Sure enough if you build it someone will figure out a way to break it. In this case it is a report from the Treasury Department’s Inspector General that shows how quickly fraud can take off. The IRS has uncovered 167 criminal schemes related to the $8000 First Time Homebuyers Credit and is examining over 100,000 files for possible civil violations.
According to a New York Times article:
“The first successful I.R.S. prosecution, a tax preparer in Jacksonville, Fla., James Otto Price III, was sentenced to 30 months in federal prison for fraud in 2008. According to the Justice Department, he claimed the credit for ineligible clients, many of whom were unaware of the action, and electronically paid himself $1,000 of the credit’s value each time.”
The report comes while congress is debating whether to extend the tax credit for another 4-6 months. Previously I had written abou the Cost of the First Time Homebuyers Credit and wondering if the total cost of the program was being overlooked.
Now it will be up the Congress and the IRS to determine if the combination of the cost and fraud will kill the latest proposals to extend the credit.