The alternative motor vehicle credit is difficult for the Internal Revenue Service to administer because of complex tax laws, according to a new report.
The Treasury Inspector General for Tax Administration found that the IRS generally provided the right information for most taxpayers to claim the credit. However, some taxpayers erroneously claimed the credit for leased vehicles because the form and instructions did not clearly inform them that credits were available only to vehicle owners.
TIGTA notified the IRS of this concern and the IRS took action to clarify the requirements on the Form 8910 instructions for the credit.
Nevertheless, some taxpayers claimed the credit for vehicles that did not qualify, claimed amounts higher than the amount allowed, or did not provide the required documentation to support the credit claim. Many erroneous claims were allowed because the IRS did not establish sufficient controls while processing tax returns to ensure that claims were only allowed for qualified vehicles, and that the amounts claimed were correct.
TIGTA recommended that the IRS establish criteria to weed out questionable claims and verify the amount of the credit claimed. If a significant compliance issue is found, the IRS should consider proposing legislation to require sellers of qualifying vehicles to provide purchasers and the IRS with documentation supporting the claims. Lastly, the IRS should establish procedures to correspond with taxpayers to ask for missing Forms 8910 or for missing information on Forms 8910 when appropriate. The IRS agreed with TIGTA’s recommendations.
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