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Earlier this week I lambasted the IRS for announcing that they would be auditing 100,000 applicants for the $8,000 tax credit. I am not a fan of the government creating honey traps and then using them to snare unsuspecting taxpayers with it or using the fear of the IRS to stop people from rightfully claiming their refunds.

However, there is no denying that there was fraud committed in the program. The Wall Street Journal does a great job of outlining some of the more egregious examples:

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.

Related posts:

1. $15,000 Home Buyers Tax Credit Smoke And Mirrors
2. $8,000 New Home Buyer Tax Credit, $6,500 Old Home Buyer Tax Credit
3. Actual Refundable First Time Home Buyer Tax Credit In Stimulus Package
4. Should The $8,000 Home Buyer Tax Credit Go Away
5. Can Land Contracts Claim the $8000.00 Tax Credit?