IRS gave car tax credit without proof of purchase

@CNNMoney June 22, 2011: 11:45 AM ET
The IRS issued $150 million worth of car tax deductions to people with no proof of purchase, according to the Tax Inspector General.

The IRS issued $150 million worth of car tax deductions to people with no proof of purchase, according to the Tax Inspector General.

NEW YORK (CNNMoney) -- The Internal Revenue Service may have granted more than $150 million in car purchase tax deductions to thousands of people who didn't have to prove they actually bought the car.

The Treasury Inspector General for Tax Administration said, in a report issued Wednesday, that the IRS failed to identify 4,257 people who claimed $150.1 million in "excessive" qualified motor vehicle deductions.

Treasury Inspector General J. Russell George said the investigation of IRS deductions, related to the 2009 American Recovery and Reinvestment Act stimulus program, "found that individuals do not have to provide any third-party documentation to support that they actually purchased a qualified motor vehicle."

The report applies to the stimulus period from Feb. 17 to Dec. 31, 2009, when the government awarded deductions for state sales and excise taxes paid on qualified vehicle purchases -- which, in this case, was any car, motorcycle or light truck that weighed 8,500 pounds or less, or a mobile home of any weight. It said the taxpayers were not required to provide documentation of the amount paid in those taxes -- assuming that they actually bought a car and paid the taxes.

The Treasury Inspector also found that 473 people "erroneously received" about $1 million in qualified motor vehicle deductions because the IRS couldn't tell that the applicants were in prison, dead or underage.

"It is imperative that the IRS address the weakness in this report," said George, in a press release. "These are taxpayers' dollars and the [IRS] must ensure that only those who deserve this and other tax benefits receive them."

The American tax machine: It's complicated

The inspector's report contained a response from Richard Byrd, commissioner of the wage and investment division of the IRS. His letter said the inspector's report "identified areas where we have already implemented changes to strengthen controls, or are in the process of doing so."

The IRS also told the inspector that more than 4.3 million taxpayers claimed the deduction: "Your report identifies a small percentage of cases in which taxpayers may have claimed questionable [qualified motor vehicle] deductions."

The bad news for anyone who thought got away with a break: IRS said it will review the returns featured in the study and conduct audits if warranted.  To top of page

Overnight Avg Rate Latest Change Last Week
30 yr fixed4.36%4.24%
15 yr fixed3.39%3.26%
5/1 ARM3.36%3.27%
30 yr refi4.34%4.22%
15 yr refi3.38%3.24%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Economic Calendar
Latest ReportNext Update
Home pricesAug 28
Consumer confidenceAug 28
GDPAug 29
Manufacturing (ISM)Sept 4
JobsSept 7
Inflation (CPI)Sept 14
Retail sales Sept 14
CNNMoney Sponsors
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.