First Time Homebuyer Tax Credits Reviewed
On April 16, 2012, the Treasury Inspector General for Tax Administration, (TIGTA) will publicly release its Interim Filing Season Report. As part of its oversight of the Internal Revenue Service (IRS), TIGTA protects the integrity of the United States system of tax administration and prevents waste, fraud, and abuse in the administration of the nation’s tax laws.
Since the inception of the American Reinvestment and Recovery Act of 2009 (Recovery Act), TIGTA has conducted extensive oversight work on related funds. You can easily access these reports here.
Each year TIGTA completes an audit of the IRS’s “filing season,” which is the critical time of year when most individuals file their income tax returns and contact the IRS if they have questions about specific tax laws or filing procedures. TIGTA reports initial filing season results in March, resulting in the so-called “interim filing season report,” and then again in the early fall on the complete filing season. Here is an example of Recovery Act oversight that is included in today’s Interim Filing Season Report:
First-Time Homebuyer Credit: TIGTA has issued several reports on the IRS’s implementation of the First-Time Homebuyer Credit (Homebuyer Credit). The Housing and Economic Recovery Act of 2008 (HERA) allowed first-time homebuyers who purchased a principal residence after April 8, 2008, and before July 1, 2009, to claim a refundable credit equal to 10 percent of the purchase price of the home, limited to $7,500. The Homebuyer Credit served as an interest-free loan to be paid back over a 15-year period beginning two years after the Homebuyer Credit was claimed.
Section 1006 of the Recovery Act extended the Homebuyer Credit to include purchases made on or after January 1, 2009, and before December 1, 2009, increased the maximum Homebuyer Credit to $8,000, and eliminated the repayment requirement as long as the taxpayers retain the home as their principal residence for at least 36 months. Individuals who purchased a home between April 9 and December 31, 2008, and claimed the credit were required to repay the credit in installments beginning with their Tax Year 2010 tax return.
As part of our Interim Filing Season report, TIGTA reviewed the IRS’s performance in collecting taxpayer repayments of the Credit. As of March 7, 2012, a total of 535,344 taxpayers reported Homebuyer Credit repayments totaling more than $175 million.
TIGTA found that the IRS improved its processing of Homebuyer Credit installment repayments; however, some were still not processed accurately. This resulted in more than $1.6 million being either refunded erroneously or not assessed. More than 4,100 tax returns were impacted by this error. TIGTA notified the IRS of this issue on February 21, 2012 and recommended changes be made to ensure that Homebuyer Credit installment repayments are correctly assessed.
In response, the IRS said it will analyze tax return data to identify affected taxpayers and to correct the tax returns.
To read TIGTA’s complete Interim Filing Season report, or recent audits of the Homebuyer Credit, visit TIGTA’s website.
— J. Russell George, Treasury Inspector General for Tax Administration