Prisoners cashed in on homebuyer tax credit

During many of my tax season interviews, I warned taxpayers claiming the first-time homebuyer credit to beware of IRS audits—even back then it was common knowledge that the IRS would be paying extra close attention to every tax return claiming the first-time home buyer credit. Of the fraudulent tax credit request found by the IRS were made by state and federal prisoners—and the numbers are astounding!

According to a Treasury Department report released Wednesday reported by CNNMoney.com, the inmates defrauded the government of $9.1 million in tax credits reserved for first-time homebuyers.

4,608 state and federal inmates tried to file for the first-time home buyer tax credit. 1,295 of them actually received the fraudulent refunds. 241 of those inmates were serving life sentences!
The Treasury’s inspector general also found that thousands of people filed multiple claims or made claims outside the allotted time period. In all, more than $28 million was given out improperly.

The problem was particularly bad in Florida: 61% of the “lifers” who received credits were incarcerated in the Sunshine State.

"It is possible for an inmate to buy a house while in prison," said Jo Ellyn Rackleff, spokeswoman for the Florida Department of Corrections. "…Many of the inmates have families with children who live outside." She said that one of the reasons why Florida inmates feature prominently in the Treasury report is because the Florida prison system is transparent in providing inmate information to the IRS.

However, it wasn’t just prisoners filing faulty homebuyer credit claims, the report found that the IRS awarded $17.6 million to 2,555 filers who had bought their homes before the credit program kicked in. The inspector general also identified 206 filers who claimed the credit for multiple addresses; these fraudulent filers were awarded a total of $1.4 million.

The report also found that improper filers included 34 employees of the IRS! This is in addition to 53 IRS employees that the inspector general identified last year as improper filers.
More according to CNNMoney: the report included a response from the IRS, which highlighted the huge scope of the program, with $12.6 billion in claims awarded to 1.8 million participants. The IRS said it had ramped up efforts to crack down on criminal activity and would continue to review claims and "recapture" pay-outs determined to be fraudulent.

The IRS claims to be working on finding the identities of the agency employees who are at fault for questionable or fraudulent claims.

Read the full article here:

Jury Indicts IRS Officer in Mortgage Refinance Scheme

According to Web CPA a federal grand jury indicted Mark Claybrooks on charges of fraud last week. Claybrooks is an IRS revenue officer who has been accused of his position to pressure taxpayers who were in debt with the IRS to refinance their mortgages with a company he was associated with.

Mark Claybrooks, 41, was charged with three counts of “acts affecting a personal financial interest” and two counts of fraud for using IRS computers without authorization. He allegedly contacted overdue taxpayers and tried to steer them toward Faith Mortgage Group in Antioch, Calif., where he worked from 2003 to 2005. He received over $20,000 from the mortgage company in exchange for his referrals.

The Contra Costa Times also ran a story about the development and notes that Claybrooks could not be reached for comment but that he is scheduled to make an initial appearance 10 a.m. this Thursday in U.S. District Court. They also found that the phone number for Faith Mortgage in Antioch had been disconnected.