Fraud in homebuyer tax credit program could scuttle revival efforts

House lawmakers are focused on fraud in the homebuyer tax credit program, raising a new hurdle for efforts by lobbyists and allies in Congress to extend the popular program.

The $8,000 tax credit for first-time homebuyers, meant to bolster the housing market, is set to expire Dec. 1, and lobbyists for Realtors, homebuilders and mortgage bankers are pressing lawmakers to extend or expand the program.

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Senate Majority Leader Harry Reid (D-Nev.), Sen. Chris Dodd (D-Conn.) and Sen. Johnny Isakson (R-Ga.) are strong supporters of an extension or expansion, but they and others in the House and Senate have yet to settle on a single way of continuing the program.

On Thursday, however, lawmakers on the House Ways and Means Committee zeroed in on fraud in the program. According to a new report from the Treasury inspector general for tax administration, the program lacked important rules and requirements in its early implementation that have contributed to potential fraud.

"The [IRS] did not require taxpayers to provide documentation to substantiate the purchase of a home," according to the report.

The report found more than 70,000 taxpayers whose returns were processed by the government prior to new rules and filters. Another nearly 50,000 taxpayers did not claim the full amount that they were eligible for under the program.

“We will hear today that taxpayers claiming the credit include those who already owned a home, who had not yet bought a home, and who are children — some as young as 4 years old," said Rep. John Lewis (D-Ga.), chairman of the House panel's oversight subcommittee. "There are possibly hundreds of millions of dollars that have been paid to taxpayers who are not entitled to the credit. We want to, and we need to, stop this fraud and abuse."