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IRS eyeing homebuyer’s credit on tax returns

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in Small Business Tax

The homebuyer’s credit is drawing a lot of flak at the IRS.

According to an April 15 report to the Senate Finance Committee by Nina Olson, National Taxpayer Advocate, more than 260,000 returns filed in 2010 have already been flagged for correspondence audits because taxpayers didn’t attach sufficient documentation for claiming the credit. This represents approximately 21% of all correspondence audits initiated by the IRS. More audits are expected to follow as the IRS sorts through more returns.

At least there’s some consolation for filers who didn’t claim the homebuyer’s credit: With its limited resources being soaked up with homebuyer credit issues, the IRS is less likely to tap these individuals for audits.

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