Most of the money — about $326 million — went to more than 47,000 taxpayers who didn’t qualify as first-time home buyers, said the report by J. Russell George, the Treasury inspector general for tax administration. Other credits went to prison inmates, taxpayers younger than 18 and people who did not actually buy homes.
“The IRS has taken positive steps to strengthen controls and help prevent the issuance of inappropriate home buyer credits,” George said. “However, many of the actions occurred after hundreds of thousands of home buyer credits had already been issued, including fraudulent and erroneous credits totaling millions of dollars.”
The popular credit provided up to $8,000 to first-time home buyers and up to $6,500 to qualified current owners who bought another home during parts of 2009 and 2010.
The IRS said it worked hard to enforce a complicated tax credit that provided more than $27 billion to almost 3.9 million taxpayers. The agency said it corrected math errors on more than 370,000 returns and audited more than 400,000 taxpayers claiming the credit, denying hundreds of thousands of questionable claims. In all, the agency said its enforcement efforts saved more than $1.3 billion and identified more than 200 criminal schemes.
The $8,000 tax credit no doubt sparked a surge in home buying last year, but when it was created, nobody considered the implications it might have when unscrupulous home buyers use and abuse the system in their favor, perhaps even participating in fraud to receive the $8,000 tax credit. In Albuquerque, many home buyers received this tax credit. It didn’t only help home buyers, but it also help sellers get their home sold, due to a surge in buyers.