Inmates receive homebuyer tax credit

IRS says 'more can be done' to weed out fraud

An audit of refunds to taxpayers claiming the federal homebuyer tax credit concludes that although the IRS has made "significant strides" in detecting erroneous claims, millions of dollars have been paid out to prison inmates and for transactions involving homes purchased before the credit took effect.

The report, by the Treasury Inspector General for Tax Administration (TIGTA), identified 14,132 erroneous credits totaling at least $26.7 million — a tiny sliver of the more than $12.6 billion in refunds paid to date, but a troubling indication that the program remains vulnerable to fraud.