In the “Week” section of the November 23 issue, the paragraph about the new-homebuyers credit is quite misleading. If one looks at the testimony of IRS Deputy Commissioner for Services and Enforcement Linda Stiff to the Ways and Means Committee, one gets a somewhat clearer picture. It is simply untrue that the IRS has no authority to demand documentation and that someone simply asserting that he bought a house and is eligible for $8,000 can do so with impunity.
As a seasonal tax preparer and one who has actual experience with individual returns, I am absolutely certain the claim is untrue. I can assure you that some refunds are being held pending proof of purchase, and that screening for those who claimed mortgage interest or real-estate taxes on their returns, with follow-ups, is happening (although such screening is not foolproof).
It is certainly true that the large volume of claimed credits, the short lead time for the IRS (which had to get ready, with no additional resources, in the middle of tax season), and the desire not to slow the issuing of refunds to a crawl have created an enforcement problem. Given the magnitude of the expenditure, assigning some additional funding to the IRS to go after incorrect credits would probably be money well spent, but I think you draw a lot of incorrect conclusions in your write-up.
THE EDITORS REPLY: Mr. Brown is clearly a well-informed adviser who would encourage clients to avoid fraudulent claims. Unfortunately, many people without such standards took advantage of the new-homebuyers credit. They were able to do so because the IRS did not want to slow down the flow of the stimulus checks by requiring documentation.
Mr. Brown cites the highly defensive testimony of Linda Stiff, the IRS’s deputy commissioner for services and enforcement. We find the indictment of the IRS by the Treasury Department’s own inspector general, J. Russell George, far more persuasive, and stand by our commentary.
Because of an editing error, the first sentence of Stephen Spruiell’s article on page 29 of this issue falsely attributes a quotation to “a critic of the $787 billion stimulus bill.” In fact it comes from the late economist and writer Stuart Chase, who was speaking of advertising.