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September 17, 2010

Repaying homebuyer tax credits

If you're among the more than 950,000 Americans who claimed the 2008 homebuyer tax credit, you're on the hook to begin paying it back next year. It's really a no-interest loan. Only in 2009 did it morph into the $8,000 incentive buyers can keep.

But the Treasury Inspector General for Tax Administration is warning that some who claimed the credit for 2009 purchases could wrongly get repayment notices because the IRS has the date incorrectly listed as 2008 in its records. Other '09 purchases were recorded by the IRS with no date.

The treasury inspector found about 60,000 such examples when it audited the IRS. (Insert your audit jokes here.)

Meanwhile, about 9,100 tax-credit claims worth more than $30 million involve buyers who purchased in 2008 but were "incorrectly recorded as 2009 or the year was not recorded," the audit report says.

The IRS agreed that these were problems and promised to verify purchase information with property records, the audit report said.

Oh, and remember some of the tax-credit shenanigans the inspectors found in earlier checks, such as people claiming the credit on homes they clearly didn't purchase because they were in preschool or prison? Add to that list the recently or not-so-recently deceased.

The inspectors found more than 1,300 instances of 2008-version credits claimed in the names of taxpayers who had died days, months or even more than a year before the home was supposedly purchased. Grand total: $10 million. These were not joint returns, in case you're wondering.

"Although the purchase may have been in progress at time of the death, the taxpayer would not have occupied the property as a primary residence and, therefore, would not have qualified for the Credit," the inspectors wrote.  

The IRS caught 528 of those from-the-beyond claims -- $4 million worth -- but had allowed the rest. It promised audits.

A reminder for you 2008 credit folks: You'll have to repay the money in 15 equal annual installments -- $500 a year, if you took the full $7,500. The first payment is due with your taxes on April 15.

Comments

Personally, I think it is a classic example of how Washington is more concerned that they resemble their help, while protecting the plutocracy. Neither programs home buyer credit to help people realize their dream of homeownership, but rather a document has been massive banks that allowed them to keep prices artificially high housing while reduce their massive inventory.

I was among those who took the 1st time homebuyer's credit for 2008. Actually, my CPA took the honors for this. I wasn't consulted with which seem strange in that anytime I have borrowed money, I had to sign a promissory note. I think it's deceptive that the IRS called it a 'credit' when it was actually a loan. Looking back in retrospect, I would never have taken the money.

That's really frustrating, Ingrid -- I'm sorry you got the repayable-loan version of the credit without anyone asking you first.

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About Jamie Smith Hopkins
Jamie Smith Hopkins, a Baltimore Sun reporter since 1999, writes about the regional economy. Her reporting on the housing market has won national and local awards. Hopkins is a Columbia native and has lived in Maryland all her life, save for 10 months spent covering schools in Ames, Iowa.
She trained to become a wonk by spending large chunks of time as a geek and an insufferable know-it-all.
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