George and an Internal Revenue Service official testifying before a House Ways and Means subcommittee stressed that many of the questioned claims may be deemed legitimate after further examination.
But the hearing raised a yellow flag as Congress considers whether to extend, or even expand, the popular program that is set to expire at the end of November.
The top Republican on the panel, Representative Charles W. Boustany Jr. of Louisiana, said that while the issue of extending the credit was not the purpose of the hearing, “every time Congress creates a new refundable credit . . . the incentive for fraud is magnified.’’
Representative John Lewis, Democrat of Georgia and chairman of the oversight subcommittee, said he had introduced legislation to improve the IRS’s administration of the program, including giving it the authority to look at prior returns to determine eligibility and requiring that taxpayers provide documented proof of a home purchase.
Currently, applicants must fill out a separate IRS form, but they do not have to supply documentation.
The tax credit is “a vital part of our economic recovery efforts. We must ensure that we are administering the credit accurately,’’ Lewis said.
George said more than 19,000 people filed 2008 tax returns or amended returns claiming the credit for homes they had not yet purchased. Those claims amounted to $139 million, and it was not clear whether the IRS planned to go back to verify that those purchases actually took place, he said.
Under the measure, low- and middle-income first-time home buyers purchasing a home between Jan. 1 and Nov. 30 of this year could claim a credit of up to $8,000 on their 2008 or 2009 income tax return.
