IRS working on strategy to recoup homebuyer tax credit

About 60,000 people bought their homes last year but the IRS recorded the purchase date as 2008 or did not include a year for the buyer in their records, which might prompt the IRS to send notices to taxpayers who don’t have to repay the credit, the report said. 

More than 950,000 taxpayers will be required to repay up to $7,500 because they bought their homes in 2008. 

Approximately 1.8 million taxpayers claimed a total of almost $12.5 billion in tax credits in 2009. 

In total, more than 2.6 million taxpayers have claimed $19 billion in first-time homebuyer tax breaks since it was enacted in July 2008.

The tax credit expired April 30. 

Initially the credit was structured as an interest-free loan, requiring homebuyers to pay back up to $7,500 over 15 years. 

Congress then reworked the program, eliminating the repayment requirement for homes purchased after 2008. The credit must be repaid if homeowners sell their primary residence within 36 months.

“Going forward, it is imperative that the IRS ensure the comprehensive strategy being developed identifies taxpayers who erroneously or inappropriately received the Credit and are required to repay it,” said J. Russell George, the Treasury Inspector General for Tax Administration, in the report.

The report also found that $10.1 million in tax credits were claimed by 1,326 taxpayers who were identified as deceased by the Social Security Administration. The IRS did not allow 528 of those individuals to receive more than $4 million they claimed for the credit, the report said.