oakwcj
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Re: Electric drive vehicle credit 8936 decreased/rejected by

Tue May 08, 2012 7:58 am

lpickup wrote:
oakwcj wrote:What's disturbing is the length of time they took before sending me their "report" without doing the simplest sanity check, such as actually looking at the form on which I claimed the credit.
Let me ask you though: you said that your return has been in limbo since January, but you only now got their report. What, if anything, did you receive in January? I received what sounds like a very similar package recently (albeit it was for my 2010 return) with enough information (I wouldn't call it a "report" though) for me to contest and substantiate the information they had. There was a very specific deadline specified and address/fax number to send my information to. Are you saying that this is the first correspondence you've received from them?
Yes. I filed my return on January 26th. It was accepted and my refund was scheduled for February 4th. The "Where's My Refund?" page has said my return was being reviewed since early February. I called twice and was essentially told ... nothing. What I got yesterday was the first "communication" I've received from the IRS.
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GaslessInSeattle
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Re: Electric drive vehicle credit 8936 decreased/rejected by

Tue May 08, 2012 10:22 am

We filed on Febuary 12th, have received exactly zero correspondence. the web site says "Your tax return has been received and is being processed." and has said that for months. We have made repeated phone calls, the first time they said that there was a discrepancy and that we should have received a notice by mail a month earlier. They told us they could not reissue the letter till 30 days from the original issue, so we scoured the house and made sure we had not received the letter, then we waited till after the 30 days and had our accountant make the inquiry (there is a special line for CPA's that sometimes offers better info). The accountant spent a lot of time digging into this with the help line and was finally referred to the advocate line, they finally admitted that they had not sent any letter out and, as mentioned earlier, we are in in "limbo land" and that they have 120 days from late March to reply or give us a refund... that's late JULY!

I contacted my Senator's office, who offered to file a Congressional Inquary. Yesterday we sent off all the waivers and forms to the Senators office for them to act on our behalf. Our CPA also suggested sending a formal complaint to the IRS, as in her 25 years in business she has never seen anything like this, oh and she also mentioned that the advocacy line told here that there was some code on the file related to the electric vehicle credit.

Not happy!
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mwalsh
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Re: Electric drive vehicle credit 8936 decreased/rejected by

Tue May 08, 2012 2:43 pm

GaslessInSeattle wrote:We filed on Febuary 12th, have received exactly zero correspondence. the web site says "Your tax return has been received and is being processed." and has said that for months.

I contacted my Senator's office, who offered to file a Congressional Inquary. Yesterday we sent off all the waivers and forms to the Senators office for them to act on our behalf. Our CPA also suggested sending a formal complaint to the IRS, as in her 25 years in business she has never seen anything like this, oh and she also mentioned that the advocacy line told here that there was some code on the file related to the electric vehicle credit.

Not happy!

Who is your Senator? I'd like to get one/both of ours on board in calling for this too.
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gmuzhik
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Re: Electric drive vehicle credit 8936 decreased/rejected by

Wed May 09, 2012 11:48 am

Hooray!! I just called the IRS and an agent told me that this TMT limitation which would have reduced my EV credit by $3300 was resolved and I have no balance due!! I did not ask what the problem was, thinking it might take them an hour or two on hold for an answer.

To summarize: On Apr 28, I got a CP11 notice that I owed $3300 due to a TMT limitation. I called them on Apr 30 to dispute. I was transferred to the Tax Law section. The agent there said I may have a case and if so, he could reverse the charge. He said it might take up to 30 days for an answer. I decided to call today to check and the agent gave me the good news!

Hope this helps others with this problem. Best of luck to all!
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Lkmtleaf
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Re: Electric drive vehicle credit 8936 decreased/rejected by

Wed May 09, 2012 6:14 pm

I'm in the same situation in Bellevue, WA. I filed in mid-April and just now received a letter from the IRS. The IRS deposited ~30% of my return and shuffled me off to limbo land stating that I would hear from them within 30 days and once I had submitted the information they needed, it would take up to an additional 90 days to conclude the investigation. The best part of the letter... "You do not need to contact us."

Rat
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Re: Electric drive vehicle credit 8936 decreased/rejected by

Wed May 09, 2012 9:09 pm

There is lots of good info here, but also some that is inaccurate or misleading. I was once an attorney and did quite a bit of tax work, both as an attorney and in an accountant's office during law school years ago, but I am not in practice now and I'm not your attorney, so don't rely on what I say here. Also, each person's individual situation is different, so it's impossible to say what's right in an individual case based on a few posts here.

