The Treasury Inspector General for Tax Administration has released Administration of the First-Time Homebuyer Credit Indicates a Need for Improved Controls Over Refundable Credits (2011-41-035):

Homebuyers who purchased a home in 2008, 2009, or 2010 were able to take advantage of the First-Time Homebuyer Credit. The Homebuyer Credit allowed eligible taxpayers to claim up to an $8,000 refundable credit on their tax return. Fraudulent and erroneous Homebuyer Credits totaling millions of dollars in refunds were issued, revealing a need for not only stronger controls over claims for the Homebuyer Credit, but also for strengthening controls over all refundable credits. …

Control weaknesses identified in the two prior reports, as well as those identified in this report, allowed potentially erroneous refunds of more than $513 million to be received by taxpayers who most likely did not qualify for the Homebuyer Credit. Furthermore, during this final phase of the audit, TIGTA identified additional IRS employees who made questionable claims for the Credit.