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.
