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Guide for Completing Form 8823 - page 190 / 197

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190 / 197

Chapter 25 Miscellaneous Noncompliance Topics

The chapter includes noncompliance topics not discussed elsewhere.

Tenant Misrepresentation or Fraud

LIHC property owners should demonstrate due diligence to prevent tenant fraud. Fraud includes deliberate misrepresentation of fact in order to induce someone else to part with something of value or surrender a legal right. In this case, the outcome of deliberate misrepresentation by a tenant can result in the property owner renting a residential unit to an ineligible tenant at a below market rate.

If misrepresentation is suspected, additional steps should be taken to verify the accuracy of information provided by the tenant. See chapter 4. Regulation 1.42-5 gives examples of how an income certification may be documented, including the submission of federal tax returns. If necessary, tenants can be asked to complete Form 8821, Tax Information Authorization, which will allow the owner to confirm the accuracy of the tenant’s tax returns with the IRS.

If an owner discovers that a tenant has deliberately misrepresented their income level, student status, household size, or any other item used to determine eligibility, the owner should consult state or local landlord-tenant laws to determine whether the tenant can be asked to vacate the LIHC unit or the rent raised to the market rate. The owner is not expected to complete the annual recertification if a tenant is asked to leave or an eviction proceeding is in process.

Report any suspected or known deliberate misrepresentation of income to the Internal Revenue Service’s *Whistleblower Office. Complete Form 211, Application for Award for Original Information, and submit the form to the address identified on the form.* The following information should be provided:

  • 1.

    tenant’s name,

  • 2.

    tenant’s social security number if possible,

  • 3.

    explain association with LIHC program,

  • 4.

    what the tenant did that misrepresented their income or documentation (the

owner may be asked to provide evidence of the tenant’s fraudulent acts),

  • 5.

    amount of tenant income as reported by the tenant and the amount actually verified, and

  • 6.

    the difference between the market rate and restricted rent for the unit, and how long the tenant was in the unit. This is the amount of economic benefit the tenant may be deemed to have received as taxable income.

25-1

Revised October 2009

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