WSJ: IRS Examining Many Suspicious First-Time Homebuyer Tax Credit Claims

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

I don't get the assumptions you are using?

The credit is 10% of the purchase price; up to $8,000 maximum.
A FHA loan would require a 3.5% down payment. Rounding up gives a payment of around of $420/month principal, interest and PMI. Figure $600 total payment with taxes and insurance.
That would need a income of around $1,500/month with no other debt

Tying it Together: Massive, Pernicious Fraud

The entire finance and real-estate “industry” is filled with massive, pernicious fraud, and we now have only one question remaining - will The Government do its lawful and mandated job, that of prosecuting the bad actors, or has it joined with the fraudsters, become one with them, and thus, declare itself as a gang of mobsters rather than a legitimate government? The latter, of course will beg only the question of what should be an ordinary American’s response.

http://market-ticker.org/archives/1514-Tying-It-Together-Massive,-Pernicious-Fraud.html

Four-Year Old Buys House With Federal Money

http://www.businessinsider.com/four-year-old-buys-a-house-with-stimulus-money-2009-10

$35 Billion Slated for Local Housing

http://online.wsj.com/article/SB125409967771945213.html?mod=rss_whats_news_us

Well-Heeled Abuse Shelter Implicated in NYC Housing Scam

http://www.renewamerica.com/columns/roberts/091022

Stiff, a 25-year veteran of the IRS, will help oversee SB/SE, one of four operating divisions within the IRS. The division employs almost 44,000 workers and oversees a variety of compliance programs for individuals and small businesses. It serves 45 million taxpayers.

“Linda brings with her an extensive background in tax administration that will serve her well in this key position,” Everson said. “As the IRS enhances its enforcement efforts, Linda’s strong background in compliance will be a real asset.”

Prior to her appointment, Stiff served as the Director, Compliance in the IRS Wage and Investment (W&I) Division, where she focused on taxpayer groups that demonstrated a high risk of non-payment and returns that posed a high risk of non-compliance.

“Linda’s insight and expertise will help SB/SE move forward on a variety of important areas,” SB/SE Commissioner Kevin Brown said. “She’s a valuable addition to the SB/SE team, and we look forward to working with her.”

Stiff began her IRS career in 1979 as a revenue agent in Jacksonville, Fla., and subsequently advanced into a number of management positions. She has served as the Business Review Executive for the Chief Operations Officer, the National Director of Governmental Liaison and Disclosure, the Chief of Staff to the IRS Commissioner, the Senior Advisor to the Chief Operations Officer and Senior Advisor to the Commissioner of W&I. Stiff also played an important role in the recent IRS reorganization.

She is a graduate of Rollins College in Winter Park, Fla., and holds a Bachelor of Science Degree in Accounting.

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