Homebuyer tax credit leading to audits

April 16, 2010 at 12:00a.m.

Associated Press

WASHINGTON

Here’s a good way to get audited by the Internal Revenue Service this year: Claim the new homebuyer tax credit.

About a fifth of all IRS examinations done by mail in the past six months were for people claiming the credit, National Taxpayer Advocate Nina E. Olson told a congressional committee Thursday — the filing deadline for individual tax returns.

The audits mean big delays in getting refunds — as much as five months — just as Congress and the Obama administration hope that tax refunds will spur economic growth and the homebuyer tax credit will improve the housing market.

“The first-time homebuyer credit is a program that I personally would not have run through the tax code,” Olson, an independent watchdog within the IRS, said in an interview. “The taxpayers need the money at the closing, and by definition, the tax code is a one-time-a-year filing event.

“Most people don’t close on their houses on April 15,” she said.

Congress passed an $8,000 credit for first-time homebuyers early last year to help jump-start housing markets as part of the massive economic recovery package. The program was so popular, Congress extended and expanded the program in November, opening it up to longtime homeowners who buy new homes.

Buyers who have owned their current homes at least five years are eligible, subject to income limits, for tax credits of up to $6,500. First-time homebuyers — or people who haven’t owned homes in the previous three years — can get up to $8,000. To qualify, buyers have to sign purchase agreements before May 1 and close before July 1.