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


Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed4.24%4.20%
15 yr fixed3.30%3.18%
5/1 ARM3.42%3.36%
30 yr refi4.22%4.16%
15 yr refi3.29%3.17%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 17,031.14 43.63 0.26%
Nasdaq 4,518.90 -48.70 -1.07%
S&P 500 1,984.13 -1.41 -0.07%
Treasuries 2.59 -0.02 -0.88%
Data as of 1:42am ET
Company Price Change % Change
Bank of America Corp... 16.74 -0.05 -0.30%
Yahoo! Inc 42.55 1.29 3.13%
Apple Inc 101.63 0.20 0.20%
Facebook Inc 74.58 -3.34 -4.29%
Microsoft Corp 46.24 -0.46 -0.97%
Data as of Sep 15

Sections

The Radisson hotel chain has suspended its sponsorship of the Minnesota Vikings in the wake of child abuse allegations against Adrian Peterson. More

First official government report shows big decrease in uninsured after Obamacare kicks in and more Americans gain health insurance. More

AT&T has developed a software platform that can transcribe and offer near-real-time analysis on customer service calls. More

Atlanta has the country's highest level of income inequality, but civic entrepreneurs can close the gap. Here's how. More

What do all 401K millionaires have in common? Christine Romans explains what it takes to be a member of the club. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.