I know this isn’t multifamily related per se, but it’s so asinine that I had to comment on it.

Apparently, a breakdown or loophole in tax fraud controls seem to have created a bit of opportunity for criminals to cash in on the federal homebuyer tax credit. And I’m not just talking about those engaged in white-collar criminal activity like cheating on one’s taxes. I’m taking about criminals whose current residences are already paid for with tax dollars—our nation’s prison system.

In a June 17 audit report issued by the Treasury inspector general for tax administration, it was found that an estimated minimum 1,295 prison inmates, 241 of whom were serving life sentences, applied for—and received—$9.1 million in homebuyer tax credits. A cool $1.7 million of those funds went to those inmates serving life terms.

You can read the entire report by clicking here. But here are some interesting takeaways:

• The audit team identified 4,608 prisoners listed on the IRS 2009 who tried to claim the homebuyer tax credit, even though they were in jail when the home was supposedly purchased.
• From a “judgmental sample” of those filings the auditors considered to be the “most egregious.” These included “715 prisoners whose filing statuses were something other than joint and who were serving life sentences during the period their home would had to have been purchased. We found 241 of these prisoners received Homebuyer Credits totaling more than $1.7 million.”
• A previous report has found that most of these fraudulent refunds were to prisoners in Florida; 61% of those were given to inmates who were in for life.

 

So what, a return address from Inmate #2468753, State Penitentiary of Florida wasn’t enough to raise the eyebrows of some file processors? Okay, you committed a crime and whoops, you can’t vote, but hey, sure, here’s a check for $8,000!

More from the report:

• The IRS has taken steps to strengthen controls and help prevent inappropriate Credits from being issued, including putting in filters to identify questionable claims before they’re processed. But more controls are needed, and fraudulent and questionable claims processed prior to the implementation of these controls will need follow-up action.
• In addition to the $9.1 million in fraudulent complaints, “multiple claims for the same home were allowed. And claims totaling an estimated $17.6 million were allowed for homes purchased prior to the dates allowed by the law.”
• “Many questionable claims for the Credit made on amended tax returns were not appropriately sent to the IRS’ Examination function for scrutiny…Further, TIGTA found additional IRS employees that had made questionable claims for the credit.”

 

It’s debatable, depending who you speak with, that the tax credit—$8,000 for first-time buyers and $6,500 to current owners buying new, permanent homes—gave a boost to the home sales market. Regardless of whether it worked, I’m sure its architects didn’t have this in mind. It could be argued that it helped to raise the federal deficit, especially given all the fraud that’s surfaced (and has yet to).

Yeah…so, I’m going to put this under the “WTF, Government?!” file.

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