WASHINGTON - The Internal Revenue Service (IRS) is having difficulty determining

which taxpayers have to repay the First-Time Homebuyer Credit (Homebuyer Credit),

according to a report publicly released today.

While the IRS accurately issued more than 5.2 million notices informing taxpayers of the

need to repay their Homebuyer Credit, it issued incorrect notices or did not send notices

to 61,427 households due to notice programming errors or incorrect information on tax

accounts, according to the report by the Treasury Inspector General for Tax

Administration (TIGTA).

Of the 61,427 households:

• 12,495 individuals were notified that they did not have to repay the Homebuyer

  Credit, when in fact they did have a repayment obligation.

• 27,728 taxpayers were notified that they had a repayment obligation despite

  having purchased their home in 2009 (only 2008 purchases have a repayment

  obligation).

• 2,152 individuals who bought their house in 2008 were incorrectly notified that

  they did not have a repayment obligation unless they sold their house.

• 18,220 did not receive a notice reminding them of their repayment requirement.
• 832 deceased individuals may have been sent an incorrect notice regarding

  repayment.

Additionally, the information provided by a vendor hired by the IRS to use third-party

data to identify individuals who may have disposed of their principal residences was

unreliable. This resulted in 53,558 individuals incorrectly receiving notices to repay the

Homebuyer Credit.

"The IRS processed the vast majority of Homebuyer Credit Claims accurately," said J.

Russell George, Treasury Inspector General for Tax Administration. "However, IRS

officials still need to eliminate the programming errors that resulted in thousands of

taxpayers being misinformed about their repayment status," he added.

The Homebuyer Credit was created by Congress in 2008 to help stimulate the housing

industry by encouraging people to purchase their first homes. Subsequent legislation in

2009 and 2010 revised, extended and expanded the Homebuyer Credit in an attempt to

help boost a sluggish real estate market. The Homebuyer Credit was a refundable credit

that could result in a tax refund when the credit exceeded the tax liability, even if no

income tax was withheld or paid.

Each of the laws with Homebuyer Credit provisions contain different Credit amounts,

qualification requirements, and repayment requirements. Individuals who received the

Homebuyer Credit for a home purchased in 2008 are required to pay back the total

amount received for the Homebuyer Credit over 15 years beginning in 2010. There are

some exceptions. In addition, individuals who received the Homebuyer Credit in 2008,

2009, or 2010 generally must repay the entire amount they received, if, during the 3-yearperiod

beginning on the purchase date and after the year for which the individual received

the homebuyer credit, they dispose of the home or it ceases to be their principal

residence. If the disposition is a sale, the repayment requirement is applicable to the

extent there is a gain on the sale of the home.

TIGTA recommended that the IRS ensure that Homebuyer Credit repayment notices are

accurately issued; correct erroneous purchase dates on tax accounts; and discontinue

using third-party vendor data to identify individuals who may have disposed of their

principal residents unless the reliability can be significantly improved. The IRS agreed

with two of TIGTA's recommendations. For the remaining recommendation relating to

accurately issuing notices the IRS indicated it is replacing some of its notices with an

online tool for taxpayers to obtain their Homebuyer Credit repayment status.