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A closer look at the first-time home buyer tax fiasco

In our last post we discussed the importance of calling a Miami tax law attorney if you are contacted by the IRS in relation to a first-time home buyer tax credit. A recent Treasury audit of the IRS revealed that the IRS has needlessly worried thousands of taxpayers by sending out erroneous notices regarding the first-time home buyer tax credit.

In addition to erroneously informing 12,495 recipients of the 2008 tax credit that they did not need to make any payments, the IRS sent notices to 832 dead taxpayers demanding repayments. This is disturbing because deceased taxpayers are not legally required to repay the tax credit.

Over 27,700 taxpayers that were part of the 2009 first-time home buyer program were also not required to pay back the tax credit, but the IRS sent repayment demands to these taxpayers as well. It is unclear how many of these taxpayers contacted tax law attorneys to address the erroneous notices and how many taxpayers needlessly made unwarranted payments.

The IRS also failed to send out 18,220 repayment notices to taxpayers who were required to make payments.

There are many contributing factors in the IRS' failure to properly administer this tax credit program. The original version of the credit rules did not require much documentation of home purchases and a vendor that helped process the credits provided incomplete or inaccurate information in over a third of the processed cases. The IRS also seems unable to keep track of taxpayers' current addresses despite receiving yearly income returns from taxpayers.

Source: The Los Angeles Times, "More problems are found with home buyer tax credits," Nov. 6, 2011