IRS Flooded With Tax Credit Requests, Slowing Process; Fraud Investigations Underway

From the Cleveland Plain Dealer
cleveland.com/realestatenews

CLEVELAND, Ohio -- Some home buyers who have requested a much-touted federal income tax credit are having to wait months to receive a refund check from the IRS.

A flood of amended tax returns and concerns about fraud have slowed the process for claiming the credit, which is aimed at first-time buyers.

As Congress works out the details of prolonging and expanding the credit offer, set to expire at the end of November, legislators are grappling with ways to make the program more efficient and less open to manipulation.

More than 1.4 million taxpayers have claimed upwards of $10 billion since 2008, when the government began offering a $7,500 credit -- a loan, really -- to people who had not owned a home in at least three years. Buyers would repay the money over 15 years. This year, Congress sweetened the package, turning the loan into an $8,000 tax credit that did not need to be repaid. To keep the cash, buyers just needed to stay in the home for three years.

The result: A boost for the moribund housing market. But along with that came a rash of fraud and innocent mistakes as people who were not qualified for the credit requested -- and received -- free government cash.

BY THE NUMBERS

A federal income tax credit has been available to first-time home buyers since 2008. It is set to expire Nov. 30.

Number of U.S. taxpayers claiming the credit:

1,426,554

Dollar amount:

$9.998 billion

Number of Ohioans claiming the credit:

48,776

Dollar amount:

$326.5 million

National rank: 33rd in terms of dollars per capita

SOURCE: Government Accountability Office (data through Aug. 22)

The Internal Revenue Service already has identified more than 160 possible fraud schemes, Linda Stiff, the agency's deputy commissioner for services and enforcement, told a U.S. House subcommittee last week. The IRS also is reviewing more than 100,000federal income tax returns that involve claims for the credit.

Recent government reports pointed out thousands of questionable claims, representing hundreds of millions of dollars. Some of the claims were filed by IRS employees. Others involved taxpayers as young as 4 years old.

As the IRS has added more fraud checks to its system, taxpayers are waiting longer for their money.

"We were getting the refunds in six weeks, and now it's taking about 20 weeks," said Marilyn Meredith, an enrolled agent who prepares tax returns in Port Huron, Mich. "The last two months is when it has really increased a lot."

Most people who buy houses this year are expected to request the credit on their 2009federal income tax return, filed in 2010. The IRS will apply the credit to whatever taxes a buyer owes and send the buyer a check for the difference. But buyers who want cash sooner have been amending their 2008 tax returns.

Those amended tax returns are filed on paper and processed manually. They go into a pool with other amended returns. The IRS receives 5 million to 7 million such returns each year, a spokesman said. Some buyers who asked for the credit in the spring are just hearing back from the IRS. And taxpayers who call to check on their refunds are being told to wait another few weeks, due to a backlog of returns and safeguards for fraud.

Filing for the credit requires no documentation of a home purchase. The form taxpayers fill out does not verify that they have not owned a home during the past three years -- a prerequisite for the credit. It asks only for the address of the home, the date of the purchase and the amount of the anticipated tax credit.

Rich Rhodes, an enrolled agent in Hinckley, tried to expedite a client's credit request by sending the IRS a settlement statement -- proof that his client bought the home. Meredith also has been attaching these statements to tax returns and writing on the forms that her clients have not owned a home in three years.

Some taxpayers are confused and probably are making mistakes on their returns, tax professionals said. People think they can request the credit before they buy a house -- not true. Others believe they can buy a home from a family member -- also prohibited.

In other cases, people are trying to fool the government. Jeffrey Schneider, an enrolled agent in south Florida, dumped two clients after they asked him to wrongly claim the credit on their tax returns. He wasn't surprised by the attempts to game a system that offers free money and requires little documentation.

"From what I've been reading, the IRS has egg on their face, all over them, because they put this nice credit out there and they get bombarded with fraud," he said.

Rep. John Lewis, a Georgia Democrat, has introduced legislation to clear up some of those problems. His bill would require taxpayers filing for the credit to be older than 18 and to provide proof of their purchase. The legislation also aims to make it easier for the IRS to run the program and to check for fraud.

