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January 28th, 2010

Washington Working in Reverse? Can’t Be

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(Hopefully the sarcasm in the title was duly noted.) Recent taxpayer frustrations are the reason why we’re delving back into the topic of the homebuyer tax credit. Homebuyers are frustrated over the delays they have been experiencing as they wait for their tax credit. One of reasons behind the delay is because Washington decided to work backwards.

Was getting a homebuyer tax credit too easy from the very beginning? Apparently so.

By now, the fraud surrounding the homebuyer tax credit program has attracted a lot of attention in the national media, and the numbers and circumstances connected to the fraud are quite astounding. Only now that the fraud has grown so widespread and costly, notes Scott Van Voorhis of the Boston Globe, has the IRS decided to take action, slowing down the time it takes to receive the credit to that of molasses.

According to Van Voorhis, $139 million was wasted on “homes that had not yet been purchased or never were.”

“Hundreds put down the names of children, some as young as four, to claim their $8,000 check,” he writes in the Globe’s blog Boston Real Estate Now.

The IRS’s ideas of cracking down are simply measures that they should have taken from the very beginning:

The IRS’ big new requirement for screening out the fraudsters is for either a signed closing statement or a certificate of occupancy, if it’s a new home. There’s also a new form, 5405. It’s amazing anyone was allowed to claim the credit previously without such basic documentation.

But apparently even doing this kind of bare bones checking will put a big strain on our nation’s tax system. It turns out the IRS won’t be able to start processing any homebuyer tax credits until mid-February.

The obvious question is, “How many fraudsters have been put behind bars so responsible, honest homeowners can receive their credit in a fair and timely manner — as promised?” With about 160 investigations under way, the IRS should be making progress, right? Not exactly.

According to Steve McGonigle of the Dallas Morning News, “there has been only one prosecution and one civil lawsuit filed against tax preparers accused of filing fraudulent claims.”

Perhaps if the IRS made basic documentation a requirement since the very beginning, homeowners wouldn’t be left waiting.

Who out there is still waiting on their homebuyer tax credit?

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One Response to “Washington Working in Reverse? Can’t Be”

  1. Visionary Realty News by Visionary Agents » IRS issues new guidelines on obtaining home buyer tax credits #realty Says: February 25th, 2010 at 11:21 pm

    [...] Washington Working in Reverse? Can’t Be (hsh.com) (No Ratings Yet)  Loading … SHARETHIS.addEntry({ title: "IRS issues new guidelines on obtaining home buyer tax credits #realty", url: "http://www.visionaryrealtynews.com/2010/02/25/irs-issues-new-guidelines-on-obtaining-home-buyer-tax-credits-realty/" }); [...]

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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