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The Internal Revenue Service is warning taxpayers to beware of fraud schemes involving the first-time homebuyer credit.

On July 23, a Jacksonville, Fla., tax preparer, James Otto Price III, pled guilty to falsely claiming the first-time homebuyer credit on a client’s federal tax return.

Price faces the possibility of up to three years in jail, a fine of as much as $250,000, or both.

The First-Time Homebuyer Credit, originally passed in 2008 and modified in 2009, provides up to $8,000 for first-time homebuyers.

The purchaser, however, must qualify as a first-time homebuyer, which for purposes of this credit means someone who has not owned a primary residence in the past three years.

If the taxpayer is married, this requirement also applies to the taxpayer’s spouse. The home purchase must close before Dec. 1, 2009, to qualify, and the credit may not be claimed on the purchaser’s tax return until after the taxpayer closes and has bought the home.

Different rules apply for homes bought in 2008.

Whether a taxpayer prepares his or her own return or uses the services of a paid preparer, it is the taxpayer who is ultimately responsible for the accuracy of the return, the IRS says. Fraudulent returns may result not only in the required payment of back taxes but also in penalties and interest.

“We will vigorously pursue anyone who falsely tries to claim this or any other tax credit or deduction,” said Eileen Mayer, chief of IRS Criminal Investigation.

To date, the IRS has executed seven search warrants and currently has 24 open criminal investigations in pursuit of potential instances of fraud involving the credit.

Posted at www.sunherald.com on July 30, 2009

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