$8000 Tax Credit Fraud under IRS Scrutiny
According to the Wall Street Journal, the IRS is reportedly examining more than 100,000 suspicious claims for the $8000 dollar tax credit and is investigating 167 "criminal schemes" involving the credit. IRS officials declined last week to describe the suspected schemes or provide additional details. However, they did say they have identified the different types of potential fraud and matched them against their compliance program.
We could speculate about how people are trying to commit fraud with the $8000 tax credit. Perhaps they are modifying closing statements, commonly known as HUD-1's to make it appear the house was purchased in the correct tax year. Perhaps they are taking incorrect tax advice from their accountants. Perhaps people are modifying HUD-1's to make it appear that they bought a house -- when in fact they did not. Regardless, the IRS taking it very seriously.The IRS says it has received more than one million claims for the $8000 tax credit. Housing industry experts estimate the credit helped to generate at least 350,000 additional home sales. The $8000 tax credit to set to expire on November 30, 2009 but leaders in the housing industry are lobbying Congress to extend it.
It would seem that widespread abuse would be relatively easy because of the loose standards for claiming the credit. In other words, the IRS never set anything in place with title and escrow companies to document the tax credit at time of sale. Free money has had a history of attracting people with dishonest intent, and $8,000 is a good deal of money. This is just the kind of trouble that will delay or eliminate the proposed extension of the program, or even it's conversion to the much talked about "$15,000 tax credit." It's always sad when dishonest people potentially destroy a good program they can benefit the masses.
On the other hand, does our country really need an extension of the $8000 credit, or even a new $15,000 tax credit? Has our country, which already has enough debt to choke 20 medium-sized countries, need to be giving out more money it doesn't have? It does seem that many citizens have developed an attitude of "entitlement" and expect the government to just keep giving out more and more money. But I digress...
According to the IRS website , the IRS successfully prosecuted its first fraudulent tax credit case in July 2009. A Jacksonville, Fla. tax preparer, James Otto Price III, pled guilty to falsely claiming the $8000 tax credit on a client's federal tax return. Price faces the possibility of up to three years in jail, a fine of as much as $250,000, or both.
A quote from the IRS's website:
"We will vigorously pursue anyone who falsely tries to claim this or any other tax credit or deduction," said Eileen Mayer, Chief, IRS Criminal Investigation. "The penalties for tax fraud are steep. Taxpayers should be wary of anyone who promises to get them a big refund.
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Source: First Time Home Buyer Tax Credit Extension
First Time Home Buyer Tax Credit Extension
For Homes Under Contract by April 30, 2010