Housing tax credit foul-ups: it’s got to get better

Commentary: Prisoners, dead people, non-homeowners among those receiving credits

This will probably get me hit with an audit by the Internal Revenue Service, but here’s a modest proposal for a federal government struggling to cut the deficit: Next time Congress decides to stimulate home purchases and energy improvements with federal tax credits, could we make sure the IRS is on board and knows what the heck it’s supposed to do?

I say that having read the latest critical report — the fourth in a series by the Treasury’s Inspector General for Tax Administration — about IRS bungling on housing-related tax credits.

The latest audit, released July 25 with virtually no media coverage, found that the IRS had allowed taxpayers to file amended returns to receive more than one year’s worth of first-time home purchase tax credits — the $7,500 repayable maximum credit plus the nonrepayable maximum $8,000 credit.

Or to switch the year of purchase from 2008 — when you were supposed to pay the credit back over 15 years — to 2009 or 2010, when you didn’t have to.

That’s a neat game — claim credits two years running on a single home purchase, or get out of paying back money to the government that you agreed upfront to repay.