The early returns are coming in on the First-Time Homebuyer Tax Credit. And it appears to be a bigger boondoggle than even I thought it would be.

At a House Ways & Means Oversight subcommittee hearing today, the Internal Revenue Service inspector general reported that the IRS is auditing more than 100,000 of the roughly 1.4 million returns that included a claim for the credit. This is a staggering audit rate for an agency that usually reviews only about 1 percent of returns.

And what the agency has found is jaw-dropping. Almost 74,000 buyers claimed the credit even though they probably owned a house over the past three years (the credit is only available to those who did not own during that period). One dead give-away: More than 12,000 of this bunch claimed the residential energy credit sometime during the past three years. Another 19,000 filed for the homebuyer credit even though they had not actually gotten around to buying a house, a fairly spectacular exhibition of chutzpah. And 580 credits were claimed on behalf of children, including at least one four-year-old—obviously a budding real estate developer.

Some taxpayers were more confused than crooked. Almost 50,000, who didn’t realize the credit increased from $7,500 to $8,000 in 2009, may have claimed less they deserved. But there was plenty of fraud too. The agency is investigating 167 separate criminal schemes associated with the credit.

And there is more. In a separate study, the Government Accountability Office concluded that in 2008-2009 more than 25,000 credits were claimed by people who reported no income and another 165,000 by those earning $25,000 or less. Care to wager how long it will be before those houses end up in foreclosure? If they were ever actually purchased, that is.

There is a lot more we need to learn about this mess. But it is easy to imagine the recipe. Take a commssion-starved real estate agent, add a buyer looking for a deal, and throw in a huge cash payment from the government. Is it any surprise that 10 percent of those claiming the credit either bungled the transaction or were engaged in a flat-out scam. 

Add to all of this the estimate by Ted Gayer at Brookings that more than 85 percent of the projected 2 million people expected to claim the credit would have bought a house anyway. Like the late, unlamented cash for clunkers program, the homebuyer subsidy is very likely doing little more than further running up the national debt to accelerate  some home purchases.

Congress is now debating whether to either continue the credit into next year or even expand it to include all home purchases. This program, as they used to say up in the North End of Boston, needs to take two in the hat.