Prisoners, dead people got car tax break: report

WASHINGTON Wed Jun 8, 2011 1:37pm EDT

Inmates sit in a classroom at the Orange County jail in Santa Ana, California May 24, 2011. REUTERS/Lucy Nicholson

Inmates sit in a classroom at the Orange County jail in Santa Ana, California May 24, 2011.

Credit: Reuters/Lucy Nicholson

Related Topics

WASHINGTON (Reuters) - Prisoners, dead people and children qualified for a 2009 tax break to spur car buying, according to a U.S. report on Wednesday that criticized the Internal Revenue Service for misapplying the refund in some cases.

The IRS should have done more to verify that people who claimed the qualified motor vehicle (QMV) deduction were entitled to it, said the report from the Treasury Inspector General for Tax Administration, a government-run IRS watchdog.

The measure, which expired on December 31, 2009, was part of the Obama administration's economic stimulus package.

Taxpayers who claimed the deduction were not required to provide independent proof that they bought a vehicle, or if they did, how much they paid in deductible sales and excise taxes, said the inspector general.

"While no amount of fraud is acceptable, more than 4.3 million taxpayers claimed more than $7.2 billion in qualified motor vehicle deductions and only a small percentage involved questionable claims," the IRS said in a statement.

"In instances where there are questionable deductions, the IRS will take steps to review the claims and conduct audits as warranted," the agency said.

The IRS failed to identify 4,257 people who made QMV claims above a level the IRS flagged as excessive, the report said. These people claimed more than $151.1 million in QMV deductions, based on the inspector general's 2010 review of 2009 returns.

"Identification of those individuals might have prevented the issuance of erroneous refunds," the report said.

Car dealers promoted the refund at the time. With the economy in recession for much of the year, the QMV deduction helped boost vehicle sales through 2009.

About $1 million in deductions went to 473 people in error "because the IRS did not have processes to identify the individuals were in prison, deceased or underage," it said.

Of that total, 439 were prisoners, who deducted $955,843 in sales tax for the purchase of vehicles in 2009 "even though they were in prison for a full year in 2009 when the vehicle was purportedly purchased," the report said.

Another $36,490 in claims were allowed for people who were dead before the before the deduction's short life, from mid-February 2009 to the end of that year, it said.

The watchdog also found that 18 people under the age of 15 got $31,139 in QMV deductions. In the United States, minors generally are not allowed to buy a motor vehicle.

The IRS said it has taken steps to strengthen controls.

(Editing by Robert MacMillan)

FILED UNDER:
We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (2)
billybob222 wrote:
meanwhile, people like me who bought 1 week before the tax break went into effect got screwed bigtime, because that dumbass obama was too stupid to realize he should have made the tax break retroactive to jan 1, instead he cheated everyone who bought cars the first 6 weeks of the year

Jun 08, 2011 1:25am EDT  --  Report as abuse
JamVee wrote:
Another example of how inept most governmental agencies are. If a private company did this type of thing, they would be out of business very quickly.

POLITICIANS SHOULD NOT BE ALLOWED TO RUN ANYTHING. I’m not even sure they should be allowed to drive a car!

Jun 08, 2011 2:05pm EDT  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.