A pair of Miami-Dade tax preparers are being accused of filing fraudulent claims for the first-time home buyer tax credit, a program created by federal stimulus laws intended to lift home sales during the recession.
The Department of Justice asked a federal court Tuesday to command both companies to stop improperly claiming the credit. Last year, concern about taxpayers abusing the tax credit led to changes in the paperwork taxpayers must submit to claim it.
The Internal Revenue Service reviewed 30 tax returns filed by Medina Group in Miami on behalf of taxpayers claiming the credit and found only one actually qualified, according to a request for an injunction against the company filed in federal court. Medina Group, which has been preparing tax returns since 2001, had claimed the credit on behalf of 174 taxpayers.
A review of 30 returns claiming the credit filed by Paula Olivette Patrice and To the Max Tax Professionals Inc. in Miami Gardens found that none of the taxpayers qualified for the credit. Patrice’s company claimed the credit on behalf of 363 people.
Neither company could be reached for comment Tuesday.
The credit was created by a federal stimulus law. People who had not owned a home in the previous three years could claim a credit of up to $8,000 against their federal income taxes if they bought a home after April 8, 2008. Now the credit also is available under certain conditions to current homeowners who buy new homes.
But for taxpayers to claim the credit, they must actually buy a home.
The Department of Justice said Patrice listed nonexistent addresses for properties she claimed her customers bought. In one case, she listed the same address on separate customers’ returns.
An interview with one of Patrice’s customers revealed she had told him the tax credit was designed to help homeowners facing foreclosure. Another asked the IRS to freeze his account so he wouldn’t receive the tax refund Patrice claimed on his behalf and had his return prepared by another company. When he refiled, he didn’t claim the tax credit.
Medina filed returns in March 2009 that falsely reported property as having been purchased months later, the federal government said. In other cases, tax credits were claimed for people who didn’t buy homes in 2008 or 2009.
Last October, a federal court in Texas permanently barred a woman from preparing returns for others in a case in which the Justice Department alleged abuse of tax credit and other tax law provisions.
Last year, the Treasury inspector general for tax administration told a U.S. House subcommittee that more than 19,000 people who claimed the tax credit hadn’t yet bought homes. Thousands more didn’t meet the program’s requirements because they had owned a home in the past. In other cases, children applied for the tax credits.
At the time, the IRS didn’t require buyers to provide documentation of the purchase, but new rules now require documentation and don’t allow taxpayers applying for the credit to electronically file their tax returns.
The IRS is also working on new rules that would regulate the tax preparation industry.
Copyright © 2010 The Miami Herald, Nirvi Shah
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