An Example of Fraud Born of Big, Invasive Government

Inmates get $9 million in homebuyer tax credits
More than 14,000 people wrongly benefited from the government’s incentive.
Posted by Elizabeth Strott on MSN June 23, 2010

The government’s homebuyer tax credit was a boon . . . to about 1,300 prison inmates.

A report by the Treasury Department showed that 1,295 inmates filed fraudulent claims totaling $9.1 million, The Associated Press reported. More than 200 of the inmates were serving life sentences.

All told, more than 14,100 taxpayers wrongly received tax credits. The report estimates that at least $26.7 million in tax credits went to people who did not qualify.

Congress initiated the first-time-homebuyer tax credit in 2008 to help boost the slumping housing market. It expired on April 30, 2010.

Some buyers got the credit for homes they purchased before the tax break went into effect, while others used a single home to claim more than one credit. One home was used by 67 taxpayers to claim credits, according to the report.

“This is very troubling,” J. Russell George, the Treasury Department’s inspector general for tax administration, told AP. “Congress created and modified the homebuyer credit to stimulate the economy and help taxpayers achieve the American dream, not to line the pockets of wrongdoers.”

The Treasury’s report comes as new-home sales tumbled to a record low because of the tax credit’s expiration.

The Internal Revenue Service said it’s taking steps to fix the snafu. “A very small number of payments were made to prisoners incorrectly, which the IRS is now taking all steps to recapture and to prevent going forward,” the IRS said in a statement. “The IRS will follow up on every instance of an improper prisoner payment and take swift and appropriate enforcement actions.”

The credit has helped more than 2.6 million first-time homebuyers, according to the IRS.