San Antonio's Rockstar Turned Realtor®: The IRS is cracking down on First Time Home Buyer Tax Credit Fraud.

Hi Matt:

This is good news.

It never fails....Someone always tries a way to take advantage.

Thanks for printing this. I have so many people reading my blog and contacting me about the credit. I tell them to seek legal advice. The rules are clear but there are always detail questions that I can't answer.

Here is one?

I have never owned a home, when my mother refinanced, she added me to the title. If I buy my first home do a qualify?

How would you have answered that one?

Anybody that wants to try and mess with the IRS is crazy. It is only a matter of time before they will catch up with you.

I wish I could say I am surprised but  I'm not. The 8000K number is thrown around a lot, but people must remember that there are first time buyers that may not qualify because of income limitations or may not receive the full 8000k because it is dependent on their tax liability. There is a nice tri-fold brochure that I make available at my listings where I think it makes sense. I think it was prepared by NAR.

Matt...

The same kinds of frauds are popping up wish "Cash for Clunkers." There are always those that will take advantage!

Thanks for the new report link. You wonder why someone would risk their freedom for an $8,000 credit. Guess they never worked on Wall Street

This doesn't surprise me in the least bit. No matter what the program there will always be people who try to take advantage of the system.

I guess we shouldn't be surprised that some people are trying to commit fraud. Do they really think they won't get caught?

Thank you for this useful information.  It's really sad that some people will ruin this for everyone!

Matt, it's my understanding that you must close BEFORE December 1st (in other words you must CLOSE by November 30th)...

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from: IRS.gov

Q. Which home purchases qualify for the first-time homebuyer credit?

A. Any home purchased as the taxpayer’s principal residence and located in the United States qualifies. You must buy the home after April 8, 2008, and before (emphasis is mine) Dec. 1, 2009, to qualify for the credit.

Fraud?  Surely not!  People wouldn't try to take advantage of something now would they...that's like saying we might live in a place where social problems are present. Go figure!

Why is there ALWAYS someone trying to take advantage.  Irritating!

I hope they thought it was worth it! Incredible.

Crime doesn't pay. You have to become a politician for that. ;->

Gee, I wish we could get cash for ex-husbands.

It never fails....someone will always try to beat the system.

LOL @ Susie. 

I never thought of this but am not surprised.  Look at all the medicare and medicaid fraud that goes on.

I think it comes as no surprise that people would try and circumvent the rules - it happens all the time.  What worries me is the people who helped committ the fraud; the agents who didn't know better, the CPAs who gave bad advice, the sales reps for home builders who told people they would receive a check from the IRS (regardless of their situation).  I've heard stories about them all.  We've even seen people still perpetuating the "used as downpayment" theory that caused the uproar when Secretary Donovan announced in at NAR Midyear.

Missy - I'd have to research that one, but my assumption would be that they wouldn't qualify.  Of course, if it was my case, I'd have them talk to a tax professional and make some calls to the IRS (I have a great source there).  I had a guy from Montana call me (because of my blog) and ask me "What about a mobile home (unattached)?"  I was curious and sought out an answer from my friend at the IRS.  Turns out they told me you could even use it on a houseboat!  I would have never expected that as a qualifying purchase.  I would base my assumption on the following from the IRS site:

Q. Does previously inheriting a home and living in the inherited home automatically disqualify an individual as a first-time homebuyer with respect to a different home that is purchased within the prescribed 2008 and 2009 time frames?  

A. Yes, an ownership interest in a prior principal residence would preclude the taxpayer from being considered a first-time homebuyer. As long as the taxpayer owned and used the prior home as his principal residence, then he is not a first-time homebuyer. There is no exception for taxpayers who did not buy their prior residences. (05/06/09)

Alfonse - I haven't liked the wording on that since I first read it.  Interpretations have seemed to vary and as of yet, I have not received a solid answer that I would trust 100%.  I have been advising all my clients to try and close before the end of November anyway (mid-Movember at the latest) so that they can avoid any mad dash or potential trouble because of a closing date which moves for reasons out of their control.

Matt, Fantastic subject! Since this program came about, I was very weary.  I am glad to hear that they are cracking down.

