Convicts, con artists profited from home tax credit

WASHINGTON - Living in prison didn't stop nearly 1,300 inmates from cashing in on a popular tax break for first-time home buyers, a government investigator reported Wednesday. Their take: more than $9 million.

More than 14,100 tax filers wrongly received at least $26.7 million in tax credits meant to boost the nation's slumping housing markets, said the report by J. Russell George, the Treasury Department's inspector general for tax administration.

A common scam had multiple taxpayers using the sale of a single home, with each claiming the credit. One home was used by 67 tax filers, the report said. In other cases taxpayers got the credit for sales that happened before the tax break started.

"This is very troubling," George said. "Congress created and modified the home buyer credit to stimulate the economy and help taxpayers achieve the American dream, not to line the pockets of wrongdoers."

The IRS says it is taking steps to get the money back. The agency noted that more than 2.6 million taxpayers claimed the tax credit through April - claiming $18.7 billion in credits - with only a tiny fraction going to prison inmates or other scofflaws.

The IRS said it has aggressively enforced the tax credit, blocking nearly 400,000 questionable claims and opening more than 150 criminal investigations.

Nevertheless, 1,295 prison inmates were able to get $9.1 million in credits, including 241 who were serving life sentences, the report said. None of the inmates filed joint returns, so the claims could not have been for purchases by spouses. Many prisons provide inmate information to the IRS, but they are not required to do so, which makes reporting uneven, the report said.