TIGTA: 20% Error Rate in Tax Credits Claimed for Electric and Hybrid Cars

The Treasury Inspector General for Tax Administration today released Individuals Received Millions of Dollars in Erroneous Plug-in Electric and Alternative Motor Vehicle Credits (2011-41-011):

Approximately $33 million in credits for plug-in electric and alternative-fueled vehicles credits were erroneously claimed by at least 12,920 taxpayers through July 24, 2010. ... That means about 20% of the $163.9 million in credits claimed by taxpayers from January 1, 2010 to July 24, 2010 for plug-in electric and alternative motor vehicle credits were claimed in error. In the course of its review, TIGTA also found that 1,719 of the 12,920 individuals also erroneously reduced the amount of Alternative Minimum Tax they owed by almost $5.3 million.

According to TIGTA’s review, approximately 29 prisoners also received $49,926 in vehicle credits even though they were in prison all of Calendar Year 2009. The erroneous claims TIGTA identified resulted from inadequate IRS processes to ensure information reported by individuals claiming the credits met qualifying requirements for vehicle year, placed in-service date, and make and model. TIGTA’s review of electronically filed tax returns identified individuals who erroneously claimed the same vehicle for multiple plug-in electric and alternative motor vehicle credits or claimed an excessive number of vehicles for personal use credits. TIGTA also determined that the IRS cannot track and account for plug-in electric and alternative motor vehicle credits claimed by individuals on paper-filed tax returns because it has not established processes to capture this information from those returns.