Tax Lawyer's Blog

William Perez of the About.com Guide to Tax Planning reports that,

Individuals who buy a home for the first time before December 1, 2009, qualify for a federal tax credit worth up to $8,000. The first time home buyer tax credit is fully refundable, and people can amend their 2008 tax return to claim an additional refund related to this credit.

The possibility of extra refunds from such a short-lived tax break was apparently too tempting for one tax preparer from Jacksonville, Florida, (James Otto Price III) who plead guilty to charges of falsely claiming the refund on a client’s tax return. The IRS is now warning taxpayers to be alert against fraudulent attempts to claim this home buyer credit, lest they too face tax fraud charges.

Perez says beware of the circling sharks:

Apparently tax preparers aren’t the only people aware of this tax credit. One of my clients recently bought the first home she ever owned, and the whole home buying and escrow process was new and overwhelming.

Within days of receiving her initial escrow papers, she started receiving an avalanche of junk e-mail and phone calls, some of them peddling “federal grants” for buying a home.

The Department of Housing and Urban Development has already alerted the public that there are no federal grants to help people buy a home.

In IR 2009-69, July 29, 2009, the IRS warns taxpayers that it has sophisticated tools in place to help it identify, locate and pursue fraudulent taxpayers and their tax preparers:

To date, the IRS has executed seven search warrants and currently has 24 open criminal investigations in pursuit of potential instances of fraud involving the credit. The agency has a number of sophisticated computer screening tools to quickly identify returns that may contain fraudulent claims for the first-time home buyer credit.

“We will vigorously pursue anyone who falsely tries to claim this or any other tax credit or deduction,” said Eileen Mayer, Chief, IRS Criminal Investigation. “The penalties for tax fraud are steep. Taxpayers should be wary of anyone who promises to get them a big refund.”

Whether a taxpayer prepares his or her own return or uses the services of a paid preparer, it is the taxpayer who is ultimately responsible for the accuracy of the return. Fraudulent returns may result not only in the required payment of back taxes but also in penalties and interest.

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