Treasury Inspector General for Tax Administration
September 9, 2010
TIGTA - 2010-51
Contact: Karen Kraushaar
WASHINGTON - The Internal Revenue Service (IRS) needs to improve its capabilities to identify taxpayers who must repay tax credits for homes they purchased under the First-Time Homebuyer Credit program, according to a new audit report publicly released today by the Treasury Inspector General for Tax Administration.
While the report noted that the IRS has taken important initial steps to identify such individuals, it found that individuals receiving the Credit had incorrect purchase dates recorded on the IRS' system which can cause some taxpayers to receive incorrect notices and others to not be identified that are required to repay the credit.
"The IRS is to be commended for its efforts to not only implement but also enforce the laws governing the First-Time Homebuyer Credit program," said J. Russell George, the Treasury Inspector General for Tax Administration. "Going forward, it is imperative that the IRS ensure the comprehensive strategy being developed identifies taxpayers who erroneously or inappropriately received the Credit and are required to repay it."
The Housing and Economic Recovery Act of 2008 created a new First-time Homebuyer Credit equal to 10 percent of the purchase price of a first-time homebuyer's home, limited to a maximum amount of $7,500, which initially served as an interest-free loan to be repaid over 15 years. Subsequent laws expanded the credit and eliminated the repayment requirement, except in those instances in which the home is sold or is no longer the taxpayer's primary residence within 36 months.
TIGTA's study found that an estimated 73,119 (4.1 percent) of the approximately 1.77 million individuals receiving the Credit had incorrect purchase dates recorded at the IRS. Of those, 59,802 had purchased their homes in 2009, but the IRS incorrectly recorded the purchases as 2008 or the years were not recorded. These taxpayers could incorrectly receive notices requiring repayment, TIGTA found.
The report also found that $10.1 million in Homebuyer Credits were claimed by 1,326 taxpayers who were identified as deceased by the Social Security Administration. The IRS did not allow 528 of those individuals to receive over $4 million they claimed for the Credit.
TIGTA recommended that the IRS take steps to correct the errors. IRS officials agreed with the recommendations and stated that they plan to take steps to improve controls.
To view the report, including the scope, methodology, and full IRS response, go to: https://www.treasury.gov/tigta/auditreports/2010reports/201041086fr.pdf.
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