Who says serving a life sentence doesn’t come with perks? Despite being in prison, nearly 1,300 inmates wrongly received more than $9 million in new homebuyer tax credits. After all, isn’t it possible to buy a home while you are in the slammer? Is this a qualification exclusion that the guidelines neglected to mention?
Not only did 1,300 inmates get the tax credit, 241 of them were serving a life sentence. Take a look at their remodeled home (after the credit) on the left. Pretty nice, huh? $8,000 goes a long way in a 10×10.
The high incidence of fraud with homebuyer tax credits caused the IRS to make significant changes to filing requirements. Those claiming the tax credit must submit their tax filing via mail and include supporting documentation. There aren’t any quick refunds when you claim the credit.
Altogether, more than 14,000 taxpayers wrongly received about $27 million in tax credits. Some taxpayers received the credit for homes purchased before the tax credit even rolled out. In other cases, several taxpayers used the same home to claim multiple credits. Investigators found one home that was used by 67 taxpayers to claim credits. Unbelievable.
The Internal Revenue Service says it is taking steps to recoup the money. “A very small number of payments were made to prisoners incorrectly, which the IRS is now taking all steps to recapture and to prevent going forward,” the IRS said in a statement. “The IRS will follow up on every instance of an improper prisoner payment and take swift and appropriate enforcement actions.”
This report puts a blemish on a very popular tax break that was part of the economic recovery package. The National Association of Realtors says the homebuyer tax credit has generated 1 million new home sales that would not have happened otherwise.
The IRS said it is aggressively enforcing the tax credit and has blocked nearly 400,000 questionable claims. Criminal investigations have been started. The efforts of the IRS have saved taxpayers more than $1 billion. But prior to the increased enforcement, 1,295 prison inmates were able to get $9.1 million in credits. And that’s mostly because the IRS does not keep up-to-date records of who is in prison. None of the inmates filed joint returns, so the credits could not have been for purchases by spouses. But one must think they had help from the outside because are inmates that on top of tax laws and procedure? It seems to hinge on criminal conspiracy.
And it seems there is no limit as to who will file a false tax return claiming the credit. An additional 87 IRS employees are being investigated for possibly making a false claim.
I found it astounding that so many people would try to perpetrate this fraud where eventually, it has to be uncovered.
Until my next post . . .
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