A local IRS spokesman would not comment on the fraud issues. During her testimony to legislators, the IRS's Stiff said the agency will keep pursuing people who wrongly request the credit. But, she said, "We cannot let fraudulent activity undermine a program that has benefited so many."

Buy This Renovated Home and Walk to the Brand New Capitol Theatre! (OK, Subtlety Is Not Our Strong Suit)

Last week, we wrote about the foreclosure rehab initiative that was spearheaded by four individuals at PURE and Civic Builders. We renovated, marketed and sold two of the three rehabbed homes in a down market. We're proud that we've added two new homeowners to the city of Cleveland, and renovated two houses that were previously in a sad, neglected state.

But we're not finished yet. We still have one house to go, located at 7212 West Clinton Avenue on one of the best streets in the Detroit Shoreway neighborhood (and indeed, in the entire city). This street is walkable, full of homeowners and great neighbors, loaded with classic architecture and rehabbed homes, and steps away from the west side's newest arts movie theatre, the Capitol Theatre.

Inside, we've transformed the classic West Clinton colonial floor plan into a modern house, while retaining its historic features. The house has refinished top-nailed wood floors, a completely new, energy efficient mechanical system, a spacious floor plan, four bedrooms and two and a half baths. The master bedroom suite features a walk-in closet and a large, adjacent bathroom with a jetted tub and a beautiful walk-in shower. The fourth floor bonus room/media room/extra bedroom offers skylights with views of Lake Erie.

Please help us spread the word about this wonderful, rehabbed home. We'd like to sell it and add one more new homeowner to the city of Cleveland!

Two Down, One To Go: Foreclosure Rehab Initiative Successful in a Down Economy

A little over a year ago, three staff from Progressive Urban Real Estate (Lee Chilcote, Dave Sharkey and Keith Brown) and the owner of Civic Builders (Dave Fragapane) started a small rehab company. We wanted to purchase distressed properties in urban neighborhoods that, despite the downturn in the housing market and the economy, had remained strong and in demand. So we bought three homes - 3804 Whitman Ave. in Ohio City, 1302 Mentor Ave. in Tremont, and 7212 West Clinton Ave. in Detroit Shoreway.

A year later, we've sold two of the homes and are putting the final touches on 7212 West Clinton Ave., which is priced at $149,900 and remains available. Our efforts prove that, while far from easy, it's possible to rehab and sell distressed/foreclosed properties to new owners, even in our current economy.

We did so without any subsidy of the rehab costs. Much thanks to Cleveland Action to Support Housing (CASH) for writing down the interest rate on our construction loan, and to Shorebank for providing the construction financing and taking chances in a volatile market.

As a result of our efforts, three vacant and foreclosed homes have now been beautifully rehabbed - and two of the three are now occupied by new homeowners and residents of the city of Cleveland!

The above photo is an interior photo of 1302 Mentor after it was rehabbed, before the new owner moved in.

Detroit Shoreway's Capitol Theatre Opens to Great Fanfare

It's show time! Capitol Theatre reopening means flicks and fun on the West Side
By Clint O'Connor, The Plain Dealer

The opening of a movie theater is not typically a five-star event. But when it's in Cleveland, as opposed to some distant shopping mall, and when it's expected to ignite 15 blocks worth of civic revitalization, it's a rare beast indeed.

Like so many well-intentioned, let's-bring-back-the-city crusades that have sprinkled ethereal hope dust over Cleveland for the past 30 years, the restoration of the Capitol Theatre could have taken a big, fat belly-flop into the cesspool of broken dreams.

But no.

This elaborate renovation project connecting Cleveland's past with its future actually succeeded. The new Capitol, at 1390 West 65th Street just north of Detroit Avenue, opens next weekend.

For the city's cultural and nightlife scene, the theater represents something film fans have been requesting for years: a movie house on the West Side that's convenient for Clevelanders, within striking distance of Lakewood and Rocky River, and one that might offer the independent and foreign fare available for decades at the Cedar Lee Theatre in Cleveland Heights.