First as to TurboTax, I use it and I think it's great. It is not perfect, however, and I have had to file amended returns on a couple of occasions because of its mistakes or poorly worded instructions. I once use Tax Cut, the software from H&R Block, and it was horrible for a number of reasons. As to the company's guarantee/warranty of accuracy, don't count on it. They only guarantee the accuracy of the calculations, not their interpretation of the law. Basically they guarantee that if you enter income as $77,500 and a credit of $7,500, they'll do the subtraction right and get the result $70,000. That's all. They don't guarantee you're entitled to the credit and won't represent you if the IRS challenges it. I think software products are all the same on that. However, I have found that CPA's are way too expensive and not reliably better. There have been several threads on this forum where an accountant or other tax professional got things wrong.

Second, you are almost always better off taking any credit or deduction if you have any lawful non-fraudulent basis for it. The IRS rarely challenges them based on suspicion, but will normally catch mistakes that violate the mathematical rules, e.g. you are claiming a credit of more than your total tax liability. In that case, just pay the difference. The 3% interest charge (if that's the current rate), if you get hit with it, will be a lot less than the cost of a CPA or attorney. Personally, I have no fear of an audit or going to court over something like this because I'm retired and have litigating experience, but I realize that's not practical for most people. It's actually easier than people think to go to court and fight your case. If you're in the right, the judge will get it right eventually, but you can almost always negotiate a settlement on very favorable terms because the government doesn't want to litigate small cases for several reasons: the cost to them, but more importantly, the damage that would be done from the precedent if the court holds their interpretation of the tax code is wrong.

Third, if I read the document right, business use does not prevent claiming the $7,500 credit, it only means that when you sell the call, your basis is small due to the credit and the credit is in effect partially recovered by the government. Form 8936 has a business use section and I think the main purpose it to prevent you from claiming the credit for the cost of buying the car and also deduct the cost of operating and depreciating it for business use, so your credit may be reduced by the amount of business use you claim or vice versa. However, I have not researched this and only glanced at that part, so maybe I have that wrong.

Fourth, someone asked how to fight a mistaken interpretation by the auditor on this. As I think the posts show, just being civil and politely disagreeing with him or her usually gets the right result. They are honest folks trying to follow the law in my experience. Give them time to research it and by all means give them any reference materials you have on this. Even if you don't agree on the credit, you can probably work out a compromise, especially if you can find some other items where you might be entitled to a bigger refund (or less tax) that you did not claim or which are in dispute, such as mileage for volunteer work or getting to medical appointments that you could have claimed on Schedule B but didn't bother with. If at the end of their process you still want to fight it, your options are generally threefold: appeal to the Tax Court, sue the government in the Court of Claims, or sue the government in U.S. District Court. For Tax Court you do not have to pay the tax first, but for the other two you have to pay the tax first and then sue to get it back. The Tax Court has the most expertise, so that's where you want to go if you are right on the law, but it may be inconvenient to get to depending on where you live and especially expensive if you have to hire someone locally to travel there. This is true for the Court of Claims, too. U.S. District Court will generally be closer and easier, but the judges know little tax law and the process is slower and clunkier. Bankruptcy is another option for a few people, but I don't recommend that or any court action over an amount this small unless you're like me -- experienced in this stuff and have the time away from work to take it on.
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HartKJ
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Re: Electric drive vehicle credit 8936 decreased/rejected by

Thu May 10, 2012 1:05 pm

Here is my experience on this issue.

I received the notice from the IRS that my refund was reduced because of the AMT issue. I discussed this issue with both Turbo Tax and spent about an hour on hold to talk directly to the IRS.

Turbo Tax: AMT should not affect credits for personal use. It does effect credits for business use. So they thought I should get the whole credit because I am neither subject to the AMT nor is the vehicle used for business, in any case.

IRS: Turbo Tax's interpretation is wrong. The $7,500 EV tax credit was among several passed into law in 2011 that had a built-in AMT limitation. The limitation applies regardless of whether you are subject to the AMT or not nor, according the IRS, if the vehicle is not for business use.

The specific limitation is this:

If the difference between your AMT (as the IRS calculates it) and the tax you actually pay is less than $7,500, then your credit is reduced by the difference. If the difference between the AMT and the tax you actually pay is greater than $7,500, you get the full credit.

