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California home buyer tax credits an issue for the IRS

An experienced California tax law attorney should be called anytime that an Orange County resident is contacted by the IRS. Any contact with the IRS can indicate that a taxpayer is under investigation or being audited and that it is time to seek a tax professional. It is important not to talk directly to the IRS even if you have not committed tax fraud or tax evasion. Honest taxpayers can find themselves in trouble for misstatements and an experienced tax attorney can properly deal with the IRS to avoid a misstatement becoming a huge headache for a taxpayer.

Many Orange County taxpayers are being contacted by the IRS in relation to the first-time home buyer tax credit. The federal tax credit program offered first-time homebuyers up to an $8,000 credit but it appears that the Internal Revenue Service's monitoring of the program has broken down. The Treasury's inspector general for tax administration shows that the IRS has botched its notification process and erroneously sent notices telling taxpayers that they owe payments even when they do not. Other people have received notices indicating that they owe nothing even when they have a balance due.

A tax professional can help analyze a notice from the IRS and determine whether the notice was sent in error. When a taxpayer contacts the IRS alone, the taxpayer may be railroaded into paying taxes that are not due because the IRS failed to properly administer its tax relief programs.

The recent audit of the IRS' administration of the first-time home buyer credit reveals that the IRS has not only harassed taxpayers unnecessarily, but that the IRS also failed to catch fraud schemes that involved first-time home buyer tax credits being granted to teens and toddlers.

We will discuss other factors in the most recent IRS mess-up in tomorrow's post.

Source: The Los Angeles Times, "More problems are found with home buyer tax credits," Nov. 6, 2011

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