The Internal Revenue Service needs to improve itscapabilities to identify taxpayers who must repay tax credits for homes theypurchased under the First-Time Homebuyer Credit program, according to a newaudit report released by the Treasury Inspector General for Tax Administration.
While the report noted that the IRS has taken importantinitial steps to identify such individuals, it found that individuals receivingthe credit had incorrect purchase dates recorded on the IRS system that cancause some taxpayers to receive incorrect notices and others to not beidentified who are required to repay the credit.
"The IRS is to be commended for its efforts to notonly implement but also enforce the laws governing the First-Time HomebuyerCredit program," said J. Russell George, the Treasury Inspector Generalfor Tax Administration. "Going forward, it is imperative that the IRSensure the comprehensive strategy being developed identifies taxpayers whoerroneously or inappropriately received the credit and are required to repayit."
The Housing and Economic Recovery Act of 2008 created anew First-time Homebuyer Credit equal to 10 percent of the purchase price of afirst-time homebuyer's home, limited to a maximum amount of $7,500, whichinitially served as an interest-free loan to be repaid over 15 years.Subsequent laws expanded the credit and eliminated the repayment requirement,except in those instances in which the home is sold or is no longer thetaxpayer's primary residence within 36 months.
TIGTA's study found that an estimated 73,119 (4.1percent) of the approximately 1.77 million individuals receiving the credit hadincorrect purchase dates recorded at the IRS. Of those, 59,802 had purchasedtheir homes in 2009, but the IRS incorrectly recorded the purchases as 2008, orthe years were not recorded. These taxpayers could incorrectly receive noticesrequiring repayment, TIGTA found.
The report also found that $10.1 million in HomebuyerCredits were claimed by 1,326 taxpayers who were identified as deceased by theSocial Security Administration. The IRS did not allow 528 of those individualsto receive over $4 million they claimed for the credit.
TIGTA recommended that the IRS take steps to correct theerrors. IRS officials agreed with the recommendations and stated that they planto take steps to improve controls.
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