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Home-related tax audits also increase

By Kay Bell · Bankrate.com
Monday, May 24, 2010
Posted: 2 pm ET

The good news, at least for the real estate sector, is that home resales were up in April. The bad news is that the IRS audited more tax returns filed by homebuyers.

The reason in both cases is the first-time homebuyer credit.

Because of widespread fraud in claiming the tax credit when it first appeared, when lawmakers extended the tax break into 2010 several verification requirements were added. A lot of taxpayers, however, didn't submit the proper documentation, such as a signed settlement sheet.

That's forced the IRS to pull those returns and get back in touch, usually via mail, with the taxpayer.  Some reports put the number of flagged homeowner credit returns at more than a quarter million.

This process is technically known as a correspondence audit.  If you get a letter from the IRS asking for more information, provide it. That's the only way the IRS will get your return moving through the system again and get your credit refund to you.

Are you still waiting for your refund? Find out what's the problem with the IRS's online refund tracking tool.

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