I have not had time to research the actual wording of the legislation/IRS regulation with respect the $7,500 credit. The reductions in this credit (at least for me) only has to do with whether the AMT limitation as described above applies or not. If it truly does, there is no recourse. No one can predict in advance how much of a credit you will get until the AMT is calculated for your situation. It might have been possible to use some legal tax maneuvering to try to alter the AMT to capture the full credit but it's far too late for that (but I am not a tax expert - just a recently burned tax payer).

With respect to Turbo Tax, I recommend you read their guarantees carefully. They do not, to my knowledge, indemnify you against this loss. They only say they will pay the penalty if you incur one due to their miscalculation. So, you might get some money from them if you incurred a penalty due to their miscalculation. Nothing in the guarantee says they will make you whole.

Signed,

Seriously peeved in TN. :evil:

Weatherman
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Re: Electric drive vehicle credit 8936 decreased/rejected by

Thu May 10, 2012 1:32 pm

HartKJ wrote:IRS: Turbo Tax's interpretation is wrong. The $7,500 EV tax credit was among several passed into law in 2011 that had a built-in AMT limitation. The limitation applies regardless of whether you are subject to the AMT or not nor, according the IRS, if the vehicle is not for business use.

The specific limitation is this:

If the difference between your AMT (as the IRS calculates it) and the tax you actually pay is less than $7,500, then your credit is reduced by the difference. If the difference between the AMT and the tax you actually pay is greater than $7,500, you get the full credit.

If this were true, I'd ask for a reference to the specific part of the tax code they believe applies an AMT limitation. IRC Section 30D(c)(2)(B) is pretty clear:

Since 2011 and 2012 Nissan LEAFs qualify as New Qualified Plug-in Electric Drive Motor Vehicles, the application of the Personal Credit is subject to Section 30D(c)(2)(b) of the tax code, which states:

(B) Limitation based on amount of tax

In the case of a taxable year to which section 26 (a)(2) does not apply, the credit allowed under subsection (a) for any taxable year (determined after application of paragraph (1)) shall not exceed the excess of—

(i) the sum of the regular tax liability (as defined in section 26 (b)) plus the tax imposed by section 55, over
(ii) the sum of the credits allowable under subpart A (other than this section and section 25D) and section 27 for the taxable year.
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SanDust
Posts: 1363
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Re: Electric drive vehicle credit 8936 decreased/rejected by

Thu May 10, 2012 4:16 pm

HartKJ wrote:IRS: Turbo Tax's interpretation is wrong. The $7,500 EV tax credit was among several passed into law in 2011 that had a built-in AMT limitation. The limitation applies regardless of whether you are subject to the AMT or not nor, according the IRS, if the vehicle is not for business use.
The IRS is wrong. Actually more accurate to say whomever from the IRS you talked to or looked at your return is wrong. Weatherman has given you the exact wording of the bill. Or just fill out the IRS form.

HartKJ
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Re: Electric drive vehicle credit 8936 decreased/rejected by

Thu May 10, 2012 8:27 pm

Weatherman wrote:
HartKJ wrote:IRS: Turbo Tax's interpretation is wrong. The $7,500 EV tax credit was among several passed into law in 2011 that had a built-in AMT limitation. The limitation applies regardless of whether you are subject to the AMT or not nor, according the IRS, if the vehicle is not for business use.

The specific limitation is this:

If the difference between your AMT (as the IRS calculates it) and the tax you actually pay is less than $7,500, then your credit is reduced by the difference. If the difference between the AMT and the tax you actually pay is greater than $7,500, you get the full credit.

If this were true, I'd ask for a reference to the specific part of the tax code they believe applies an AMT limitation. IRC Section 30D(c)(2)(B) is pretty clear:

Since 2011 and 2012 Nissan LEAFs qualify as New Qualified Plug-in Electric Drive Motor Vehicles, the application of the Personal Credit is subject to Section 30D(c)(2)(b) of the tax code, which states:

(B) Limitation based on amount of tax

In the case of a taxable year to which section 26 (a)(2) does not apply, the credit allowed under subsection (a) for any taxable year (determined after application of paragraph (1)) shall not exceed the excess of—

(i) the sum of the regular tax liability (as defined in section 26 (b)) plus the tax imposed by section 55, over
(ii) the sum of the credits allowable under subpart A (other than this section and section 25D) and section 27 for the taxable year.
Weatherman - Thanks for putting so much useful information out on this subject. I think after reviewing the information here and other sources, I should be able to get the remainder of my credit...eventually.

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