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Fraudulent Claims Taint Tax Credit Program

WASHINGTON (AP) - Congress got an earful about the $8,000 First Time Home Buyer Tax Credit this Thursday. J. Russell George, Treasury Inspector General for Tax Administration, questioned the eligibility of some 100,000 returns out of the 1.5 million tax filers who have claimed the $8,000 credit on their tax returns.

He said many claimants could possibly be illegal immigrants. Upwards of 580 people seeking a total of $4 million for the tax credit were under the age of 18. The youngest taxpayer receiving the credit was 4 years old, his office said.

George said more than 19,000 people filed 2008 tax returns or amended returns claiming the credit for homes they had not yet purchased. Those claims amounted to $139 million and it was not clear that the IRS planned to go back to verify that those purchases actually took place, he said.

He said his office had identified another $500 million in claims, by some 74,000 taxpayers, where there were indications of home ownership. A first time home buyer may not have owned a home within the past three years to be eligible for the credit.

George, an Internal Revenue Service official testifying before a House Ways and Means Committee subcommittee will initiate further examination of these claimants and others to determine their legitimacy.

George's testimony before the subcommittee raised a yellow flag as Congress considers whether to extend, or even expand, the popular program that is set to expire within 38 days on November 30th.

Currently, applicants must fill out IRS Form 5405 to claim the Tax Credit, but do not have to supply documentation.

Linda Stiff, IRS' deputy commissioner for services and enforcement, testified that "any time that there is an opportunity to receive cash back, it tends to attract people that might have intent to defraud the government." She said the agency "will vigorously pursue those who filed fraudulent claims."

While the program has widespread support in Congress, there are growing concerns about the costs. The cause, said Sen. Jack Reed, D-R.I., "is a worthy one." But "I hope we can find ways to pay for it."

Critics have also characterized the program as a subsidy for people who would have bought a new home regardless of the tax credit. The National Association of Realtors has estimated that one-fourth of those who have claimed the credit, about 350,000, would not have purchased their homes without the credit.

Link: Fraudulent Claims
Posted by Customer Service on October 23rd, 2009 9:31 AMPost a Comment (2)
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