WASHINGTON - Here's a good way to get audited by the Internal Revenue Service this year: claim the new homebuyer tax credit.
About a fifth of all IRS examinations done by mail in the past six months were for people claiming the credit, National Taxpayer Advocate Nina E. Olson told a congressional committee yesterday - the filing deadline for individual tax returns.
The audits mean big delays in getting refunds - as much as five months - just as Congress and the Obama administration hope that tax refunds will spur economic growth and the homebuyer tax credit will improve the housing market.
"The first-time homebuyer credit is a program that I personally would not have run through the tax code," Olson, an independent watchdog within the IRS, said in an interview. "The taxpayers need the money at the closing, and by definition, the tax code is a one time a year filing event.
"Most people don't close on their houses on April 15," she said.
Congress passed an $8,000 credit for first-time homebuyers early last year to help jump-start housing markets as part of the massive economic recovery package. The program was so popular, Congress extended and expanded the program in November, opening it up to longtime homeowners who buy new homes.
Buyers who have owned their current homes at least five years are eligible, subject to income limits, for tax credits of up to $6,500. To help prevent fraud, homebuyers are required to include a settlement statement, also known as a HUD statement, with their tax returns. Longtime homeowners have to provide proof they have owned their current home for five years.
The documentation requirements mean that taxpayers applying for the credit cannot file their returns electronically, which also delays refunds.