Thread: Congress Scrutinizes Problems in Homebuyer Credit-Fraud/IAs

Originally published October 22, 2009 at 7:11 AM | Page modified October 23, 2009 at 1:19 AM


Congress scrutinizes problems in homebuyer credit

The rush to implement a tax credit for first-time homebuyers opened the program up to potential fraud by people who hadn't bought a home or already owned one, Congress was told Thursday.

By JIM ABRAMS

Associated Press Writer

WASHINGTON — The rush to implement a tax credit for first-time homebuyers opened the program up to potential fraud by people who hadn't bought a home or already owned one, Congress was told Thursday.

J. Russell George, Treasury Inspector General for Tax Administration, questioned the eligibility of some 100,000 claims out of the 1.5 million who have sought to take advantage of the $8,000 tax credit incorporated in the economic stimulus package enacted last February.

He said claimants include those who could possibly be illegal immigrants and that 580 people seeking $4 million from the first-time homebuyer credit were under the age of 18. The youngest taxpayers receiving the credit were 4 years old, his office said.

George and an Internal Revenue Service official testifying before a House Ways and Means Committee subcommittee stressed that many of the questioned claims may eventually be found to be legitimate after further examination.

But the hearing raised a yellow flag as Congress considers whether to extend, or even expand, the popular program that is set to expire at the end of November.

The top Republican on the panel, Rep. Charles Boustany, Jr., of Louisiana, said that while the issue of extending the credit was not the purpose of the hearing, "every time Congress creates a new refundable credit ... the incentive for fraud is magnified."

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

Rep. John Lewis, D-Ga., chairman of the oversight subcommittee, said he had introduced legislation to improve the IRS' administration of the program, including giving it the authority to look at prior returns to determine eligibility and requiring that taxpayers provide documented proof of a home purchase.

Currently, applicants must fill out a separate IRS form, but do not have to supply documentation.

The tax credit is "a vital part of our economic recovery efforts. We must ensure that we are administering the credit accurately," Lewis 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 prior home ownership.

The homebuyer credit was a key element of the $787 billion stimulus package enacted last February. Under the measure, low- and middle-income first-time homebuyers purchasing a home between Jan. 1 and Nov. 30 of this year could claim a credit of up to $8,000 on their 2008 or 2009 income tax return.

George said the IRS has implemented computer programming to reject claims from people who have not yet purchased a new home. He also acknowledged that the agency has installed filters to catch claimants who had entered information on tax returns indicating they may have owned a home in the three previous years. Those could include deductions for home mortgage interest or real estate taxes.

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.

http://seattletimes.nwsource.com/html/p ... edit.html#

He said claimants include those who could possibly be illegal immigrants and that 580 people seeking $4 million from the first-time homebuyer credit were under the age of 18. The youngest taxpayers receiving the credit were 4 years old, his office said.

Sounds like "straw" purchasers. Either illegal aliens using their anchor child's ss# and name or previous homeowners using using their child's ss# and name.

How is it that a 17 year old cannot purchase a car, but doesn't have a problem getting $$ to buy a house?!?!?!

Yeah, governement run programs run really well don't they?

Cash for clunkers, cash for home buyers but nothing for people who don't need a new car or home. Having been responsible with my finances for the past 30 years it now feels like I'm the dupe.

First-time homebuyers tax credit: Should Congress end it or extend it?

Lita Epstein
Oct 23rd 2009 at 1:00PM

While headlines in newspapers across the country today focus on the possibility that hundreds of millions of dollars in fraudulent claims may have been paid out under the first-time homebuyers tax credit, there's an even more a pressing matter regarding the credit that must be dealt with soon: Should the tax credit be extended past Nov. 30? If so, how large should the tax credit be, and for how long should it be available?

Despite the possibly significant number of the frauds, which were revealed Thursday by the Treasury Department and the IRS in testimony before the House Ways and Means Oversight subcommittee, there's bipartisan support for extending the first-time homebuyers tax credit, with over two dozen bills seeking to keep it going in some form. Clearly, based on existing homes sales figures, the credit is working.

Senate Majority Leader Harry Reid (D-Nev.) wants to extend the current $8,000 tax credit for first-time homebuyers for another four months, and then lower the amount by $2,000 every three months to gradually phase out the benefit.

Even more enthusiastic about the credit are Sens. Christopher Dodd (D-Conn.) and Johnny Isakson (R-Ga.), who want to extend the tax credit to all homebuyers until June 30, and raise the income limits to $150,000 for a single person and $300,000 for a couple. Currently, the income limits are $75,000 for a single person and $150,000 for a couple. Some lawmakers are balking at this option because it would cost about $16.7 billion in lost tax revenues.

Mark Zandi, the chief economist of Moody's Economy.com supports extension of the tax credit. He writes, "Based on simulations of the Moody's Economy.com macro model, the expanded tax credit, if extended through the end of 2010, would increase 2010 sales by almost 600,000. This in turn would generate $33 billion in additional real GDP, lifting growth in 2010 by about 25 basis points." In addition, he adds, "Benefits would flow to a range of hard-pressed industries, including mortgage lenders, real estate firms, insurance companies, property maintenance and repair businesses, and building supply retailers."
The White House right now is not excited about extending the tax credit, and has sent out its deputies to try to quash efforts to do so. In testimony before the Senate on Tuesday, Shaun Donovan, secretary of the Department of Housing and Urban Development, said there is evidence the tax credit benefited the housing market, but questioned whether the cost was worth it, according to a report in The Wall Street Journal. Donovan told the Senate he does not expect to see a "catastrophic decline" in home sales if the tax credit expires on Nov. 30, but does think an expiration could have some "negative implications" for the market.

