1,300 Inmates Got $9M in Homebuyer Tax Credits

The investigator said 241 of the inmates were serving life sentences.

In all, more than 14,100 taxpayers wrongly received at least $26.7 million in tax credits that were meant to boost the nation's slumping housing markets, said the report by J. Russell George, the Treasury Department's inspector general for tax administration.

Some taxpayers received the credit for homes purchased before the tax break was started. In other cases, multiple taxpayers improperly used the same home to claim multiple credits. Investigators found one home that was used by 67 taxpayers to claim credits.

"This is very troubling," George said. "Congress created and modified the homebuyer credit to stimulate the economy and help taxpayers achieve the American dream, not to line the pockets of wrongdoers."

The Internal Revenue Service says it is taking steps to get the money back. The agency noted that more than 2.6 million taxpayers claimed the tax credit through April—claiming $18.7 billion in credits—with only a tiny fraction going to prison inmates or other scofflaws.