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Senate extends homebuyer tax credit

By Holden Lewis · Bankrate.com
Thursday, July 1, 2010
Posted: 8 am ET

The Senate extended the homebuyer tax credit Wednesday night, and the measure should hit the president's desk soon. The House had extended the tax credit earlier in the week.

This means that homebuyers have until Sept. 30 to close their transactions and take possession of their houses. The deadline had been June 30.

And now for a moment of cynicism.

No doubt there are a few thousand people who genuinely could not close their purchases by June 30, despite having signed purchase contracts by the April 30 deadline. But I suspect that the number of honest people who are helped by this three-month deadline extension will be dwarfed by the number of tax cheats who will take advantage of it.

The National Association of Realtors estimated that up to 180,000 buyers would have been unfairly excluded from the tax credit, had the deadline not been extended to Sept. 30. "It would be a tragedy for them not to be able to complete the purchase in time to claim the credit," the Realtors' president said.

That brings up a few questions. Is it truly a tragedy when someone is prevented from claiming a $6,500 or $8,000 tax credit? Or is that an overstatement? And if it's an overstatement, what should we make of the Realtors' estimate of 180,000 buyers who are affected? Might that be an overestimation? Might we even characterize it as a gross exaggeration?

My answers to the above questions are no, yes, we shouldn't believe it, yes, and yes.

Under a post yesterday, a commenter wrote, "Still waiting for my tax credit, too. Two months after submitting 2009 return, IRS requested addtional home purchase documentation."

I hope the reader would agree with me that the delay is worthwhile if it's a sign that the IRS is cracking down on cheaters.

The IRS's inspector general estimates that about 1,300 prisoners have fraudulently collected homebuyer tax credits worth $9.1 million. Among the prisoners who scammed the IRS were 241 serving life sentences.

Prisoners aren't the only problem. The IRS watchdog also found many instances in which multiple people fraudulently claimed the homebuyer tax credit on the same house. The inspector general found five houses -- five -- for which 256 people had claimed the tax credit.

Then there are the people who lie to the IRS about the purchase dates for their houses. The inspector general already has found thousands of people claimed the credit even though they didn't buy their houses during the relevant period. How many thousands more have gone undetected?

The three-month deadline extension will allow more homebuyers to predate their purchase contracts so they can claim the credit. And it will help a few honest people, too.

But, please. Don't complain that it's taking the IRS too long to send your check. Such griping is unseemly to those of us who bought our houses long ago, and didn't get $8,000 gifts courtesy of our fellow taxpayers. Spend my money well. Don't forget to tip.

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