The project worked for two reasons, according to Jeffrey Ramsey, executive director of the Detroit Shoreway Community Development Organization. One was fresh financial sources: the federal New Market Tax Credit and Ohio's Historic Tax Credit.

The other reason: "This is not a stand-alone theater," he said. "It is part of a partnership with Cleveland Public Theatre, the Near West Theatre and the neighborhood."

If it had just been the Capitol Theatre, said Ramsey, it never would have happened.

Loads of determined folks within his organization and the Gordon Square Arts District, which runs along Detroit Avenue from West 58th Street to West 73rd Street, made it a reality, along with about $7.5 million from the tax credits, a city of Cleveland loan and grants from Cuyahoga County, the Cleveland Foundation and the Ohio Cultural Facilities Commission.

Organizers hope the sparkling movie house, which took 16 months to renovate and will employ about 20 people, draws film-goers who will spill into shops, restaurants, galleries and bars in the neighborhood before and after shows. The area is already on the rise with choice eateries, such as Luxe, La Boca and Stone Mad Irish Pub, drawing good crowds.

A Historic Time to Buy

Young people just starting to invest and buying their first homes are potentially the winners in this recession.

First-time homebuyers, most between the ages of 25 and 45, accounted for about 45 percent of home sales from January through July 2009, according to the National Association of REALTORS®

"This is a historic time," says George Jaramillo, a 35-year-old business analyst in Atlanta, who recently bought three homes, two of them foreclosures. "It's a great opportunity to make some great gains in the future."

A study by investment company T. Rowe Price points out that investing when prices are low can result in amazing gains. For instance, between 1970 and 1990, the annualized rate of return for the S&P 500 was 11.5 percent.

"We need to be shouting from the rooftops that this is not the time to get out of the market if you're young," says Christine Fahlund, a senior financial planner with T. Rowe Price. "This is the time to be in the market."

Reprinted from www.realtor.com.

Cleveland Lands 2014 Gay Games

COLOGNE, Germany — The Federation of Gay Games announced this afternoon that Cleveland will be the site of the 2014 games.

The city was chosen over Boston and Washington, D.C., after a year-long site-selection process, the organization said in a news release.

"Cleveland demonstrated to the Federation of Gay Games that they understood the mission of the Gay Games and our principles of ‘Participation, Inclusion, and Personal Best’," said Kurt Dahl, of Chicago, and Emy Ritt, of Paris, FGG Co-presidents.

"We were highly impressed by the facilities and infrastructure, the widespread community support, their financial plan and the city’s experience in hosting large scale sports and cultural events."

Mayor Frank Jackson said the city "is prepared to roll out the welcome mat to the LGBT athletes, their families and spectators from around the world. Fans of the Gay Games will find that Cleveland is a great place to celebrate sports and culture and that we have tremendous assets and amenities for them to enjoy. The sports and cultural environment here is truly a uniquely Cleveland experience, one they will cherish for years to come."

Cleveland’s 2014 Gay Games IX Sports & Cultural Festival is set for Aug. 9 through Aug. 16, 2014. It will include 30 sports, four cultural events, opening and closing ceremonies and cultural events.

"Gay Games generate $50 million to $80 million in estimated local economic impact in addition to significant ongoing travel and tourism visibility benefits for the host city," the FGG said in the news release.

36 Hours in Cleveland: NY Times Admires Cleveland's Entrepreneurial Spirit, Bohemian Dreamers

September 20, 2009
36 Hours in Cleveland
By BRETT SOKOL
“YOU Gotta Be Tough” was a popular T-shirt slogan worn by Clevelanders during the 1970s, a grim period marked by industrial decline, large-scale population flight and an urban environment so toxic the Cuyahoga River actually caught on fire. These days it still helps to be at least a little tough; a fiercely blue-collar ethos endures. But instead of abandoning the city, local entrepreneurs and bohemian dreamers alike are sinking roots; opening a wave of funky boutiques, offbeat art galleries and sophisticated restaurants; and injecting fresh life into previously rusted-out spaces. It’s a vibrant spirit best exemplified by Cleveland’s new all-female roller derby league, whose wry name, the Burning River Roller Girls, and home, a former GM auto factory retooled into a 60,000-square-foot sports facility, say it all.

