Treasury Inspector General for Tax Administration
October 12, 2011
TIGTA - 2011-66
Contact: Karen Kraushaar
WASHINGTON – The Internal Revenue Service (IRS) is having difficulty determining which taxpayers have to repay the First-Time Homebuyer Credit (Homebuyer Credit), according to a report publicly released today.
While the IRS accurately issued more than 5.2 million notices informing taxpayers of the need to repay their Homebuyer Credit, it issued incorrect notices or did not send notices to 61,427 households due to notice programming errors or incorrect information on tax accounts, according to the report by the Treasury Inspector General for Tax Administration (TIGTA).
Of the 61,427 households:
Additionally, the information provided by a vendor hired by the IRS to use third-party data to identify individuals who may have disposed of their principal residences was unreliable. This resulted in 53,558 individuals incorrectly receiving notices to repay the Homebuyer Credit.
“The IRS processed the vast majority of Homebuyer Credit Claims accurately,” said J. Russell George, Treasury Inspector General for Tax Administration. “However, IRS officials still need to eliminate the programming errors that resulted in thousands of taxpayers being misinformed about their repayment status,” he added.
The Homebuyer Credit was created by Congress in 2008 to help stimulate the housing industry by encouraging people to purchase their first homes. Subsequent legislation in 2009 and 2010 revised, extended and expanded the Homebuyer Credit in an attempt to help boost a sluggish real estate market. The Homebuyer Credit was a refundable credit that could result in a tax refund when the credit exceeded the tax liability, even if no income tax was withheld or paid.
Each of the laws with Homebuyer Credit provisions contain different Credit amounts, qualification requirements, and repayment requirements. Individuals who received the Homebuyer Credit for a home purchased in 2008 are required to pay back the total amount received for the Homebuyer Credit over 15 years beginning in 2010. There are some exceptions. In addition, individuals who received the Homebuyer Credit in 2008, 2009, or 2010 generally must repay the entire amount they received, if, during the 3-yearperiod beginning on the purchase date and after the year for which the individual received the homebuyer credit, they dispose of the home or it ceases to be their principal residence. If the disposition is a sale, the repayment requirement is applicable to the extent there is a gain on the sale of the home.
TIGTA recommended that the IRS ensure that Homebuyer Credit repayment notices are accurately issued; correct erroneous purchase dates on tax accounts; and discontinue using third-party vendor data to identify individuals who may have disposed of their principal residents unless the reliability can be significantly improved. The IRS agreed with two of TIGTA’s recommendations. For the remaining recommendation relating to accurately issuing notices the IRS indicated it is replacing some of its notices with an online tool for taxpayers to obtain their Homebuyer Credit repayment status.
Read the report.
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