To those who would claim the First-Time Homebuyer Credit without qualifying for it, beware: [Thanks T.M.!]
WASHINGTON — The Internal Revenue Service today announced its first successful prosecution related to fraud involving the first-time homebuyer credit and warned taxpayers to beware of this type of scheme.
On Thursday July 23, 2009, a Jacksonville, Fla.-tax preparer, James Otto Price III, pled guilty to falsely claiming the first-time homebuyer 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.
To date, the IRS has executed seven search warrants and currently has 24 open criminal investigations in pursuit of potential instances of fraud involving the credit. The agency has a number of sophisticated computer screening tools to quickly identify returns that may contain fraudulent claims for the first-time homebuyer credit.
“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.”
A refund that large is going to be awfully tempting to claim, even when it’s not justified. Mr. Price won’t be the last to feel the IRS’s wrath.
Bubble Meter
UK House Bubble
Ohio Fraudclosure
Northern Virginia Housing Bubble Fallout
Mish's Global Economic Analysis
Breaking News Relevant Articles© Copyright 2012 Housing Doom | Copyright© 2011, AuthentiCraft, Inc.
indeed twist. and these preparers that are doing this are complete idiots. it’s gotta be one of the EASIEST fraudulant claims for the irs to verify. and due to the $ amount of the credit, i would guess that they are asking a very high percent of people claiming it to verify it. it’s also a real simple rule. has you OR your spouse been on title in the past three years….if “yes” then you don’t qualify.
AZSaluki-
I’m no tax expert, but isn’t a sudden large jump one year in your refund a good way to get flagged for an audit? Even if I did legitimately qualify for this deduction, I would think it would be a good year to especially have all my ducks in a row for the IRS- no one likes surprises.
This is beyong dumb. Unless you paid cash for a house and did not have a mortgage, the interest to which is reported to the IRS every year, there is no way to get away with it.
There are a few loopholes, like if you have an 18+ year old kid, he can take title to the house and get the tax credit if you can qualify for the loan. Not sure I would trust an 18 year old kid with my tax credit or title to the house though.
Here we go…the big bad IRS warning, like a warning label on a pack of cigs.
In good times when they benefit from high cap gaines taxes, all is good. But the bottom falls out due to SEC and government cronys, gives a bailout, they IRS to the Micro managing rescue to run up their “I found fraud Quota”! Its no different than phoenix DUI/speeding ticket quota.
Can’s squeeze water from a stone Big Gov!
They like shooting fish in a barrel, don’t they!
Pfft!
Tobby-
I was wondering if the points that these fraudsters are trying to stretch are things like “first time buyer” [i.e.- Maybe the house could go in my spouses name since the current house went in my name two years ago, or maybe they figure that two and a half years without a mortgage is close enough.]or perhaps “primary residence”, [How many multiple primary residences have we seen in the past few years.]
It’s hard to see how anyone could be blatant enough to try and claim the deduction without purchasing a house at all, but I’ve watched enough sleezy stuff going on to expect people to cut ethical corners in droves.
twist,
you don’t even need a jump in refund to get flagged. to claim the credit there is a new form you must attach to the return. it identifies items like the price, buyer, and closing date. i don’t know how the irs is selecting…but they could easily do title searches or simply send you a letter requesting the closing statement (that’s called a paper audit). they don’t have to look very hard. there are legitimate ways to get it if it’s a grey area. i had an engaged couple that were looking (guy owned a rental)so i simply had them go through the event, but wait to make it legal. two (unmarried) people can purchase a home if only one qualifies, that person can claim it. so they had the ceremony, then bought a home, then she took the credit, then they legally got married. she wasn’t thrilled about having “2″ anniversary dates….but for 8K she got on board with the plan.
AZSaluki-
Thank you for letting us know how it works. Your solution sounds like a good one to stay within the law.
I’ll bet we’ll see a lot of “creative” solutions that are not so legal though.
To some degree I believe that this is all bark and no bite. Can you name a single provision that the IRS has NOT threatened to crack down on? If they threaten but then do not do anything about it it will still have the effect of scaring everyone into compliance. Look at how many of those rich people with offshore accounts are seeking clemency from the IRS right now because of mere threats to clamp down. This is the same sort of thing. It is pretty smart when you think about it, gets them quite a bit of revenue without having to step up enforcement too much.
What if a person has never reported mortgage interest (because he didn’t have any) or taxes on his returns but actually owned a home? If he truly bought a new house and kept the old one, how likely is it that he would get away with taking the credit? How deep does the IRS dig on every claim? The only way the IRS could find out is to search county records. Correct?
Just wondering