Homebuyer Tax Fraud: Did the Bad Apples ruin it for everyone else?!

I guess it doesn’t surprise me too much because I personally encountered lenders and real estate agents misleading buyers about the first time homebuyer tax credit.

We were very quick to release news and educate homebuyers about the original $7,500 first time homebuyer tax credit and have been on the forefront of the changes and extensions of the credit since.

I have personally received calls from homebuyers that were advised that they could claim the credit before the home was purchased.  This “advice” was given by misleading lenders and real estate agents because they thought it would help them “get the sale”.

Let’s hope they didn’t screw things up for all of us.

Tax Fraud was the prevalent topic of discussion at this morning’s House Ways & Means Committee hearing on extending the homebuyer tax credit.  It seems that the bad apples are still out there misleading buyers and advising that they commit federal tax fraud, costing tax payers over half a billion dollars.

USA Today reports some disturbing statistics about buyer fraud:

WASHINGTON (Reuters) — Thousands of individuals claiming the first-time homebuyer’s $8,000 tax credit may have been trying to scam the system, including purported 4-year-olds and illegal immigrants, according to a watchdog report released Thursday.

Treasury Inspector General for Tax Administration J. Russell George told a House panel that more than 19,000 people filed 2008 tax returns claiming the credit for homes they had not yet purchased. George said his office had identified another $500 million in claims, by some 74,000 taxpayers, where there were indications of prior home ownership.

He told a House Ways and Means oversight subcommittee that they also found 580 taxpayers under the age of 18 who claimed $4 million in first-time home buyer credit. One was 4 years old.

I did a google search after watching the hearing – take a look at these headlines dominating the internet.

The anti-establishment radical would say “oh, this is just another wasteful government program with no oversight or accountability” – I’m not that person though.

I am frustrated that consumers, buyer’s themselves, still think it’s ok to take the easy way out.  As a matter of fact, it straight out pisses me off (sorry about the PG-13 moment).

YES, there are sleazy people in the lending and real estate world that will do anything for a fistful of sweaty money at the expense of trusting consumers….but you know what….People are NOT that STUPID.

Ignorance is not an excuse because I guarantee if these buyers asked a few more questions, concerns and doubts would arise as to legitimacy of their actions.

Yeah, yeah, I know…i’m going off on a rant again, i’m sorry.  It just kills me that the future of something as beneficial as this tax credit  is teetering on the actions of criminals trying to milk the system for everything they can get.

Deeeeeeeeeeeeeeeeeeeeeeeeep Breeeeeeeeeeeeeeeeeeeeeeeeeeeeath……………….ok……..I need a meditation moment to bring down my blood pressure so I can give you the silver lining on the clouds that seemed to hover over this hearing today.

The good news, as I saw it, was that much of the discussion was with IRS directors questioning ways to beef up the screening of these applications to reduce or eliminate the kind of fraud we’re talking about.

The committee stated that they are not opposed to extending and possibly even expanding the homebuyer tax credit beyond first time homebuyers.

My impression was that the Committee was looking for ways to eliminate fraud, and not the credit itself.  I’m going to lean toward saying that this credit is still very much alive.

I would imagine that things will move pretty quickly at this point and I fully expect that we have a decision before the expiration of the current $8,000 First Time Homebuyer tax credit before it’s November 30th deadline.

I will keep a close eye on this and let you know what I know, when I know it.

Other articles about this topic that might interest you:

1. Ways and Means Committee Announce Hearing on Homebuyer Tax Credit FROM THE COMMITTEE ON WAYS AND MEANS SUBCOMMITTEE ON OVERSIGHT FOR IMMEDIATE RELEASE October 22, 2009 Lewis Announces Hearing on...
2. UPDATE: $8,000 Homebuyer Tax Credit Extension – October, 2009 We still don’t have anything concrete on the progress of H.R 2801 which looks to extend the $8,000 homebuyer tax...
3. UPDATE: Homebuyer Tax Credit Too Costly for America? I Ran across some news today on the extension and expansion of the homebuyer tax credit and wanted to share...

Tagged as: expanding tax credit, extending tax credit, house ways and means committee, HR 2801, Tax Credit, tax fraud