An article in today’s Wall Street Journal brought to my attention a news release on the website of House Ways and Means Oversight Subcommittee Chairman John Lewis (D‑GA) in regard to the First Time Homebuyer Tax Credit. I am posting the whole release below but thought I would just bring to your attention the following facts:

• Around 1 million homes have been bought using the scheme
• The IRS is examining 107,000 of them
• The IRS has identified 167 fraud schemes (click here for details of one conviction posted today)
• This means that 1 in 10 of the credits are under review by the IRS.

Below is the full text of the release [PDF] [Link]

October 20, 2009: Lewis Announces Hearing on Administration of the First Time Homebuyer Tax Credit

House Ways and Means Oversight Subcommittee Chairman John Lewis (D‑GA) today announced that the Subcommittee on Oversight will hold a hearing on administration of the first‑time homebuyer tax credit.  The hearing will take place on Thursday, October 22, 2009, at 10:00 a.m., in the main Committee hearing room, 1100 Longworth House Office Building.

In view of the limited time available to hear witnesses, oral testimony at this hearing will be from invited witnesses only.  Any individual or organization not scheduled for an oral appearance may submit a written statement for consideration by the Subcommittee and for inclusion in the printed record of the hearing.

BACKGROUND:

In 2008, the “Housing and Economic Recovery Act of 2008” (Public Law 110‑289) established a first‑time homebuyer tax credit for low‑ and moderate‑income taxpayers of up to $7,500.  The tax credit applies to homes purchased after April 8, 2008, and before July 1, 2009.   The credit must be repaid over a 15‑year period, and repayment is accelerated if the home is sold within such period.

In 2009, the “American Recovery and Reinvestment Act of 2009” (Public Law 111‑5) extended and expanded the 2008 first‑time homebuyer tax credit for homes purchased between January 1, 2009, and December 1, 2009.  The Act increased the maximum tax credit to $8,000.  It also waived the repayment requirement unless the home ceases to be the taxpayer’s principal residence within a 36‑month period following purchase.

The first‑time homebuyer credit is fully refundable, which means that the credit will be paid out to eligible taxpayers even if they have no tax liability or the credit exceeds the amount of tax due.  For homes purchased in 2008, the credit may be claimed on the 2008 income tax return.  For homes purchased in 2009, the credit may be claimed on the 2008 income tax return (original or amended) or the 2009 income tax return.

On July 29, 2009, the Internal Revenue Service (IRS) announced its first successful prosecution related to fraud involving the first‑time homebuyer credit and warned taxpayers to beware of schemes.  As of September 30, 2009, the IRS has identified 167 criminal schemes involving the credit and opened nearly 107,000 civil examinations involving the credit.

In announcing the hearing, Chairman Lewis said, “I am pleased that more than one million taxpayers claimed the first‑time homebuyer credit.  However, I am concerned about recent reports that there have been fraudulent schemes involving the credit.  This hearing will allow the Subcommittee to hear what, if any, additional steps should be taken to allow the IRS to strike a balance between issuing timely refunds of the homebuyer tax credit and protecting federal revenue.”

FOCUS OF THE HEARING:

The focus of the hearing is to review the IRS’s administration of the first‑time homebuyer tax credit.  The Subcommittee will examine recent allegations of fraud involving the tax credit and consider opportunities to enhance administration during the 2010 filing season.