The Internal Revenue Service (IRS) is cracking down on fraudulent claims of the first-time homebuyer tax credit. The national tax service is trying to close loopholes in the system that it says allows unqualified borrowers access to taxpayer funds toward home purchases. The first-time homebuyer tax credit provides up to $8,000 to individuals or married couples who haven’t owned a home in three years and who close on a property by Dec. 1, 2009. Borrowers that meet certain requirements are even able to monetize the tax credit toward mortgage down payment use in excess of the Federal Housing Administration's 3.5% minimum in order to obtain an FHA-insured mortgage. In these cases, borrowers access the funds through short-term loans that are repayable after their income tax returns are filed with the IRS. The IRS issued a statement Wednesday warning income tax fraudsters that it's watching for illegal uses of the first-time homebuyer tax credit, and has already successfully prosecuted a tax preparer who attempted the fraud. The IRS already has 24 open criminal investigations involving fraudulent uses of the tax credit. It executed seven search warrants in relation to some of those cases. “We will vigorously pursue anyone who falsely tries to claim this or any other tax credit or deduction,” said Eileen Mayer, IRS criminal investigation chief, in a press release. “The penalties for tax fraud are steep. Taxpayers should be wary of anyone who promises to get them a big refund.” In one such case of the tax credit fraud, a Jacksonville-based tax preparer, James Otto Price III, pleaded guilty last week to falsely claiming the credit on a client’s tax return. When Price is sentenced, according to the IRS, he faces up to three years in jail and/or a fine of up to $250,000. The IRS added individuals are ultimately responsible for the accuracy of their return, even if it’s prepared by a tax professional, and improper returns may result in not only back taxes, but penalties and interest, too. Write to Austin Kilgore.