Orange County tax lawyers will tell you that one of the great tax credits in recent years has been the First-Time Homebuyer Tax Credit. To qualify for the credit, you must either be a first-time homebuyer, or qualify as a long-time resident purchasing a new main home. (To qualify this way, you need to have lived for five of the last eight years in the same main home). First-time homebuyers can receive a credit up to $8000. Long-time residents can receive a credit up to $6500.
It is a very appealing tax credit that 1.8 million people have applied for.
One problem, though, is that 19,000 of the people who applied for the credit and received it, did not bother to buy a home! Another 74,000 who applied and received the credit, had at least bought a home, but they did not qualify for the credit (there are also income limits and purchase price limits in order to qualify).
More than 500 people who applied were under the age of 18 (the minimum age to qualify is 18).
Many of these applicants for the credit were doubtless simply mistaken about their qualification for the tax credit. Others were probably aware that they were, let’s say, stretching their qualifications. But the IRS reports that it is investigating at least 100 suspected criminal schemes involving the credit.
A Jacksonville, Florida, tax preparer was recently sentenced to thirty months in prison because they filed fifteen tax returns that falsely claimed the homebuyer credit.
The IRS is also conducting over 100,000 examinations that could result in taxpayers having to give back monies they received via the credit, and possibly pay penalties.
- Source: New York Times “Home Buyer Tax Credit Called Successful, But Costly” April 26, 2010 aar