Four-Year-Old Got Homebuyer Tax Credit, Treasury Says

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Thanks, this type of thing fuels the ‘govt can’t do anything right’ constituency.

I’m always careful to make proposals that minimize incentives for fraud and abuse, and also minimize the amount of regulation and supervision needed to ensure compliance.

Hence, I’ve proposed the payroll tax holiday and per capita revenue distributions to the states to support aggregate demand.

Four-Year-Old Got Homebuyer Tax Credit, Treasury Says

By Dawn Kopecki

Oct. 22 (Bloomberg) — Children as young as four years old have
improperly received first-time homebuyers tax credits
as the U.S. failed
to adequately screen filings, a Treasury inspector general told
lawmakers today.

“Some key controls were missing to prevent an individual from
erroneously or fraudulently claiming the credit and receiving an
erroneous refund of up to $8,000,” Treasury’s J.
Russell George told the House Ways and Means Committee’s oversight

More than 1.2 million borrowers through Oct. 9 have claimed almost
$8.5 billion of the $13.6 billion set aside for “first- time” homebuyer
tax credits this year, George said.

George said the IRS has identified almost 74,000 claims that may
not have qualified as first-time homebuyers.
They also found that 580
taxpayers under 18 years old and therefore ineligible to buy a home
claimed almost $4 million in tax credits.

The credits, which are available for taxpayers who haven’t owned a
home in the last two years, are credited by Realtors and mortgage
bankers with helping to stabilize home sales this year following the
worst housing slump since the Great Depression.

Lawmakers in the Senate are pushing to extend the credit beyond its
Nov. 30 expiration and expand it to more borrowers.

“Every time Congress creates a new refundable credit — meaning
that individuals can get a check from the government whether or not they
have actual tax liability — the incentive for fraud is magnified,”

Louisiana Representative Charles Boustany, the subcommittee’s
top-ranking Republican, said during the hearing.

Waste, Fraud and Abuse

If Congress extends the credit, the IRS needs to institute better
controls to prevent waste, fraud and abuse, Boustany and Chairman John
Lewis, a Georgia Democrat, said.

Federal auditors also found claims in excess of the maximum amount
allowed, with improper documentation or that exceeded the income
requirements of $75,000 per individual and $150,000 per couple.

Senate Banking Committee Chairman Christopher Dodd and Senator
Johnny Isakson, a Georgia Republican and former Realtor, urged
colleagues at a separate hearing this week to extend the credit through
next June and to expand it to all couples earning $300,000 or less.
Isakson estimated that his plan would cost less than $17 billion in lost
tax revenue.

Purchases of existing homes in August were up 3.4 percent compared
with a year earlier, the National Association of Realtors said. New home
sales were up 30 percent from January’s record low, government figures

Shaun Donovan, secretary of the Housing and Urban Development
Department, called the tax credit a “positive force” in the housing
market during the Oct. 20 hearing before the Senate Banking Committee.

“The end of the tax credit would have some negative affect in the
market,” he said. He said he doesn’t think it would cause a
“catastrophic decline” in home prices.