handed lemons...Refuse to sign for them. Life's lemons can't be delivered without a signature.)
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To: Kennard

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.


14 posted on 10/19/2009 8:12:54 PM PDT by Cicero (Marcus Tullius)
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To: Kennard

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?


15 posted on 10/19/2009 8:16:16 PM PDT by GeronL (They Made It Happen On Purpose Economically. MIHOPE)
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To: Attention Surplus Disorder

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


16 posted on 10/19/2009 8:16:36 PM PDT by MadelineZapeezda (Promoted by God to be a Mother!!!! Thanks, Susan)
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To: MadelineZapeezda

co-owners in above post


17 posted on 10/19/2009 8:17:38 PM PDT by MadelineZapeezda (Promoted by God to be a Mother!!!! Thanks, Susan)
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To: HereInTheHeartland

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.


18 posted on 10/19/2009 8:23:08 PM PDT by Attention Surplus Disorder (It's better to give a Ford to the Kidney Foundation than a kidney to the Ford Foundation.)
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To: Kennard

Who would have ever thought that the government handing out buckets of borrowed money would encourage fraud?


19 posted on 10/19/2009 8:24:48 PM PDT by Minn (Here is a realistic picture of the prophet: ----> ([: {()
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To: Kennard

um..all return addresses are from Detroit ?


20 posted on 10/19/2009 8:24:53 PM PDT by stylin19a
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