Posted by: jeb1 | September 16, 2010

At IRS: Backlog for Home Buyers’ Tax Credit

By Alan J. Heavens, The Philadelphia Inquirer

Sept. 15–The Internal Revenue Service continues to have trouble handling claims for home buyer tax credits, a Treasury Department audit shows.

The audit by the Treasury Inspector General for Tax Administration, completed Aug. 16 and released last week, said some taxpayers not entitled to the credit received it and others who were supposed to get it did not.

A previous audit completed in June found that thousands of taxpayers — including prison inmates serving life sentences — fraudulently claimed a total of $134 million in tax credits, and that the IRS missed them all.

The IRS has tightened procedures since the June audit to stem the flow, the inspector general said.

The audit found that though $10.1 million in credits were claimed by 1,326 taxpayers the Social Security Administration identified as dead, the IRS succeeded in blocking 528 of those from receiving the more than $4 million they claimed for the credit.

The problem with identifying who must repay stems from differences in laws authorizing the tax credits.

The first of three tax credits was approved in July 2008. It was an interest-free loan that offered $7,500 to qualified first-time buyers that would be repaid to the Treasury in $500 increments over 15 years.

The second, with a maximum of $8,000 for first-timers, did not need to be repaid. It was approved in February 2009 and expired Nov. 30.

On Nov. 5, 2009, the tax credit was extended, and a maximum $6,500 added for qualified buyers who had not bought a primary residence in five years or more.

That one expired April 30.

In 2009, about 1.8 million taxpayers claimed $12.5 billion in credits, the inspector general stated. More than 950,000 taxpayers will be required to repay the credits because they bought their houses in 2008.

The audit found that 73,119 of the approximately 1.77 million individuals receiving the credit had incorrect purchase dates recorded at the IRS.

Of those, 59,802 had bought their homes in 2009, but the IRS incorrectly recorded the purchases as having been made in 2008 or did not record the years.

These taxpayers could incorrectly receive notices for repayment, the audit found.

In response, IRS officials said the agency planned to use third-party property records to verify home-purchase and other information to try to resolve discrepancies.

It also plans to audit the remaining 798 accounts of taxpayers identified as dead and recover the claims, if necessary.

The deadline for closings on homes bought with credits was extended to Sept. 30 from June 30 when 180,000 buyers could not meet the deadline because of mortgage-processing delays.

The National Association of Realtors’ most recent estimate shows that 4.4 million existing and new-home buyers qualified for all the credits. Contact real estate writer Alan J. Heavens at 215-854-2472 or

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