Prisoners have defrauded taxpayers out of more than $9 million, report says.
In a report released Wednesday, a government investigator estimates that 1,295 inmates filed fraudulent first-time home-buyer claims totaling $9.1 million.
The report by Treasury Inspector General J. Russell George said 241 of the prisoners who received a check from the government are serving life sentences for serious crimes.
"This is very troubling," George told the Associated Press. "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 IRS responded to the report with this statement: "In swiftly making the First Time Homebuyer Credit immediately available to more than 2.6 million homebuyers, 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 will follow up on every instance of an improper prisoner payment and take swift and appropriate enforcement actions."
In total, more than 14,000 taxpayers wrongly received at least $26.7 million in tax credits, according to the report. Some received credits for homes purchased before the program started. In other cases, taxpayers used the same home to claim multiple credits. Investigators found one home, for example, that was used by 67 taxpayers to claim credits.
When the program first started, the IRS did not require taxpayers to provide proof that they did in fact purchase a new home, exacerbating the problems with fraud.
According to the IRS, more than 2.6 million first-time homebuyers filed for the credits of up to $8,000 before the program that expired at the end of April. In the latest program, for which Congress expanded the tax credit to existing homeowners, participants have to close by June 30, but there is an effort in Congress to extend the closing deadline to the end of September.
» AP: Investigator: Inmates get homebuyer tax credits
» ABC News: Inmates Defrauding Home-Buyer Tax Credit
» Businessweek: IRS Blocks 10% of First-Time Homebuyer Tax Credits After Audits