Friday

3 p.m.
1) HELLO CLEVELAND!

Staring at platform shoes worn by Keith Moon or Elvis Presley’s white jumpsuit hardly evokes the visceral excitement of rock music, let alone its rich history, but the Rock and Roll Hall of Fame and Museum (751 Erieside Avenue; 216-781-7625; www.rockhall.com; admission, $22) thankfully has a wealth of interactive exhibits in addition to its displays of the goofier fashion choices of rock stardom. There’s a fascinating look at the genre’s initial 1950s heyday, as well as the hysteria that greeted it — preachers and politicians warning of everything from its incipient Communist subversion to its promotion of wanton sexuality. On the top floors, a well-curated exploration of Bruce Springsteen’s career is on display through next spring.

5 p.m.
2) FROM STEEL TO STYLISH

The steelworkers who once filled the Tremont neighborhood’s low-slung houses and ornately topped churches have largely vanished. A new breed of residents has moved in along with a wealth of upscale restaurants, artisanal shops and galleries showcasing emerging artists. Inside Lilly Handmade Chocolates (761 Starkweather Avenue; 216-771-3333; www.lillytremont.com), you can join the throngs practically drooling over the mounds of freshly made truffles. Or grab a glass at the wine bar inside Visible Voice Books (1023 Kenilworth Avenue; 216-961-0084; www.visiblevoicebooks.com), which features scores of small-press titles, many by local authors.

7 p.m.
3) IRON CHEF, POLISH CLASSIC

Cleveland’s restaurant of popular distinction is Lolita (900 Literary Road; 216-771-5652; www.lolabistro.com), where the owner and “Iron Chef America” regular Michael Symon offers creative spins on Mediterranean favorites including duck prosciutto pizza ($13) and crispy chicken livers with polenta, wild mushrooms and pancetta ($7). (Reservations are recommended.) More traditional comfort food is at Sokolowski’s University Inn (1201 University Road; 216-771-9236; www.sokolowskis.com), a beloved stop for classic Polish dishes since 1923. Even if you’re unswayed by Anthony Bourdain’s description of the smoked kielbasa ($7.25) as “artery busting” (from him, a compliment) at least swing by for the view from the parking lot — a panorama encompassing Cleveland old and new, from the stadiums dotting the downtown skyline to the smoking factories and oddly beautiful slag heaps on the riverside below.

11 p.m.
4) CLASSIC COCKTAILS

One aspect of Tremont has remained steady over the years: it’s a night crawlers’ paradise. Nowadays, discerning drinkers head for the nearby Velvet Tango Room (2095 Columbus Road; 216-241-8869; www.velvettangoroom.com), inside a one-time Prohibition-era speakeasy and seemingly little changed: the bitters are housemade, and the bartenders pride themselves on effortlessly mixing a perfect Bourbon Daisy or Rangpur Gimlet. Yes, as their menu explains, you can order a chocolate-tini — “But we die a little bit every time.”

Saturday

11 a.m.
5) FARM FRESH

Start your day with a visit to the West Side Market (1979 West 25th Street; 216-664-3387; www.westsidemarket.com), where many of the city’s chefs go to stock their own kitchens. Browse over 100 vendors selling meat, cheese, fruit, vegetables and baked goods, or just pull up a chair at Crêpe De Luxe’s counter (www.crepesdeluxe.com) for a savory Montréal (filled with smoked brisket and Emmenthal cheese; $6) or the Elvis homage Le Roi (bananas, peanut butter and chocolate; $5).

