Homebuyer tax credit fraud
Don't be a victim of first time homebuyer tax credit fraud. In the first case nationwide, the IRS has just indicted a tax preparer for fraud involving this credit.
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NEW YORK (CNNMoney.com) -- The IRS is on the lookout for taxpayers and tax preparers skirting eligibility rules when claiming the $8,000 tax credit. Here's what you need to know.
1. Get the story
The IRS just prosecuted a tax preparer in Jacksonville, Florida for falsely claiming the $8,000 first time homebuyer tax credit for a client's tax return. His clients either didn't buy a home or they didn't qualify for the credit.
And this isn't the only case. There are about 24 criminal investigations still pending. The agency says it has screening tools in place that can detect fraud.
The penalties can be steep if you're caught: up to three years jail time and/or up to $250,000 in fines.
Even if you use a tax preparer, YOU are ultimately responsible for the accuracy of the tax return. If there is an error, you may be responsible for paying back taxes, penalties and interest.
2. Protect yourself
Here's how you can protect yourself: first, use a reputable tax preparer. The sad truth is that anybody can put out a shingle and claim to be a tax preparer.
To be safe, you'll want to pick a certified public accountant or an enrolled agent (a professional licensed by the federal government). You can find out whether your CPA has had any recent disciplinary actions against him or her by going to the AICPA's Web site, where there is also info about picking a tax professional. Don't automatically trust a tax preparer who promises you a big refund.
Finally, make sure your refund comes directly to you.
3. Know the facts
The First-Time Homebuyer Credit provides up to $8,000 for first-time homebuyers.
And remember, it's a credit -- not a tax deduction.
To qualify you have to be a first-time homebuyer --so you cannot have owned a primary home in the past three years.
And you must close before December 1st of this year.
Go to federalhousingtaxcredit.com for more info.
-- CNN's Jen Haley contributed to this article.
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