Thousands May Incorrectly Be Using Stimulus Tax Breaks

According to the NY Times, a new watchdog report has emerged showing that thousands of Americans may have incorrectly claimed tax breaks enacted by the recent stimulus package. Over 73,000 taxpayers reportedly took advantage of the first-time homebuyers credit, resulting in over $500 million in lost federal revenue.

That finding was one part of a report by the inspector general for tax administration that said the Internal Revenue Service does not know whether the majority of the $312 billion in tax breaks available through the American Recovery and Reinvestment Act are being claimed legitimately.

The report said that for businesses and individual taxpayers claiming tax relief under the 2009 act, “the IRS is unable to verify eligibility for the majority of Recovery Act benefits at the time a tax return is processed.”

The finding is likely to stoke debate in Congress and among analysts over the merits of the package, a centerpiece of the Obama administration’s economic recovery plan.

The act, passed by Congress in February as a means of stimulating the ailing economy, provides $252 billion in tax breaks to individuals and $74 billion to businesses. The overall act, of which tax breaks are the showpiece component, was designed to pump $787 billion into the economy. Tax benefits for individuals include first-time homebuyer credits, residential energy improvements, and the “Making Work Pay” credit designed to reduce tax bills for working families. For businesses, they include credits for renewable energy investments, construction and accelerated depreciation and loss carrybacks, among other things.

The report said that as of July 25, 73,799 taxpayers had incorrectly claimed $504 million in credits in the program for first-time home buyers.

More Than 350,000 Homeowners Aided by Federal Mortgage Program

According to reports released this morning, federal mortgage programs have aided a surprisingly large amount of homeowners in the country. So far, over 300,000 families have been helped by the program, which is getting close to President Obama’s goal of half a million. Check out the following clip from a WashingtonPost.com article on the topic.

Lenders have helped more than 350,000 homeowners reduce their monthly mortgage payments through a federal foreclosure prevention program, according to government data released Wednesday morning.

That brings the industry closer to meeting the Obama administration's goal of modifying the loans of at least 500,000 borrowers by Nov. 1. But the data illustrate that some large lenders continue to struggle to address the backlog of homeowners in need of help.

Under the federal program, known as Making Home Affordable, lenders are paid to lower the payments of troubled borrowers. Consumer advocates and homeowners have complained that it's still difficult to reach lenders for help and confusion remains about how the program works.

Since the initiative was launched in March, 12 percent of delinquent borrowers have received help under the program, according to the Treasury data. That is up from less than 10 percent last month.

Retail sales unexpectedly dip 0.1 percent in July

The U.S. Commerce Department made an unwelcome announcement today stating that despite the prediction of an increase, retail sales in the U.S. actually dropped by 0.1% last month. This number would have been much worse if it were not for auto sales, which actually rose by 2.4% due to the Cash for Clunkers program. Check out the following story on this unexpected revelation courtesy of the Associated Press.

The Commerce Department said Thursday that retail sales fell 0.1 percent last month. Economists had expected a gain of 0.7 percent.

While autos, helped by the start of the Cash for Clunkers program, showed a 2.4 percent jump -- the biggest in six months -- there was widespread weakness elsewhere. Gasoline stations, department stores, electronics outlets and furniture stores all reported declines.

The July dip was the first setback following two months of modest sales gains. Excluding autos, sales fell 0.6 percent, worse than the 0.1 percent rise economists had forecast.

Gas station sales plunged 2.1 percent, due more to falling pump prices than weak demand. Excluding the drop at gas stations, retail sales would have posted a modest 0.1 percent increase.

Department store sales fell 1.6 percent and the broader category of general merchandise stores, which includes big chains such as Wal-Mart Stores Inc. and Target Corp., posted a decline of 0.8 percent.