Audit: IRS dropped the ball on oversight of homebuyer credit

Julianne Breitbeil, an IRS spokeswoman, said Wednesday that the agency was grateful that the inspector general recognized the measures it took to process claims accurately, and that the IRS had moved aggressively when there were signs of questionable claims.

In its response included with the report, the IRS also maintained that the credit — which was enacted in 2008, then extended and expanded twice in 2009 — “presented significant administrative challenges.”

“The scope and magnitude of the credits required coordination across many business units and represented a fundamental shift in our traditional approach to return processing and compliance enforcement,” Peggy Bogadi, commissioner of the agency’s wage and investment division, wrote to the inspector general.

The new report came after a 2009 audit found that insufficient IRS oversight allowed tens of millions of dollars in potentially inappropriate claims. The inspector general also said that IRS acted on recommendations made during the audit process.

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According to the report, the IRS closed almost 88 percent of those roughly 495,000 examinations before sending out a refund.

"This avoids improper refunds and the associated difficulty in trying to collect the amount improperly refunded," the report said.

But the audit also found that more than 1.1 million claims had been processed before the IRS implemented the filters needed to set up examinations of credit claims.

After following up, the agency found that around a quarter million of those claims were suspect, but decided to audit only the almost 70,000 it found most questionable. 

This post was updated at 4:15 p.m.