IRS gripe

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Landshark

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This is just a gripe as the matter will be resolved with our CPA.

Yesterday we received a large envelope from the IRS which included a letter stating that our 2019 returns had been audited and that we owed $9,500. This was news my wife did not welcome. A quick scan of the documents indicates that they are allowing the Sales Contract, but disallowing the Credit, claiming that we did not submit the required documents. So, $7,500, plus a $1500 penalty and $500 in interest.

A brief history. We bought the car in August of 2019. It has been registered and insured in our names since that time. There is no reason that we would not be eligible for the credit.

We received a warm up letter in March of this year informing us that they were not allowing the credit, due to a lack of required documents. My wife is OCD about this stuff. We submitted all the documents from the required document list and made our own copies, which were filed in a Clarity Tax Credit folder. Sent certified mail with confirmation of receipt. Since then we’ve received correspondence twice that they were still working on the matter.

Then yesterday happened.

Strangely, we have copies of all the required documents that were submitted in March, which matches, exactly, the new list of required documents. If only that had the ability to tell us which document they misplaced.
 
Something doesn't seem right -- the initial tax filing doesn't include submitting any documents to the IRS (other than Form 8936 itself). If you were being audited the first letter you got would have asked for additional documentation; it wouldn't have claimed it hadn't been provided because it isn't part of filing. What documents did they request ("they" being the IRS, right?)

Your CPA might have asked for docs like the sales contract to get the info to put on 8936, but that still wouldn't have gone to the IRS with the original filing. I'd double check that the CPA got the original 8936 right -- key info would be the Year/Make/Model (my form done with TaxAct says "2019 Honda Clarity Plug-in H" then was cut off), the VIN (make sure that's right; IRS may well cross-check), and the date the vehicle was placed in service (make sure that's in 2019, likely the purchase contract date). If any of that was wrong or missing it could have flagged the audit.

In your case the CPA should handle it, but when I've had some issues I found that while it was hard to get a call in (hour+ of hold and a couple transfers), the agents had lots of info and were very helpful when I did. In one case, I had a wrong or missing Form 8606 for a nondeductible IRA (because I didn't enter some things right in TaxAct), and they told me to just send them the updated form and it all got taken care of. In another year THEY had missed the correct 8606, could see it in their computer, and expedited getting it rereviewed and cleared. Whoever handles it, it should be pretty simple to resolve if you are actually entitled to the credit.
 
Below is a photo of the original correspondence which requested documents. The IRS stated that the VIN was ineligible or invalid. The VIN, vehicle description and date placed in service are all correct on the 8936 that was filed with the 2019 return. All requested documents were submitted.

The other photo is the most recent letter which requests additional documents. My current hunch is that the 30KC in the middle of the VIN was entered as 3OKC on their end, thus triggering an invalid/ineligible VIN. All requested documents will be submitted tomorrow.B8D4358B-C4A3-446C-BFB0-E222461DD823.webp 3BAD486E-CA93-4695-BEED-C1D26BC2934E.webp
 
That is annoying -- that might be on your CPA then, since I assume the return was filed electronically and they were the ones to hand-enter it. If you have a direct PDF save of your return you can check -- I just cut the VIN from the PDF of our 2019 return's 8936, and pasted it into https://www.autozone.com/vin-decoder. It returns "2019 Honda Clarity Plug-in Hybrid Touring 4 Cylinders 1.5L MFI HEV DOHC 091 CID". It wasn't a touring, but everything else is right. For the 2020 I replaced it with, it returns "2020 Honda Clarity Plug-in Hybrid 4 Cylinders 1.5L MFI HEV DOHC 091 CID". I remember copying both from my insurance company's website because I was afraid of similar errors and I knew it had auto-validated and populated the info there when I added the cars.

Yeah, it's tough that once the flag is triggered they want all of the other info that wouldn't have otherwise been needed -- and even worse when they misinterpreted or misplaced some of that additional info or want even more. Good luck, and I'd be interested to know what the CPA says. They may be able to help with contacting the IRS in person too. I know when you're doing shady things it's not recommended to speak to them, but for correcting legitimate facts I don't see a downside; it certainly worked in my case.
 
It could be on the CPA. We now have a new CPA.

However, the first request from the IRS was for the correct VIN and the Sales Contract. We provided them with the correct VIN and the Sales Contract which also has the ViN. So, they’ve received 2 documents with the correct VIN and had the opportunity to correct any documents which may have had an incorrect VIN, which they said was the issue in the first place.

They’ve allowed the Sales Contract and are now requesting a copy of the Title/Registration with VIN and Insurance Card with VIN, which they say we did not submit, which is true because they never requested those documents until now.

