Prevalence of Cheating Should Not Affect Extension Of Home Buyer Tax Credit

Recent reports of taxpayers cheating on their tax returns by claiming the Home Buyer Tax Credit should not adversely impact extension of the program.

According to an October 22, 2009 report appearing in Marketwatch, The Treasury Inspector General for Tax Administration (TIGTA), disclosed that there were approximately 90,000  erroneous returns out of 1.2 million processed. That means that about 7.5% of the returns were erroneous.

Some of the problem may be the  weak and confusing language in the law. TIGTA said that 600 filers were under 18, and 19,350 hadn’t yet purchased their homes.

Another 70,000, or about 78% of the possible erroneous returns, already owned a home. But many of these filers may actually be correct, because the law didn’t prohibit someone from owning another home within the previous 3 years, it just prohibited them from owning a “Principal Residence.” See the Marketwatch report in full: http://www.marketwatch.com/story/fraud-found-in-home-buyer-tax-credit-claims-2009-10-22

 Also, just because there were “Erroneous” returns, that does not mean the program was bad. It was actually quite effective in eliminating a lot of excess housing inventory so that housing markets can recover and begin contributing to the economic recovery.

AccountingWEB.com has a report on the IRS Oversight Board’s 2008 Taxpayer Attitude Survey. According to the survey, 89% of American taxpayers think it is “Not at all” acceptable to cheat on their tax returns. However, 6% think it is acceptable to cheat “A little here and there.” And 3% thint it  is acceptable to cheat “As much as possible.”

Given these attitudes, the results on the First-Time Home buyers Tax Credit seem to be pretty much in the same ballpark. And you wouldn’t eliminate the income tax just because 3% cheat as much as possible, would you?

To view thwe Accounting WEB article, see http://www.accountingweb.com/item/107041

President Obama

President Obama and many members of congress want this popular and effective program extended and expanded to cover all buyers, not just first-time buyers. That change alone would eliminate 78% of the “Erroneous returns.”

We think it gets extended and expanded because the country needs the jobs it will create, but probably not before the November 30, 2009 expiration date.