- The Washington Times - Monday, May 23, 2011

More than 100 employees of the Internal Revenue Service cheated the government by fraudulently claiming a first-time homebuyer tax credit included in the 2008 and 2009 economic stimulus packages, according to federal investigators.

The Treasury Department’s inspector general for tax administration, in several reports over the past few years, has identified a total of 128 IRS employees who claimed the credit but who also made other claims that showed they either weren’t first-time buyers or bought their homes outside the eligibility period for the credit, which was worth up to $8,000.

Meanwhile, one other IRS employee has been charged with using her position to try to help friends and relatives take advantage of the credit, which was signed by President Bush and then boosted under President Obama’s 2009 stimulus law.

The IRS employees represented a small part of the total fraud in the program, which the inspector general said may have totaled more than a half-billion dollars overall. The inspector general said refundable tax credits, which transfer money back to taxpayers even when their tax liability is zero, “are targets for fraud.”

Members of Congress who have oversight over the IRS said it’s particularly egregious when the employees are caught cheating.

“It is incomprehensible that this many IRS employees improperly claimed the homebuyer tax credit,” said Sen. Orrin G. Hatch of Utah, the top Republican on the Senate Finance Committee. “These are the very people who are supposed to fairly enforce our tax laws, but seem to instead be taking advantage of that expertise for their own personal benefit.”

Asked for comment, the IRS requested that The Washington Times submit questions in writing, which The Times did.

Instead of answering the questions, spokesman Grant William issued a general statement saying the agency takes compliance with tax laws “very seriously” and promised “strong action, including dismissal” when it finds that an erroneous claim has been made.

Mr. Williams did not respond to follow-up requests.

At least one IRS employee is facing charges of making a false claim while acting as an officer of the government — a felony punishable by up to five years in prison — stemming from the tax credit.

Federal prosecutors in Boston say Michael E. Doyle of New Hampshire, who worked for the IRS for about 20 years and who was a supervisor in its Andover, Mass., office, claimed he had bought a home on April 15, 2008. In reality, he bought the home for $260,000 on Aug. 15, 2007, months before the eligibility period.

Mr. Doyle’s attorney didn’t respond to a message seeking comment.

In another case, part-time IRS employee Catherine Griffin in Georgia has been charged with altering information in IRS computers to help four friends and family members appear eligible for the credit. She charged them $2,000 each.

She pleaded guilty March 24 to one count of accessing a computer without authorization and is awaiting sentencing.

A spokeswoman for the inspector general said they are not able to give out details on active investigations and can’t talk about closed cases because of taxpayer confidentiality rules, so it’s not clear how many other IRS employees face legal jeopardy.

The inspector general’s warning about refundable tax credits is likely to find a receptive audience in Congress.

The House Ways and Means Committee, which has oversight responsibility for the IRS, is holding a hearing Wednesday on improper payments made under refundable tax credits.

A spokeswoman for the committee said it was “outrageous that the abuse of refundable credits has become so widespread that even employees of the IRS, the very agency that is supposed to be protecting taxpayer dollars, have been improperly claiming the very credits they are paid to administer.”

She said she expects the IRS will have to answer tough questions at the hearing.

A $7,500 homebuyer credit was created in 2008 as the housing bubble popped and was designed to stimulate the real estate market. Mr. Obama’s 2009 stimulus boosted the credit to $8,000, eliminated a payback requirement and extended the eligibility period.

The credit proved wildly popular, and the government issued $27 billion in credits to 3.9 million taxpayers in 2009 and 2010.

Early on, the IRS didn’t even require those claiming the credit to submit documents proving their eligibility before they were granted the credit, and Congress didn’t give the agency the tools to track fraud.

Among the bogus claims the inspector general identified, totaling up to $513 million in unwarranted payouts, were:

• 13,448 taxpayers who claimed the credit on a house they said they hadn’t bought, but promised to buy in the future.

• Nearly 50,000 taxpayers who appeared to have owned the home for up to three years, in violation of the credit’s eligibility requirements.

• More than 1,000 prisoners who received the credit despite being incarcerated at the time.

• Thousands of taxpayers who claimed the credit for a home for which someone else also claimed the credit.

• Stephen Dinan can be reached at sdinan@washingtontimes.com.

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