1,300 inmates get $9M tax break

June 24, 2010 at 12:00a.m.

Associated Press

WASHINGTON

Living in prison didn’t stop nearly 1,300 inmates from cashing in on a popular tax break for first-time homebuyers, a government investigator reported Wednesday. Their take: more than $9 million.

In all, more than 14,100 tax filers wrongly received at least $26.7 million in tax credits meant to boost the nation’s slumping housing markets, said the report by J. Russell George, the Treasury Department’s inspector general for tax administration.

A common scam had multiple taxpayers using the sale of a single home, with each claiming the credit. One home was used by 67 tax filers, the report said. In other cases, taxpayers got the credit for sales that happened before the tax break started.

The Internal Revenue Service says it is taking steps to get the money back. The agency noted that more than 2.6 million taxpayers claimed the tax credit through April — claiming $18.7 billion in credits — with only a tiny fraction going to scofflaws.

The tax credit “has played a critical role in stabilizing the hard-hit housing market,” Assistant Treasury Secretary Michael Mundaca said in a statement.

Nevertheless, 1,295 prison inmates were able to get $9.1 million in credits, including 241 serving life sentences, the IG’s report said. None of the inmates filed joint returns, so the claims could not have been for purchases by spouses.

Investigators also found 87 IRS employees who may have improperly claimed the credit.