the IRS is looking into 100,000 suspicious claims for the tax credit for qualified home buyers, the Wall Street Journal reports. As I wrote over the weekend, home buyers are leaping in to the market to take advantage of a potential $8,000 federal tax credit for anyone who has not owned their own home for three years. Many are hurrying to get deals into escrow this month, to give their lenders time to process paperwork.
From the story:
“More than a million claims for the credit have been received so far, and housing-industry experts estimated that the credit has helped generate about 350,000 home sales that wouldn’t otherwise have occurred. But some lawmakers and tax experts now say there is evidence that a significant number of the claims might prove to be unjustified, or even fraudulent.”
Several bills have been introduced in Congress to extend the deadline for the tax credit, make the credit larger, or even expand the program to all home buyers. If the IRS starts to come up with a laundry list of fraudulent credits, the agency could put a chill on all the extend-the-credit enthusiasm.
[Via Calculated Risk]
I don’t believe that criminal behavior should stop good policy. Fraud should be prosecuted, and the IRS should follow up on red flags. But the $8000 homebuyer tax credit has been a huge boost to the real estate recovery. For months I’ve watched people scramble to make offers on homes for sale in San Diego. Every single first time buyer has the tax credit in mind, and they’ve been creating mental deadlines to be in escrow by October 31 so that they can close by November 30. I think that an extension with a gradual phase out by the end of 2010 (Max Baucus’ proposed amendment) is a the best approach. Without an extension I think it’s safe to say that there will be a big lull in real estate activity during the coming months.
[...] This sham policy while giving Robert Shiller a “funny feeling” also is a great way to get you audited should you receive its benefits… it’s also a great way to perpetuate widespread fraud and support ridiculously high [...]
[...] couples. This sham policy while giving Robert Shiller a “funny feeling” also is a great way to get you audited should you receive its benefits… it’s also a great way to perpetuate widespread fraud and support ridiculously high housing [...]