I don't like the wording either... (and have also recommended that my clients not wait 'till the last minute, just in case the closing gets delayed due to high demand!)...

but it appears that saying BY December 1... would INCLUDE December 1.   Stating BEFORE December 1, would exclude it.

Is there anything left in life that folks won't try to fraud?  There will always be those looking to find loop holes or game the systems others put into to place that are meant to help the majority.  We see it every day and on every level.  Great post Matt.  :-)

Matt,

I think you hit it on the head when you stated that they should talk to a CPA or tax att'y. This is like answering questions regarding whether or not a bank can go after you personally if you default on a mortgage. It's complicated. Leave it to people who do this stuff for a living.

People that love to get something for nothing will always have their hands out . . . and in -- everyone elses' pockets -- Carla

This is good to know. It is important to refer buyers with questions to a qualified professional who can answer their questions about the use of the credit before they end up either inadvertently or deliberately committing fraud.

I have been reading a lot about this lately too and I am glad - they need to be dilligent.

we knew it was bound to happen. people always think they can "beat the system". im glad the irs caught on as i knew they would.

Hi Matt~ There will always be those fools that think they can beat the system.  Why in the world would anyone even try to?  Especially of all people, The IRS!  You have got to be crazy to even think about it or consider it. 

...and right they should be cracking down on unscrupulous buyers.

Patricia

I am not surprised that there is some fraud surrounding this giveaway of money.

But then when one looks at the politicians and sees the fraud being committed it is not surprising that others would think they should get away with it. It's sad all around.

Matt, Great information. Thanks for keeping us abreast. It seems that no mattter the situation, someone has to come in and adjust it to their benefit. Terrible!

M-Stig ! Very good info for those sneaksters who may be planning to find a way to take advantage of the credit without legally being entitled to it !

Here's an idea - FOLLOW THE RULES ! ... It's still there for the law abiding FTBs - many of my buyers already have their checks who bought their first homes this year.

Good info.

Cheers matt !

Sheldon :o)

Thanks Matt, having committed fraud is one thing and some will always try. Making a mistake in a complicated situation is another thing.  We must always advise, as you say, our clients to seek expert help in preparing for their refund. This is an excellent reminder for us agents.

Thanks for the clarification.  I had no idea it could be used for a mobile home.

Matt - always SOMEONE trying to get something for nothing! Very good info to pass along...let's hope some of those sneaky peeps come across your post in their "research".

Good!

I hope they fine those that are attempting to manipulate the tax credit that was put out for good reasons.

Fraud always screws everything up!

Fraud is why we are in this mess of short sales and foreclosures.

I've also seen a lot of people trying to access the money before they should & have been telling lots of buyers they can't!!

I liked your statement of advice regarding tax professionals "qualified AND trusted".  as the IRS release noted beware of tax preparers promising large refunds.  Thanks for the info.

Matt, Thanks, there is always somebody watching somebody who is watching????  Yet someone keeps trying to fool Uncle Sam.

Thanks for the information.  I have explained the rules to my clients and have encouraged anyone considering taking this credit to talk to a tax professional to get it right.  Don't mess with the IRS. 

For the most part it s cut and dry.  I do have a couple questions on it myself...but have been told to contact a CPA.

Dude, awesome timing! 

I am blogging tomorrow on a TURN DOWN i had to do...on someone trying to defraud us!

It sucks! 800 score, and USDA loan...PERFECT BLOG TIMING!!!!  Nice job!  I will be linking to it for sure!

Thanks!

Darin

Great to remind everyone that the IRS is still watching. And why would anyone be surprised that there is fraud out there?

I called it "fraud" quite awhile ago.  The fact is you don't mess with the government's money (well, your tax money) and not have it labeled fraud.  I applaud the IRS in it's efforst and I hope they bring in more people who in my opinion stole our money.

Darin - I look forward to reading the story behind that.  Good to hear that you caught on and stopped your involvement.

I'm not shocked.  Most people are honest and want to do the right thing, but I have had several people quiz me to see if I could find a way around the rules... 

Human behavior never changes, if there is an angle to be had, leave it to some to find and exploit it.  Sad commentary, but thanks for the info.  Very useful to know.

Nothing surprises me anymore, well actually thats not true, I'm shocked almost everyday!