2:30 p.m.
6) ART CANVAS

For nearly 20 years the William Busta Gallery (2731 Prospect Avenue; 216-298-9071; www.williambustagallery.com) has remained a conceptual-art-free zone — video installations included. “With video, it takes 15 minutes to see how bad somebody really is,” said Mr. Busta, the gallery’s owner. “With painting, you can spot talent right away.” And that’s predominantly what he exhibits, with a focus on exciting homegrown figures like Don Harvey and Matthew Kolodziej. In the nearby Warehouse District, Shaheen Modern & Contemporary Art (740 West Superior Avenue, Suite 101; 216-830-8888; www.shaheengallery.com) casts a wider geographic net with recent solo exhibits from the buzzy ex-Clevelander Craig Kucia, as well as New York-based artists like Mark Fox and Keith Mayerson.

6 p.m.
7) PARIS ON LAKE ERIE

The most talked about new restaurant this year is L’Albatros (11401 Bellflower Road; 216-791-7880; www.albatrosbrasserie.com), which the chef Zachary Bruell opened last December. Set inside a 19th-century carriage house on the campus of Case Western Reserve University, this inviting brasserie serves impeccably executed French specialties like chicken liver and foie gras mousseline ($9), a niçoise salade ($10) and cassoulet ($22).

8 p.m.
8) BALLROOM BLITZ

The polka bands are long gone from the Beachland Ballroom (15711 Waterloo Road; 216-383-1124; www.beachlandballroom.com), replaced by an eclectic mix of rock groups. But by running a spot that’s as much a clubhouse as it is a concert venue, the co-owners Cindy Barber and Mark Leddy have retained plenty of this former Croatian social hall’s old-school character. Beachland draws local favorites like the avant folkie Bill Fox and post-punkers This Moment in Black History, as well as hot touring acts like Neko Case and the Hold Steady. Mr. Leddy, formerly an antiques dealer, still hunts down finds for the basement’s This Way Out Vintage Shoppe.

Sunday

11 a.m.
9) BEETS, THEN BEATS

One of the few restaurants in town where requesting the vegan option won’t elicit a raised eyebrow, Tommy’s (1824 Coventry Road; 216-321-7757; www.tommyscoventry.com) has been serving tofu since 1972, when the surrounding Coventry Village, in Cleveland Heights, was a hippie oasis. The bloom is off that countercultural rose, but the delicious falafel ($5.79) and thick milkshakes ($4.59) endure. The time warp continues through a doorway leading into Mac’s Backs bookstore (No. 1820; 216-321-2665; www.macsbacks.com), a good place to find out-of-print poetry from Cleveland post-Beat writers like d.a. levy, T. L. Kryss and rjs.

2 p.m.
10) FREE IMPRESSIONISTS

For decades, the University Circle district has housed many of the city’s cultural jewels, including Severance Hall, the majestic Georgian residence of the Cleveland Orchestra; the Cleveland Institute of Art Cinematheque, one of the country’s best repertory movie theaters; and the lush 285-acre Lake View Cemetery. At the Cleveland Museum of Art (11150 East Boulevard; 216-421-7340; www.clemusart.com), already famed for its collection of Old Masters and kid-friendly armor, the June opening of the museum’s Rafael Viñoly-designed East Wing puts the spotlight on more modern fare, moving from a roomful of Impressionists dramatically centered around one of Monet’s “Water Lilies” paintings, up to current work. A visually arresting 2008 drawing by Cleveland’s T. R. Ericsson more than holds its own amidst heavyweight contemporary pieces from Anselm Kiefer and Kiki Smith. A further enticement: admission to the museum’s permanent collection is absolutely free.

THE BASICS

Many major airlines fly nonstop from New York area airports into Cleveland Hopkins International Airport. A recent Web search found round-trip fares for fall flights starting at $239. Although a light rail system connects the airport with both downtown and University Circle, a rental car is advised for reaching most other neighborhoods.

The Marriott Downtown at Key Center (127 Public Square; 216-696-9200; www.marriott.com) is a 25-story, 400-room hotel in the heart of the city. The comfortable, amenity-filled rooms provide quick access to downtown attractions; some feature impressive views of Lake Erie. Doubles start at $159.

A boutique-style option is the Glidden House (1901 Ford Drive; 866-812-4537; www.gliddenhouse.com), 60 quaint rooms in a 1910 French Gothic mansion on the Case Western Reserve University campus, an easy walk to most cultural destinations around University Circle. Doubles from $139.