One of the big incentives for consumers considering the purchase of an EV is a federal tax credit. A credit of up to $7,500 is available depending on the vehicle and is gradually phased out as sales of a model increase. According to a report in Bloomberg, over $70 million in EV tax credits were improperly claimed.
- Thousands of returns and millions of dollars are at issue.
- Improperly awarded EV credits are being missed during auditing.
- Process improvements are needed to stop the problem.
Erroneous EV tax credits are making their way through on too many tax returns. (Photo: Getty Images)
The findings were uncovered in an audit conducted by the Treasury Inspector General for Tax Administration. It showed 16,510 tax returns filed from 2014 to 2018 included $73.8 million in questionable EV tax credits. Another 1,509 returns amounted to $8 million and a final 68 returns added another $1 million to the total.
That amounts to 18,807 returns with $82.8 million in erroneous claims. Although both the number of returns and the dollar amount are high, it’s still a small portion of the $1.4 billion paid to nearly 240,000 taxpayers during that timeframe.
Exactly how taxpayers managed to get these credits through was redacted, but the report did make recommendations to mitigate the problem. Those recommendations focus on the current absence of an effective way to prevent these types of claims from happening in the first place.
There were four specific recommendations, starting with using the Vehicle Identification Number (VIN) to help identify improper claims. The report also recommended using data analytics to track claims and then using those findings to determine how to ensure compliance. A new audit sheet for examiners who audit EV credits and a recovery program for reclaiming credits were also recommended.
WHY THIS MATTERS
Affordability is a key part of any vehicle purchase and the EV tax credit figures heavily into the purchase decision of electric vehicles. Ensuring these credits are properly allocated is essential to maintaining the effectiveness of the program.