20% of Electric and Hybrid Tax Credits Claimed Erroneously

The Treasury Inspector General for Tax Administration released a new report a few days ago asserting that individuals received millions of dollars in erroneous plug-in electric and alternative motor vehicle credits

Here's what the TIGTA found:

As of July 24, 2010, TIGTA identified 12,920 individuals who electronically filed their tax returns and erroneously claimed $33 million in plug-in electric and alternative motor vehicle

credits. In addition, 1,719 of the 12,920 individuals also erroneously reduced the amount of Alternative Minimum Tax owed by almost $5.3 million. During this review, management took corrective actions to reduce erroneous claims when process weaknesses were brought to their attention. These actions have resulted in an estimated $3.1 million in revenue protected. The erroneous claims TIGTA identified resulted from inadequate IRS processes to ensure information reported by individuals claiming plug-in electric and alternative motor vehicle credits met qualifying requirements for vehicle year, placed in-service date, and make and model.

In addition, TIGTA found that the IRS is unable to track and account for plug-in electric and alternative motor vehicle credits claimed by individuals on paper-filed tax returns. Processes were not established to capture this information from paper-filed tax returns.

Finally, our review of electronically filed tax returns also 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 identified improper claims for the credits by prisoners and IRS employees. TIGTA has referred the information on the IRS employees to its Office of Investigations for further review.

You can download a PDF of the TIGTA's full report at Treasury.gov...

IRS Paid Out $111 Million in Erroneous Stimulus Tax Breaks

Due to a lack of controls to prevent ineligible taxpayers from claiming the 8,000 first-time homebuyer tax credit, and credits for vehicles, the IRS paid out $111 million in erroneous refunds. The Treasury Inspector General for Tax Administration released these figures, among others, earlier today.

The Wall Street Journal reports

To put the errors in perspective, IRS processed more than $81 billion in claims for stimulus-related tax benefits in 2010, involving upwards of 90 million returns.

About 126,000 of those returns were flagged by TIGTA as including erroneous claims that weren’t caught by the IRS before they were processed. In some cases, the IRS put compliance controls in place during the tax-filing season to catch the errors.

The number of U.S. taxpayers filing returns electronically continued to increase, reaching 72% of all filers in 2010, the report said.

About 8 million people claimed more generous tax credits for college tuition in the stimulus law this year, for a total of $7.1 billion in benefits. Four million took advantage of a tax break for state sales and excise taxes on new-vehicle purchases, for an average tax deduction of $2,048.

Read more here