Electric drive vehicle credit 8936 decreased/rejected by IRS

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LOL. No wonder claiming EV credit now flags your return.

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Thought I would leave this here, might find it useful. Using material from MNL user Weatherman and myself, this is a consolidation of it into one place regarding the 7500 credit being reduced by AMT/TMT.

http://goo.gl/l3w8W" onclick="window.open(this.href);return false;

-Zarwin
 
To put it in its most simple form...

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.



For 2011, unless your regular tax liability is reduced by the foreign tax credit, section 26(a)(2) does not apply. Therefore, your personal tax credit is limited by the difference between your regular tax liability plus any additional taxes imposed by the AMT (Section 55), and the sum of credits allowable under subpart A (other than Section 30D and 25D) and Section 27 for the taxable year.

This means that, if you took no additional credits under subpart A, your credit under Section 30D can not exceed your regular tax liability, or your AMT (whichever is larger).

Therefore, not only is the AMT not a limitation to your credit, it may, under certain circumstances increase your available credit under Section 30D.

For example, if your regular tax liability is $5,000, but the tax imposed by Section 55 increases your total tax by $2,500, you can take a $7,500 tax credit under Section 30D of the tax code, even though that's more than your regular tax liability for the year.


The CP12 notice from the IRS is true, for "some credits", however it is not true for the credits specified in Section 30D of the tax code.

The simplest defense against the CP12 notice is to refer to Section 30D(c)(2)(b) of the tax code.
 
Weatherman: Thank you for this post. This gives me some hope. You state that if you do not have a foreign tax credit, the AMT TMT limitation does not apply. Unfortunately, I DO have a foreign tax credit of $96. Does this say that my $96 credit is costing me $3300 of my $7500 EV tax credit? (My total tax liability is more than $7500 which is not the issue for me). If true, I wonder if I can resubmit my tax return and delete the foreign tax credit.
 
If Section 26(a)(2) does apply, it simply means your maximum allowable credit may be a bit smaller.

In your case it would be your regular tax liability reduced by $96 (your foreign tax credit), or your AMT, whichever is the larger number.


Just a quick disclaimer... I'm not a CPA or a tax attorney. But, the law is very simple, and tax preparation software, like TurboTax, is correct in its calculations. Knowing the tax code puts you in a powerful position when dealing the IRS, but if they aren't cooperative, you might want to seek professional advice..
 
Thanks for the clarification. Disclaimer noted! As far as Turbotax doing the right calculations, either they or the IRS are in error because Turbotax gave me the whole $7500. I appreciate any clues that help me to fight this, i.e. tax code references. I will pour over the codes. I found them on http://www.taxalmanac.org" onclick="window.open(this.href);return false; and http://www.law.cornell.edu/uscode/text/26/55" onclick="window.open(this.href);return false;. At least, now we know what to search for.

If anyone else has resolved this, please post how it was done. I will do the same. I have an IRS agent looking into this. He said I may have a case. He said it may take up to 30 days for an answer. Meanwhile I am accruing a 3%/year interest charge if I fail to overule them. I feel like David vs Goliath!
 
why I went with the lease as well., Never trusted the government to give the 7500.00 back. If it cost me alittle more at least Nissan gets it and maybe will continue to make better EV's. Hope all works out for you guys. :geek:
 
haha, i just got a letter from the IRS saying they did not refund to me the entire amount that i claimed i was owed. who wants to guess that it's the EV credit? i have to check my bank account. within 3 weeks they are supposed to contact me.

edit: ha, my refund is short by less than $100. if i had to guess now i'd say that the EV credit made them take a careful look at the return and they found some random error i made.

edit edit: hmm, the refund is short almost exactly by the amount of foreign tax credit that i have. but i don't understand how that could have limited the EV credit because my regular tax is a 5-digit number. reducing that by the foreign tax credit is still a number much larger than $7500. i wonder if the IRS has gotten confused here and reduced the EV credit by the foreign tax credit.
 
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. I spoke to a nice lady at the IRS who said that she had never seen anything like this in her 21 years there. I took a bit of comfort from that and am trying to keep my sense of humor intact. I'm faxing them Form 8936 from my return and the bill of sale for the LEAF, because the nice lady said they were checking a lot of these credits and would probably ask me for it once they realized their mistake. She even apologized.
 
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. I spoke to a nice lady at the IRS who said that she had never seen anything like this in her 21 years there. I took a bit of comfort from that and am trying to keep my sense of humor intact. I'm faxing them Form 8936 from my return and the bill of sale for the LEAF, because the nice lady said they were checking a lot of these credits and would probably ask me for it once they realized their mistake. She even apologized.
sorry to hear about that.
it seems a one-off situation and, while considerable money is involved, you seem to be maintaining a level of outrage that exceeds the situation.
I wish you well and fervently wish you get your credit.
 
oakwcj said:
...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! ...My return was completely accurate...they were checking a lot of these credits...

My return was filed in early March... Well past the 4 weeks to expect a refund. We'll see...
 
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. I spoke to a nice lady at the IRS who said that she had never seen anything like this in her 21 years there. I took a bit of comfort from that and am trying to keep my sense of humor intact. I'm faxing them Form 8936 from my return and the bill of sale for the LEAF, because the nice lady said they were checking a lot of these credits and would probably ask me for it once they realized their mistake. She even apologized.
sorry to hear about that.
it seems a one-off situation and, while considerable money is involved, you seem to be maintaining a level of outrage that exceeds the situation.
I wish you well and fervently wish you get your credit.

What level of outrage? It's too bizarre for outrage. But wouldn't you think that computers, what with their advanced cut-and-paste capabilities, would have eliminated transposition errors?
 
oakwcj said:
But wouldn't you think that computers, what with their advanced cut-and-paste capabilities, would have eliminated transposition errors?
I would, but I have seen too many times where someone re-entered the data by typing it off a printed list or whatever. I go to great lengths to massage data so it will import properly, and most would say that I expend too much effort. And then I see stupid stuff like this and I'm not sorry one bit.
 
thankyouOB said:
did you paper or electronic file?

I bet it was electronic.

You'd win the bet. And, yes, Kafka would like that, because it means that no human ever looked at my actual return.
 
The IRS sent me a pamphlet entitled "The Examination Process", which gives this explanation of why it examines returns:

"While most returns are accepted as filed, some are selected for examination. The IRS examines (or audits) some federal tax returns to determine if income, expenses, and credits are being reported accurately. IRS selects returns for examination using various methods. These methods include random sampling, computerized screening, and comparison of information received by the IRS such as Forms W-2 and 1099. Having your return selected for examination does not suggest that you made an error or were dishonest."

I have heard from sources inside and outside of the IRS that they have been much more aggressive this year in randomly selecting returns claiming large credits. It seems likely that my return would have been randomly selected even if they had gotten the credit I was claiming right. 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. In the end, it doesn't matter if you file electronically or on paper, with or without a tax professional. Their algorithm doesn't care.
 
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?
 
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