Fraud found in the homebuyers' tax credit program
The audit of the program by the Treasury Inspector General for Tax Administration found 14,132 erroneous tax filings for credits that total at least $26.7 million.
Before your blood pressure rises too high, this is really just a small sliver of the more than $12.6 billion in credits paid to date through the program -- although it is troubling that the program remains so vulnerable to fraud.
Last week, a measure was approved to extend the tax credit program's closing deadline by three months for the 180,000 households who had signed home purchasing contracts by April 30. Originally, they had just two months to close and many people were fearful that delays in getting their overwhelmed lenders to move would cost them eligibility in the program. The extension, while a boon for those already in the system, opens the door to fraud, its critics say, because it gives people a chance to post-date purchase contracts and still close on time.
And post-dating the contracts was precisely one of the scams that the audit found. So was a scam where multiple people claimed to have all purchased the same house -- with each one filing for the tax credit. In one case, it is believed that 67 taxpayers all listed the same home trying to claim the tax credit.
"The good news is that the IRS has made significant strides resolving problems associated with this program," said J. Russell George, the Treasury Inspector General for Tax Administration, in a press release.
And this time, no minors were found to have gotten the tax credit, he said. Progress over the last time the program was audited. And the IRS is taking steps to get its -- I mean our -- money back.
The popular program, considered the darling of President Obama's economic recovery package, actually got a one-two punch yesterday. The program's sunset in April was blamed for a 33% drop in new home sales the following month. Once the incentives were removed from the picture, home buyers stopped buying. Realtors have loved the program and credited it with keeping the existing home sales market from flat-lining. They report that many clients say that the only reason they were shopping for homes was the tax credit. And while new home sales may be tanking, the National Association of Realtors yesterday reported they haven't seen a slowdown yet in existing home sales.
Lawrence Yun, NAR chief economist, expects another month of post-tax credit boom.
That said, the tax credit is over, people. And it isn't expected to come back, but interest rates remain low and the inventory of homes to choose from is flush, making this an attractive time to buy, agents say.