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IRS Refund Delays Tied to Homebuyer Credit and Fraud

5:19 PM, Apr 20, 2011   |    comments
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Some callers to our 2 On Your Side Tipline say their 2010 tax refunds have been held up apparently because they took the First Time Home Buyer credit which was available between 2008 and April 2010 to help stimulate the housing market.

It turns out there is an issue causing the delay and numerous criminal tax fraud investigations. The credit was really an interest free loan which homeowners have started paying back.  

An IRS spokesperson says they will not discuss individual cases because of privacy. But they do say there is a particular processing issue impacting refunds for married couples filing joint returns this year. The issue is related to Form 5405 and primarily affects taxpayers who filed returns this year before February 22nd.

An IRS statement also says the agency is working aggressively to manually process returns for that affected group of taxpayers. The IRS says it understands the hardships caused by the delayed refunds and has assigned additional staff and resources. The agency indicates it may take more weeks to straighten out these issues.

 At the same time the IRS continues to investigate criminal fraud cases tied to the Homebuyer credit. The agency says it blocked over 400,000 applications for fraud or erroneous applications. There have also been 200 criminal cases, one of which involved an IRS agent arrested in New Hampshire.    

 Overall about 4 million people took advantage of the Homebuyer Credit program with about $29 Billion provided through those credits.   



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