But the bigger attempt to try to kill the tax credit is being led by the IRS and its testimony about fraudulent claims. The IRS testified before the House Ways and Means Committee that:

19,300 people claimed the credit on their 2008 tax returns before they had purchased a home, for a total of $139 million;
74,000 buyers, including some IRS employees, claimed $500 million even though they had owned a home before; and
580 taxpayers under age 18, including some as young as 4 years old, claimed the credit, resulting in another $4 million in fraudulent claims. The IRS suspects some parents used their children to dodge income limitations.

In total, the IRS has identified 160 potential schemes relating to the first-time homebuyers tax credit that could result in criminal investigations, and has targeted 107,000 claims for reexamination, some of which have been frozen. The problems occurred because the tax credit program began before fraud monitors were put in place. Now that the IRS has identified potential fraud schemes and knows what changes might be needed in the law, it says it can prevent a recurrence of these problems. The fraud-detection software is already in place to catch most of the known frauds. Also, lawmakers already plan to add a provision requiring taxpayers be at least 18 years old to claim the tax credit.

Anything that improves the situation in the housing market will help everyone. House prices will continue to fall until the backlog of foreclosures and other homes on the market has been cleared. Zandi writes, "Since the peak in housing wealth, homeowners have lost more than $5 trillion in home equity, and close to 15 million homeowners -- more than a fourth of all those with first mortgages -- are estimated to be under water; their homes are worth less than they owe. With nest eggs so cracked, households are in no mood to spend more."

Consumers' moods must be improved before the economy can hope to rebound. Improving home values will certainly go a long way to making that happen.

http://www.dailyfinance.com/2009/10/23/ ... t-or-exte/

Originally Posted by miguelina

He said claimants include those who could possibly be illegal immigrants and that 580 people seeking $4 million from the first-time homebuyer credit were under the age of 18. The youngest taxpayers receiving the credit were 4 years old, his office said.

Sounds like "straw" purchasers. Either illegal aliens using their anchor child's ss# and name or previous homeowners using using their child's ss# and name.

How is it that a 17 year old cannot purchase a car, but doesn't have a problem getting $$ to buy a house?!?!?!

Yeah, governement run programs run really well don't they?

Ditto M! Anyone who believes that illegal invaders wouldn't exploit their anchor babies SS# for their own economic benefit is living in fantasy land! These people have no sense of right and wrong! Only what they can take!

Why is the government involved in this at all? The free market should be a free market. With all the foreclosures, short-sales, etc., it’s already a buyer’s market. The government should stay out of this.

Why is it only first time home buyers? How do first time buyers contribute differently than the others? Generally first homes are smaller and owners pay fewer taxes. Each time you purchase another one, it tends to be more expensive and therefore more tax. The U.S.A. is broke already!

It seems to me like they’re trying to close the barn door after the horse got out. Fraud filters should have been put into place before the system was implemented. I’m figuring it’ll cost tax payers a lot more to go back and try to get reimbursed than if the credit wasn’t given in the first place.

Finally, if any illegal alien got a tax credit, that’s an embarrassment to the country.

What's embarrassing is that we have 20 million plus illegal invaders in this country, who ignore and violate our laws ,while this pathetic government does nothing, except figure out ways to keep them here and give them access to even more services through our tax dollars!

That's embarrassing!

Friday, October 23, 2009

Dead People, Illegals Got Homebuyer Tax Credits

Neil Cavuto, Managing Editor & Anchor
FOXBusiness

Turns out more than four-year olds were getting checks.

Here's the deal.

Seems like everyone was in on this deal.

Even Americans who shouldn't have been.

Even those who weren't…Americans.

No less than the Treasury Inspector General for Tax Administration saying that homebuyer tax credit program was the equivalent of a Pez dispenser.

Only each Pez was worth about 8,000 bucks.

And the government all but saying, you want the candy, you got the candy!!

Now, the not so sweet results.

J. Russell George telling me exclusively on Fox that the fraud was so rampant, so widespread, so un-checked, and so under-reported that he's only now "guesstimating" the abuse at half a billion bucks.

Half a billion bucks!!

And that could be conservative.

But the inspector general clear…this thing became a mess.

Bigger than stimulus bucks that went out to dead people.

Or thousands of checks that went out to prison inmates.

Or thousands of prescriptions that went out to corpses.

Some of them written by doctors who were also corpses.

Dead serious, this is a dead mess.

And this homebuyer tax credit program…perhaps the dead zone epicenter of the dead mess itself.

Fraud on such a massive scale, that if Mr. George is right, had IRS agents themselves, among the abusers.

And this is about a lending program that was supposed to help first-time buyers get a home.

A noble goal. And for the government, a noble effort.

But one abused by folks far from noble, and administered by a bureaucrats clearly far from even competent.

http://www.foxbusiness.com/story/market ... x-credits/