Taxation & Estate Planning

New Homebuyers IRS Fraud

By Darrin Mish

The IRS has been deluged with false claims on the new homebuyers' tax credit applications. Under the scheme, first time homebuyers – those who have not owned a principle home during the last three years – who purchase their homes between Jan 1 and Dec 1 this year are entitled to an $8,000 tax credit. But some homebuyers have been waiting for months for their check due to the large quantity of applications the IRS has been receiving, many of which are false, causing the IRS to scrutinize each application thoroughly before proceeding.

Many taxpayers have been applying for the credit when they actually have not bought a house for the first time. Another form of false application comes in the form of applications made on behalf of first time homebuyers by scam operators. They charge the homebuyers a small fee, say $2,000 then take the details of the homebuyers like their Social Security and bank account numbers. Using this information, these scammers apply for the credit without the homeowners filing up the amended form required by the IRS.

In view of these cases of fraud, the IRS has issued a stern warning to the public – if you do not qualify, do not try to cheat the system. At present, the IRS is investigating 24 cases of suspected fraud around the country, issued 7 search warrants and last month a scam operator in Florida pleaded guilty to charges of fraud in connection with the first time homebuyers' tax credit scheme. James Otto Price III of Jacksonville faces a sentence of up to 3 years imprisonment, a $250,000 fine or both upon conviction.

Another occurrence that further slows things down is when genuine homebuyers purchase the house they rent or lease. This means there is no change of address and this requires further IRS background checks. In such cases, the IRS advises these relevant homebuyers to make copies of their closing statements and attach it to the Homebuyers Tax Credit Form, Form 5405. This would facilitate the process and enable the IRS to contact them easily if any further enquiries are required.

The only legitimate way to obtain the first time homebuyers' tax credit is to file an amended return and submit it to the IRS.

Genuine applicants who experience problems are advised to call the IRS Taxpayer's Advocate's Office who will conduct a proper investigation. The toll free phone number for Georgia and South Carolina is 1-877-777-4778.

Darrin T. Mish is a veteran, nationally recognized tax attorney who has focused on providing IRS help to taxpayers for almost two decades. He regularly travels the country training other attorneys, CPAs and enrolled agents on how to handle their toughest cases with the IRS. He is highly ranked among the top attorneys in the country, with an AV rating from Martindale-Hubbell and a perfect 10 on Avvo.com. Martindale-Hubbell has also honored him with a listing in their Bar Register of Preeminent Lawyers. He is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. With clients on every continent but Antarctica, he has what it takes to solve your IRS problems no matter where you live in the world. If you would like more information about his practice and how he can help you, please call his office at (813) 229-7100 or toll free at 1-888-GET-MISH.

Full post as published by IRS Problem Solver Blog on September 17, 2009 (boomark / email).