I’m considering sending them a stool sample as a preemptive measure.
 
VIN numbers can have problems. A friend of mine bought a Jeep Grand Cherokee about 15 years ago in CT (where property taxes are assessed on cars) and he got a very high property tax bill. Turns out the VIN said his car was fully loaded, and the car was actually a base model. Took a long time to straighten out.
Have you tried running the number through one of the VIN checking services or Carfax or something?
 
Landshark said:
No, I haven’t.

Our accountant was out of the office last week. We’ll submit the currently requested documents this week and await the results.
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Hope all goes well with you. I'm a bit afraid since I saw your post since I filed myself with TurboTax and they only asked me to fill the VIN and date of purchase.
 
I'm in the same boat. I also filed for the $7,500 tax credit in 2020 with Turbo Tax. So far, I haven't heard anything back from the IRS.
 
coutinpe said:
Hope all goes well with you. I'm a bit afraid since I saw your post since I filed myself with TurboTax and they only asked me to fill the VIN and date of purchase.
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BrianRC said:
I'm in the same boat. I also filed for the $7,500 tax credit in 2020 with Turbo Tax. So far, I haven't heard anything back from the IRS.
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If by "haven't heard anything back" you mean you didn't get an audit or other notice, you should be fine. I filed with the credit in 2020 and 2019 (different cars!) and other than the 2020 return taking a few extra months before the IRS processed the refund, all seems good. The VIN and date of purchase/service is all that was needed for the original filing.

I use TaxAct, but if you have a PDF version of your return from TurboTax or can open the program/site and copy the VIN filed, you can check it yourself at someplace like https://www.autozone.com/vin-decoder to make sure it shows a Clarity PHEV. I'm 99% sure that was the problem with Landshark's return -- if the VIN was invalid or for another type of car, it's a potential fraud flag for the IRS and *then* they ask for a lot more documentation that isn't otherwise needed.
 
Landshark said:
Processed the refund?
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We filed our 2020 tax return on 4/26 which included the EV tax credit and happened to result in a refund. The IRS approved/send the refund 8/27, 16 weeks later. I know a lot of refunds were delayed this year, and rumors were that returns with EV tax credit forms were taking longer -- possibly because they were checking VIN #s up front now (pure speculation).
 
JCA said:
We filed our 2020 tax return on 4/26 which included the EV tax credit and happened to result in a refund.
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Thanks. So they processed your return, which resulted in a refund. It wasn’t clear to me when you said processed the refund, in the context of discussing the credit.

For the record, here is the result of a VIN check. I’m 99.9% certain that this has been botched by the IRS.
D163DE90-3B8B-4E36-AC76-53475CB88748.webp
 
Just a reminder to everyone, even if you have a cpa or other tax preparer do your Federal return, the return that is filed is based on the information that YOU provide to them. As far as the IRS is concerned, YOU sign the return and are responsible for the accuracy of the return. An error, such as with the VIN number, will cause the IRS computer to kick the return out. Once it is out of the automated system, you are at the mercy of the understaffed humans at the IRS.

Make sure that the VIN entered on line 2 of form 8936 matches the actual VIN on the vehicle and that they both match that on window sticker.

Although not a CPA, I have worked in a tax preparer's office and have some experience in this area.
 
DaleL said:
Just a reminder to everyone, even if you have a cpa or other tax preparer do your Federal return, the return that is filed is based on the information that YOU provide to them. As far as the IRS is concerned, YOU sign the return and are responsible for the accuracy of the return. An error, such as with the VIN number, will cause the IRS computer to kick the return out. Once it is out of the automated system, you are at the mercy of the understaffed humans at the IRS.

Make sure that the VIN entered on line 2 of form 8936 matches the actual VIN on the vehicle and that they both match that on window sticker.

Although not a CPA, I have worked in a tax preparer's office and have some experience in this area.
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That makes sense. However, in our case, the VIN was, is and has always been correct on Form 8936. I don’t know if the automated system or an understaffed human has requested the additional information. To date we have provided the VIN on no less than 5 separate documents.

The 2 most recently requested documents, Title/Registration and Insurance, both with VIN, were submitted because in the words of the IRS, “You did not submit the required documents for the credit.” Yet, to my knowledge, the only required document is Form 8936 which includes a vehicle description, VIN and date placed in service. That document was submitted with the correct information.

I realize that this is a department which will never be capable of operating efficiently. Adding more staff would likely lead to more people doing more things inefficiently, and just create the same problems on a larger scale. They’ve been wasting time and resources on this and it still isn’t finished. They’ll have to mull over the response from our CPA and make a decision. So, more wasted time.
 
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