Treasury Inspector General for Tax Administration
February 3, 2011
TIGTA - 2011-8
Contact: Karen Kraushaar
WASHINGTON – 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, according to a report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).
That means about 20 percent 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.
TIGTA conducted the audit as part of its continuing oversight of the Internal Revenue Service’s (IRS) implementation of the American Recovery and Reinvestment Act of 2009 (Recovery Act). The Act included a number of provisions that encourage the purchase of motor vehicles that operate on clean renewable sources of energy. 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.
TIGTA recommended that the IRS develop procedures to disallow credits for vehicles with nonqualifying years, initiate actions to recover erroneous credits identified by TIGTA, and either develop a coding system to identify vehicle makes and models or require the Vehicle Identification Number on the forms used to claim plug-in electric and alternative motor vehicle credits.
The IRS agreed with the recommendations. In addition, IRS management took corrective actions to reduce erroneous claims when process weaknesses were brought to their attention, resulting in an estimated $3.1 million in revenue protected.
“The IRS, along with all Federal agencies, is required to ensure that Recovery Act funds are used for authorized purposes and appropriate measures are taken to prevent waste, fraud, and abuse,” said J. Russell George, the Treasury Inspector General for Tax Administration. “While IRS management did take corrective actions to reduce erroneous claims when TIGTA brought these process weaknesses to its attention, more clearly needs to be done.”
To view the complete report, including the scope, methodology, and full IRS response, go to: http://www.treas.gov/tigta/auditreports/2011reports/201041011fr.pdf.
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