Audit Help

In December of 2017 I purchased a new 2016 Nissan Leaf SV. I claimed the $7500 credit with no issue. I drove the car for right at a year until a move and a new job made the real world range of 90 miles untenable. The only issue I ever had with the tax credit was the Louisiana department of revenue requesting a copy of my sales agreement for eligibility to claim the smaller state deduction LA was offering in 2017. This year I got a letter from the IRS requesting a copy of my sales agreement and certificate of origin. Since I had no idea what a certificate of origin was and did not break the law in any way I sent in a copy of my sales agreement with a copy of the 30D form noting that the 2016 Leaf was eligible for the $7500 credit for the 2017 filing year. Fast forward to this week I got a formal audit and bill for over $10k(credit + penalty + interest). They are specifically requesting a copy of the registration and certificate of origin. I sold my little Leaf in Nov of 2018 so I have not had my hands on that registration in two years and I don't know that I ever saw the certificate of origin. I have until 12/23/20 to pay or respond. I am going to try and exhaust all recourses before retaining an attorney. Monday I will be at the DMV, as well as on the phone with my CPA and the dealership. Has anyone else fallen victim to this I saw that an IG at the IRS was making this a personal witch hunt. I know I can reliably obtain proof of insurance shouldn't that suffice as proof of ownership and registration? Any assistance would be greatly appreciated. The 8936 form from 2017 does not require individuals to provide certificate of origin or proof of registration for eligibility if the manufacture has already registered with the IRS and the vehicle is listed on form 30D. I do not understand how they can move the goal post 3 years later. I don't look for ways to cheat my taxes I am regular sucker that is always doped by the feds, why are they coming after me. I follow the rules. Someone please help!

The MCO is what serves as the title until the vehicle is titled. I don't know why they want that, either. If the dealership registered the car for you, then only they and the DMV saw the MCO, and the title should suffice. That's all the info I can provide.

I think I just drew a very short straw. They are being very unreasonable. The problem is I never had the title since it was financed the year I had it and that was two years ago. That does give me an idea though maybe NMAC could provide me a copy of the title! Thanks

When you lease a car, the manufacturer's leasing arm - in this case NMAC - owns it, and the federal EV credit goes to them. NMAC passes some of it on it the case of a cash incentive, but the lessee is NOT eligible to get the $7500 credit themselves. Maybe they think that you leased the car...?

Well that would be feasible if the sales agreement didn’t explicitly say I was buying/financing the car. After looking closer my CPA should’ve requested a copy of my registration and certificate of origin before filing the 8936. This is still a witch hunt spurred by the IG at the IRS. I suppose if the DMV can’t provide records for a car I sold two years ago then I will have to just pay up. Just sucks we just try and escape this endless cycle of debt and nothing only to have **** like this happen. I didn’t break the law but I currently can’t “prove it” either. God bless America I guess.

Keep your head up, OP. There is no way you will have to pay the IRS, but you will have to play the game.

The IRS is demanding proof that the car was in your possession. Fair enough, since that is one of the criteria for the tax credit. Ignore the request for the MCO -- you never had it. You (or your lender) DID have the title, and you will have to track it down. I suggest starting from your local MVD or the insurance company you used when you bought the car. IIRC both agencies require a Title and keep copies. Your other choices could the your lender, the person you sold the car to, or your car buyer lender. The car dealership may also have documents.

Once you send them a copy of the Title, you will have satisfied their demand. Some idiot clerk at the IRS may still demand the MCO and reject your paperwork as insufficient. At that point you appeal their decision, and you keep rejecting their decision until you reach a competent person at the IRS. That takes time, and you will not enjoy the letters you get in the meantime but it WILL work out in the end because you are right. Don't involve a lawyer -- that is a waste of money. You can however ask your CPA to call the IRS on your behalf (*after* you submit the Title paperwork) since they have access to less stupid IRS customer support.

I know all this because the IRS demanded a payment of ~ $500,000 from me a couple years ago for unpaid taxes on stock gains + fines etc.
It took about a year to go from IRS estimate, to appeal, to demand from me for tax court. Prior to having a tax court date set, the IRS lawyer for the Western US who would have prosecuted my case called me up, asked a few questions, and agreed that the entire case was a pile of nonsense. The case was closed a few weeks later, although I did receive a refund of ~ $100 due to an error I had made on my tax return that he caught during his review.

Disclaimer: I am not a lawyer or a CPA, and I do not have any expertise in taxes beyond what a regular citizen can acquire by reading the internet and the IRS publications. It's just that the IRS is chock full of idiots that you sometimes have to wade through until you reach someone competent.

I seem to recall that you had to retain posession of the vehicle for 2 years to remain eligible for one of the incentives but I don't recall whether that was for the tax credit, or for the CA rebate...

All of this has been incredibly helpful! You folks are still one of the best groups on the web! Thank you sagebrush! I got a copy of my original registration from the local OMV, I requested a copy of the MCO from my state office, I have copies of my proof of insurance. I just reached out to my insurance company about a copy of the title. I will put a request in with NMAC as well. Once I get it sent in I will have my CPA call. Thanks for all the support folks!

Now I have such a letter.

Joy.

This is disturbing. My 2020 Leaf will be my 4th federal tax credit.

I hope this isn’t a trend. I never have a title. In Florida I always request an electronic title. When I trade a car in the dealership takes care of all title transfers so I never see or sign a title. Even if I had a paper title who keeps copies of it when you sell or trade?

The only “proof” of ownership would be a buyers order and registration. Why wouldn’t that be proof enough?

Now I’m going to get copies of my window stickers and keep them. Hopefully these will qualify as certificate of origin.

How many people keep these documents after disposing of a car?

I was audited in 2019 for tax year 2018 when I bought 2 plug in hybrids. They said I filed the wrong form, I forgot which one they said, but it was for business. I wrote back saying I did file the correct form, 8936, and it was for personal use.

Nubo said:

I seem to recall that you had to retain posession of the vehicle for 2 years to remain eligible for one of the incentives but I don't recall whether that was for the tax credit, or for the CA rebate...

Click to expand...

In CA for the CA rebate, if you claimed it, used to be 2.5 years I believe. How often they actually look I have no idea. I figured if they see you re-registered twice, meaning you carried it past the full two year mark, you probably will be OK. That's my minimum plan.

I was audited once by the IRS over a calculation I did instead of using a table. I actually talked to them on the phone and went through the calculation. Oddly it came out slightly different than the table. They never called me again or sent me another letter. I think the difference in taxes was less than $100. And maybe it wasn't a true audit? Rather than telling me I made an error? But after the phone call they just disappeared. I always wondered if they discovered an error in the calculation in the book and therefore let it slide. It also was a paltry $ amount. But as far as I understood you could use the equation or table. Long ago though.