Homebuyer's Tax Fraud

Even as lamwakers in both parties call for the extension of a special homebuyer's tax credit, investigators told Congress that thousands of people have tried to illegally claim that tax break, with some using their four year old child as a front.

Why all the people trying to take advantage of Uncle Sam?  Well, the IRS didn't exactly make you prove up front that you bought a house in the first place.

"For example, IRS decided that requiring taxpayers to attach supplemental documentation about a home sale to a tax return would be burdensome," read a report to Congress by investigators at the General Accountability Office.

Making it worse was that the IRS was urged to require such forms.

The Treasury Department Inspector General told lawmakers that the feds "identified 19,351 Tax Year 2008 electronically filed tax returns on which taxpayers claimed Credits totaling over $139 million for homes that had not yet been purchased."

Read that again.  The homes "had not yet been purchased," but these people were asking for tax credits for buying a home.

But it gets even better.

"Through July 25, 2009, we identified 582 taxpayers under 18 years of age who claimed almost $4 million in First-Time Homebuyer Credits," read a report from Treasury.

"The youngest taxpayers receiving the Credit were 4 years old."

Once again, the IRS wasn't exactly looking for this kind of fraud.

"The age of the taxpayer receiving the First-Time Homebuyer Credit was not one of the specific filters implemented by the IRS to screen claims for the Credit on original filed returns."

You can see the testimony of the Treasury Inspector General at http://is.gd/4wBG5

All of this comes as lawmakers are demanding that the tax credit be extended, arguing it has helped the economy by spurring the real estate industry.

It may also spur a lot of legal bills as well.

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