IRS Warns: Don't Take $8,000 First Time Home Buyer Tax Credit If You're Not Eligible

Last Updated Aug 24, 2009 2:40 PM EDT

It had to happen: With $8,000 in free cash available to first-time home buyers (and those who haven't owned a home in the past three years), somebody had to take advantage of the situation.

The Internal Revenue Service announced this morning its first successful prosecution related to fraud involving the first-time homebuyer credit and warned taxpayers to beware of this type of scheme.

According to the IRS statement, last Thursday, a Jacksonville, Fla.-tax preparer, James Otto Price III. pled guilty to falsely claiming the first-time homebuyer credit on a client's federal tax return. Price faces the possibility of up to three years in jail, a fine of as much as $250,000, or both.

The IRS has to date executed seven search warrants and currently has 24 open criminal investigations in pursuit of potential instances of fraud involving the credit. How are they catching taxpayers who misuse the $8,000 first time home buyer tax credit? Apparently, the agency has a number of sophisticated computer screening tools to quickly identify returns that may contain fraudulent claims for the first-time homebuyer

credit.

"We will vigorously pursue anyone who falsely tries to claim this or any other tax credit or deduction," said Eileen Mayer. Chief, IRS Criminal Investigation said in her statement. "The penalties for tax fraud are steep. Taxpayers should be wary of anyone who promises to get them a big refund."

The IRS wants you to know that it doesn't matter when you prepare your own retun or pay someone to do it. You're the one who signs on the dotted line and is ultimately responsible for the accuracy of your federal income tax return. If you commit tax fraud - which is what you're doing when you sign a return that claims deductions or tax credits you're not entitled to - you may not only have to pay back taxes, but penalties and interest.

And, as Mr. Price as learned, you may also go to jail.

Read More:
  • Is the $8,000 First-Time Home Buyer Tax Credit Enough to Save the Housing Market?
  • $15,000 Home Buyer Tax Credit Gets A Boost

© 2009 CBS Interactive Inc. All Rights Reserved.

Source: www.cbsnews.com

Category: Credit

Similar articles: