What can the IRS do?
If you've bought an electric vehicle and claimed the $7,500 tax credit in the past few years, it might be worth pulling out your tax returns. According to a report from the Treasury Inspector General For Tax Administration (TIGTA), nearly $74 million in tax credits may have been improperly claimed during a five-year period. TIGTA found 16,510 individual tax returns filing questionable claims during the 2014-2018 processing years, and $73.8 million in potentially 'erroneous' credits given out by the IRS.
Additionally, TIGTA is questioning 1,509 returns to the tune of $8 million and another 68 returns for which taxpayers received approximately $1 million in Plug-In Credits. If our math is right on that last one, it means 68 people managed to get a credit of $14,705 while the maximum is actually $7,500.
The report has redacted sections, so details on exactly how taxpayers improperly claimed the credits are scarce. However, the report does point out that the Internal Revenue Service lacks an effective process to prevent improper claims under the program. It also says: "IRS examiners are generally not reviewing questionable claims for the Plug-In Credit during examination when IRS filtering does not identify the credit."
As a result, TIGTA made four recommendations to the IRS in order to "improve the detection and prevention of erroneous Plug-In Credit claims". According to the report's summary, the "IRS plans to start a program to recover erroneous credits, among other steps."
Overall, TIGTA found more than $1.4 billion in credits were paid to almost 240,000 taxpayers in the period investigated. The Energy Improvement and Extension Act of 2008 was enacted by congress in 2008, and the Qualified Plug-In Electric Drive Motor Vehicle Credit currently applies to each automaker up to the first 200,000 qualifying electric vehicles sold. It's then phased out over the following year in stages.
The idea is to offset the added cost to customers in buying a plug-in electric vehicle. For example, the Chevy Bolt is an "affordable" plug-in electric vehicle, but the subcompact car starts at $36,620 before any credits are applied.
As of now, it's only Tesla and General Motors that have surpassed the 200,000 sales mark. While automakers would like the federal government to extend the credit past 200,000 vehicles, President Trump wants to scrap it.