Friday, July 31
Posted 11 a.m. EDT
There are anecdotal reports that the housing market is, in some areas, starting to recover.
The new -- and improved, thanks to the 2009 stimulus bill -- first-time homebuyer credit is one of the reasons cited for the hopeful real estate stirrings.
But as often happens with taxes, every silver lining has a cloud. Some folks, it seems, are illegally claiming the first-time homebuyer credit. And some tax professionals are helping them.
One such preparer just got nabbed.
James Otto Price III of Jacksonville, Fla., pled guilty this week to falsely claiming the first-time homebuyer credit on a client's federal tax return. He now awaits sentencing, which could get him up to three years in jail, a fine of as much as $250,000 or both.
Price's plea was the IRS's first successful prosecution related to first-time homebuyer credit fraud. It probably won't be the last.
The agency has 24 open criminal investigations into similar homebuyer credit fraud cases. Make sure you aren't added to that investigation list.
If you plan to claim the credit, follow all the new credit rules.
And if your tax preparer says it's OK for you to take the tax break, make sure he or she clearly explains just exactly how you qualify. I know it's hard to believe, but some preparers actually fabricate deductions and credits for clients and then put a portion of those fake tax savings in their own pockets. Look out for such a possibility if your tax pro's fee is based on your refund amount.
Remember, too, that even when someone else fills out your tax form, when you sign it, you are responsible for everything on it.
If you truly are a victim, you won't end up facing criminal charges, but you will still owe any taxes that you should have properly paid in the first place, along with and penalties and interest.