Tax Credit Abuse and the Four-Year-Old Home Buyer

[mad1]

Russell George, who serves as the inspector general for tax administration, detailed potential fraud and abuse of the tax credit in testimony Thursday. The hearing comes as real-estate industry lobbyists work overtime to get Congress to extend the tax credit, which is due to expire at the end of November and which is credited with boosting home sales by 150,000 to 400,000, according to various economists’ estimates.

To encourage non-homeowners to buy homes, the credit is limited to those who haven’t owned a home in the past three years. But many cases of abuse appear to be designed by those trying to get around that restriction. Among Mr. George’s findings:

* Some 580 filers under 18 years of age had claimed almost $4 million in first-time home-buyer credits, including one that was just 4 years old. “Contract law generally exempts children under the age of 18 from being bound by the terms of a contract,” Mr. George said in written testimony. “Therefore, it is unlikely that these taxpayers would have entered into an arm’s-length transaction for the purchase of a home.”
* Some 74,000 tax credit claims worth $500 million came from taxpayers who had indications of prior home ownership within the preceding three years.
* Another 19,300 tax returns in 2008 were filed claiming the credit for a home that had not yet been purchased. Those credits totaled more than $139 million.


IRS Watchdog Testifies on Instances of Home Buyer Tax Credit Fraud and Abuse - Developments - WSJ

Quote:

Oct. 22 (Bloomberg) -- Children as young as 4 years old received first-time homebuyer tax credits as the U.S. failed to adequately screen filings, a Treasury inspector general told lawmakers today.

“Some key controls were missing to prevent an individual from erroneously or fraudulently claiming the credit and receiving an erroneous refund of up to $8,000,” Treasury’s J. Russell George told the House Ways and Means Committee’s oversight panel.

The Internal Revenue Service has identified 73,799 claims totaling almost $504 million that may not be from first-time homebuyers. They also found that 582 taxpayers under 18 years old and ineligible to buy a home claimed almost $4 million in credits. More than one 4-year-old received the credit, according to George.

Four-Year-Olds Got Homebuyer Tax Credits, U.S. Says (Update5) - Bloomberg.com

Did anyone consider safeguard to prevent such an occurrence. This makes me confident about fraud in a government health care program.