The IRS allowed $33 million in erroneous tax credits for alternative-fuel motor vehicles last year. A review by the Treasury inspector general found that over a six-month period in 2010, the IRS repeatedly missed erroneous tax credits for the vehicles, some of which were even claimed by IRS employees and prisoners.
A provision in the stimulus law gave tax credits to individuals who purchased plug-in electric and alternative-fuel motor vehicles. The inspector general identified 12,920 individuals who wrongly claimed over $33 million in vehicle credits. Of those incorrect claims, almost 2,000 people also reduced the amount of their minimum tax due by an additional $5.3 million.
The review found instances where tax-filers claimed the same vehicle for multiple credits or an excessive number of vehicles for personal use. It also found improper claims for the vehicle credits made by prisoners and IRS employees. The information on IRS employees is being investigated further.
"IRS is unable to track and account for plug-in electric and alternative vehicle credits claimed by individuals on paper-filed tax returns," the report said. Paper-filed tax returns did not have any process to screen information on electric vehicle credits, though the IRS did screen credits for tax returns filed electronically.
FAST FACT: The inspector general found that 29 prisoners received $49,926 in vehicle tax credits despite being incarcerated all of 2009.
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