Why Can't the First Time Homebuyer Credit Fraud be Prevented?
Reading Gail Perry's article today got me steamed up again. She published the information from the TIGTA report that explains why IRS's hands are tied.
Frankly, the reasons are nonsense. And if those are the reasons, Congress has time to fix them right now, while they are preparing the First Time Homebuyer Credit extension and expansion for a vote next week.
So I called my Congressman's office and left him a message to call me. To save time, I sent him an email outlining my proposed solution. You are welcome to send an email to your legislator, too.
Here is the letter:
Dear Mr. Sherman,
Since you are both a CPA and an attorney, you have a pretty good grasp of what goes on at IRS.
This $600+ million worth of fraud could easily have been prevented.
And if you're about to vote on another round of funds for new homebuyers and those who already own homes, it's time to incorporate a fix the legislation up for vote next week.
In the TIGTA report, IRS presents the following excuses - to which the solutions are simple:
1) The tax agency was given authority by Congress to pay the credits, but not to require documentation of an actual, qualifying home purchase.
2) Requiring documentation would preclude people from filing electronically.
3) The IRS doesn’t have “math error authority” to disallow a credit during processing, based on incorrect math in the application.
Solution to problem #1 - have Congress authorize IRS to require document of actual, qualifying home purchase before releasing the funds.
Solution to problem #2 - Simple. Put a checkbox on Form 8453 that there are attachments to Form 5405 to prove the taxpayer has qualified for the credit. Put instructions on Form 5405 describing what documentation to send. (read http://www.marketwatch.com/story/home-buyer-tax-credit-refunds-delayed-for-months-2009-10-26 )
Solution to problem #3 - Have Congress give IRS “math error authority” to disallow a credit during processing, based on incorrect math in the application.
You have time to incorporate these suggestions into the new legislation.
Please, please, pretty please with a cherry on top - add this in and save us all time, heartache, audits and more fraud.
Right now, IRS is holding up refunds for about 4 months - on electronically filed 2008 returns. Imagine what this is going to be like when 2009 returns start pouring into the IRS campuses.
Thanks for considering my suggestion.
Eva Rosenberg, MBA, EA
Northridge, CA member NAEA, CSEA
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Eva Rosenberg, MBA, EA, is the publisher of TaxMama.com, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.