Electric drive vehicle credit 8936 decreased/rejected by IRS

My Nissan Leaf Forum

Help Support My Nissan Leaf Forum:

This site may earn a commission from merchant affiliate links, including eBay, Amazon, and others.
lpickup said:
oakwcj said:
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.
 
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!
 
GaslessInSeattle said:
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.
 
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!
 
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."
 
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.
 
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:
 
HartKJ said:
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.
 
HartKJ said:
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.
 
Weatherman said:
HartKJ said:
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.
 
In case you did not see it earlier in this thread, here is a doc that has expanded info and links into the tax code for this tax credit issue.

http://goo.gl/l3w8W" onclick="window.open(this.href);return false;
 
thankyouOB said:
oakwcj said:
I was going to start a new thread, because what I have to report is straight out of the Twilight Zone. My tax return has been in limbo since late January. Today I got an "Examination Report" with pages of attached garbage from the IRS. The upshot is that my claim for a "Mortgage Interest Credit for $7,500" under Form 8396 was disallowed and penalties were imposed, because I failed to substantiate the claim! That's right, some bozo transposed the three and the nine and turned my claim for an EV credit on Form 8936 into a claim for a mortgage interest credit on Form 8396. My return was completely accurate. .....
sorry to hear about that.
it seems a one-off situation ....
Not a one-off, I just got a letter from IRS saying exactly the same thing (invalid mortgage Interest deduction). In my case they took a portion of the refund.
I filed in Feb. and received a letter from the IRS in early April saying they believed my return had an error and would contact me in 30 days. I paid for the TurboTax audit support and contacted them today. They had me upload all the supporting docs, assigned me a rep and said they'd get back to me by phone in 3-5 days with their assessment. We'll see.

BTW, I filed electronically. At first I thought it was a TurboTax formatting error in the machine readable form that gets transmitted. But, if that were the case it seems like there would be several more of these 8396<->8936 cases.
 
After hearing gmuzhik's experience and reading the great documents posted in this thread I decided it was time to speak to the IRS. After ~3 hours on the phone (mostly on hold) I finished up with the "Tax Law" department and was told I had a case and that TMT should not be applied to decrease the credit as long as the vehicle is 100% personal use. The IRS has 30 days to hash it out so I will keep everyone updated. Thanks for the help!
 
GaslessInSeattle said:
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!


Did you ever get your refund? I'm also still stuck in "Your tax return has been received and is being processed" land. Was counting on my refund for some home repairs this spring, but at this rate maybe by fall! Too bad we can't charge the IRS interest!
 
thankyouOB said:
did anyone with this problem file on paper?

that is to say, are all those in limbo or denied electronic filers?

I can't answer your question, but my guess is that paper returns are scanned and digitized. I don't believe, based on experience with other government agencies, that the IRS uses the paper returns for processing.
 
I'm in the same boat as Ready2plugin. Been almost 2 months since my e-filed tax return was accepted, and it's still being processed. Wonder if we've made it to the FAQ's though.....
 
I paper-filed, mailing 16 April 2012.
I just checked "Where's My Refund" at: http://www.irs.gov" onclick="window.open(this.href);return false;
and found that I should expect the refund on June 12th.
We shall see what transpires.
 
garygid said:
I paper-filed, mailing 16 April 2012.
I just checked "Where's My Refund" at: http://www.irs.gov" onclick="window.open(this.href);return false;
and found that I should expect the refund on June 12th.
We shall see what transpires.

Good luck. Mine stated I should have my refund on May 15th, which came and went, so it's now back to received and being processed....
 
Back
Top