Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Scamming the system for $8,000 tax credits

By Les Christie, staff writer


NEW YORK (CNNMoney.com) -- Some homebuyers are angling to claim the $8,000 tax credit even though they missed the deadline.

To claim the credit, buyers had to sign contracts by April 30 and close the sales by June 30. But real estate agents say some buyers are demanding quick closing dates to meet the June 30 deadline, even though they failed to meet the April 30 deadline.

And because the IRS doesn't require paperwork specifically proving the contract date, they might get away with it.

"We're getting an enormous number of contracts with June 30 closing dates even though the parties just came to terms, like yesterday," according to Glenn Kelman, CEO of real estate broker Redfin. "The clients won't explain why they need a June 30 closing but they still insist on it."

But claiming the credit does require more than sending in your taxes and asking for the money. Buyers have to fill out form 5405, which specifically asks them if they were in contract by April 30. They also have to attach a copy of their settlement statement, which they receive at closing.

"People do have to submit documentation," said an IRS spokesman.

But, the settlement statement does include the contract date -- just the "date of purchase," which is the closing date. So, buyers are backdating their tax forms in hopes of not getting caught.

"It's just illegal," said Tara-Nicholle Nelson, a real estate broker, attorney and an accredited buyer's agent and a spokeswoman for Trulia, the real estate website. "But if everyone in the transaction is colluding, it would be difficult to catch."

An IRS audit, however, might uncover bank records of down payments, dated emails discussing the deals and faxed documents with date and time stamps.

The IRS is keeping mum about how much it knows about this kind of fraud, except to say they have vigorous manual and systemic checks to detect potentially false claims. Anyone who submits fraudulent documentation to support any entries on their tax returns are filing false returns and risk possible civil or criminal penalties.

And even the Treasury Inspector General is keeping quiet, despite releasing a report on Tuesday about other abuses of the homebuyer tax credit - including prisoners claiming the benefits.

"Even if we did know about it, we probably wouldn't comment," an IG spokesman said. To top of page


Overnight Avg Rate Latest Change Last Week
30 yr fixed3.92%3.81%
15 yr fixed3.15%3.13%
5/1 ARM3.54%3.53%
30 yr refi3.80%3.80%
15 yr refi3.14%3.12%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 24,508.66 -76.77 -0.31%
Nasdaq 6,856.53 -19.27 -0.28%
S&P 500 2,652.01 -10.84 -0.41%
Treasuries 2.35 -0.00 -0.13%
Data as of 11:53pm ET
Company Price Change % Change
Bank of America Corp... 28.73 -0.11 -0.38%
Twenty-First Century... 34.88 2.13 6.50%
General Electric Co 17.64 -0.12 -0.68%
Ford Motor Co 12.46 -0.17 -1.35%
AT&T Inc 37.74 -0.30 -0.79%
Data as of 4:04pm ET

Sections

More than 5% of DACA recipients have started their own businesses since enrolling the program, according to a recent survey. More

Residents of Beattyville, Kentucky, voted overwhelmingly for Donald Trump a year ago because he promised them jobs and renewed prosperity. One year later, not much has changed. But few people here are blaming him for that. More

The FCC will vote on whether to repeal net neutrality comes amid mounting protests from tech companies, consumer advocacy groups and even some Republicans in Congress. More