If you bought an electric vehicle and made a claim for the $7,500 tax credit on your taxes, you might want to pull out those old returns as a tax watchdog says tens of millions of dollars in credits were claimed inappropriately.
According to an audit by the Treasury Inspector General for Tax Administration, more than $70 million in tax credits may have been improperly claimed during a five-year period.
The questionable claims were found in 16,510 individual tax returns during the 2014-2018 processing years, TIGTA claims. Those filers received $73.8 million in potentially erroneous credits. Another 1,508 people an additional $8 million.
Overall, TIGTA found more than $1.4 billion in credits were paid to almost 240,000 taxpayers during the same period that were reviewed as part of the audit. In October 2018, the Joint Committee on Taxation estimated that the credit would cost $7.5 billion over a five-year period (Fiscal Years 2018 through 2022).
Details about how taxpayers improperly claimed the credits were mostly redacted, though the audit found that the Internal Revenue Service lacks an effective process to prevent improper claims under the program, which awards as much as $7,500 for electric-car buyers, Bloomberg reported.
“Although the IRS has taken steps to address some of TIGTA’s previous recommendations to improve the identification and prevention of erroneous credit claims, many of the deficiencies previously identified still exist,” according to the audit.
The watchdog made four recommendations to the IRS, which agreed with the findings, the recommendations include:
- Use VINs provided by taxpayers on their tax returns and readily available third-party VIN information to identify taxpayers who are claiming the credit for (certain vehicles/makers eligible for the full credit).
- Develop a compliance program to address the taxpayers who appear to have erroneously received the Plug-In Credit identified in this report that meet selection threshold criteria and have open statutes.
- Use available vehicle VIN listings submitted by leasing entities to claim a Plug-In Credit to perform a computer analysis to identify individual taxpayers claiming a credit
- The Commissioner, Small Business/Self-Employed Division, should update Examiner Lead Sheets to provide guidance to examiners to review the Plug-In Credit along with information on VIN characteristics, including available resources to check and determine the validity of a VIN (such as using the VIN decoder on the Department of Transportation website).
While the plans to crackdown on the mistakes, errant filings (intentional or oherwise) are important, it’s also important to know that the IRS plans to start a program to recover erroneous credits, among other steps, according to a summary of the audit.
The EV credits were part of the American Recovery Act of 2009, which was aimed at jumpstarting the economy mired in a recession. Earlier credits were available, according the TIGTA report, but the current set up of a $7,500 credit available to buyers of vehicles until that automaker sold 200,000 units and then it phased out over a one-year period was part of the legislation. Thus far on Tesla and General Motors have surpassed the total.