We as agents are not privy to a buyers tax situation, to say you are getting $8,000 from Uncle Sam, asking for trouble.

I am disappointed, but not surprised to find that some will commit fraud.  Hopefully, most of these folks have simply misunderstood the regulations.  Good advice to seek a tax professional before claiming the credit.  The IRS has some nasty penalties.

The tax credit has been a moving target since it was announced.  I prefer to direct FTHBs to reputable information online, or a knowledgeable lender in Texas.  Interesting info that you can use it for a houseboat! 

Thanks for this Post Matt.  I, like many others obviously saw this coming.  The question had been asked me many times and I have been very firm with my answer.  I use the "F" word in my conversation hoping they understood the potentially serious ramifications of a wrong decision.  I am actually amazed that I hear gasps from others in the industry when they find out I discuss the ramifications of Fraud with my potential clients.  That's another story in itself.

I am not surprised. It seems there is always someone wanting to break, or bend these rules; however, I certainly would think twice, or 3 or 4 times, before messing with the IRS!!!  What are these people thinking???

www.charlottelakewyliehomes.com

I take it you are referring to will full fraud in your post.  Not people who think they qualify, but did not read the fine print.

Fraud...? where? how?... kidding of course, but the mess we are in had its roots in some kind of fraud perpetrated some time ago by trusted people. You will think that your tax preparer would know best not to go that rout. The part about, no matter who prepares your taxes... YOU the taxpayer are responsible should be taken into consideration when someone wants to help you get a better refund.

Antonio

Matt - you've inspired me to write a blog explaining some of the finer nuances of the $8,000 first time homebuyer tax credit. It's a shame to hear people are actually committing fraud though. Why am I surprised?

Matt,

Very interesting! I'm always amazed that certain people can think up deviant ways to CHEAT!! How do they do this? Was I asleep when the cheat GENE was being distributed?  I still haven't figured out how you can claim this on a tax return and not have it red-flagged! Can you tell me?

Kathy Opatka

It is a shame when people look for angles to take advantage of the system.  Good post to get the word out that people are doing things like this.  I believe that anyone who commits fraud will pay for it one way or the other... it always is just a matter of time.

Everybody has questions and hopes to use the credit.  A good tax professional has the answers.

I don't think anyone questions the fact that fraud will always exist no matter the field, industry, or job.  It's out there.  I do find it shameful that so many people get caught up in it.  Mortgage fraud, tax credit fraud, home buyer fraud - our industry gets hit with a lot of it and I hate to see it become associated with our industry.  Too many people out there aren't out to defraud anyone, but the one's who do make the headlines and give us all a stigma that we have to work harder every day to shake.

Christopher and Stephanie - They will pay one way or another, I do believe that.

Thanks for all the comments everyone!

I used to have a boss that often said that people that commit fraud are usually smart enough to make more honestly...

Lane - I think your boss was right.  All the work that goes into a con or fraud - it's logic, critical thinking, outthinking your "opponent" - there's so much there that if controlled and focused could actually result in amazing business skills.

There's always going to be fraudsters...just sucks that half of them if not more are elected officials....

greetings-- just attended a seminar on the 1st time credit -- in Savannah, ga.  done by the State  of Ga. Assoc. of Realtors.-.  There can always be fraud-- but has anyone looked at the possible discrim. in the issue of married couples where one has owned a property  but other hasn't and they don't qualify  and the fact that 2 unmarried people can qualify -- even if one has owned a property before-- As I understand what has been proposed in the tax law.-- Would like to see some clarification on that !!   

 There was also a discussion -- re: married couple getting divorced-- in order for at least one of them to qualify --even if at a lessor amt.---if the home was only in one persons name.

-As FAR  as  I am concerned -- they should have done something for anyone wanting to buy -even if not 1st time buyer & - even if it wasn't $8000-- I think that would have done more to move the housing mkt. vs. just 1st time buyers (the hardest group to get qualified)

look forward to any thoughts/comments---and i also concur --get with a good accountant to check out what can and can not be done-- with this tax credit.---In additon to the federal tax credit there is also an additional credit for Ga. but it is so complex -- you def. need to ck w/ an accountant