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IRS refused my tax credit

Discussion in 'Model S' started by Woland, Apr 25, 2015.

  1. Woland

    Woland Member

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    I just got a notice from the IRS that they denied my $7,500 tax credit from form 8936 for my Tesla purchased in 2014.

    I had an accountant review it before submitting and everything looks fine.

    Any idea what's up or what I should do? I tried calling the IRS but they're closed on the weekend.

    Thanks!
     
  2. sorka

    sorka Active Member

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    Well, you didn't really give very much information so it's hard to say.

    They gave no reason for denying it? BTW, you submitted your taxes already and claimed the credit. Are they now saying you owe $7500 after the fact?

    You had at least $7500 in tax liability right? And it wasn't offset by business losses or anything else complicated like that right?

    You bought the Tesla new and it has never had the tax credit claimed for it before, right?

    There are no income limits or AMT limits that reduce the credit, so it can't be anything like that.
     
  3. Musterion

    Musterion 18h 03m 37s −24° 23′ 12″

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    So if you don't have any of the issues @sorka mentions, and you are properly due the credit, you will need to ask IRS why it was denied. Did you happen to file electronically or by paper? I am not sure if things have gotten better or worse, but in last two years because of "abuse," the IRS has been denying the credit to some unless backup information was provided. If you search the forum you will see many of these incidents and they were predominantly for efiles. For that reason two years ago I did the paper file and had no problems. The "abuse" can include someone else using your VIN (either on purpose or by accident) to get the credit and then their electronic cross check throws a red flag on your return. Also there may be an electronic DMV check but in past they were sometimes asking for this proof of ownership after the fact.
     
    • Helpful x 1
  4. sorka

    sorka Active Member

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    Make sure you include the AMT form even if you didn't owe AMT. Apparently the IRS will refuse your refund if the form wasn't included.

    - - - Updated - - -

    Note, even if you owe AMT, the credit won't be reduced by it, but for some reason they require the AMT form be filed anyways. Dozens of reports all over the internet of being denied for exactly the same reason. I had to double check because I have been deep in AMT for over a decade and I don't get any deductions for things like property taxes any more :(
     
  5. Zarwin

    Zarwin Member

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    #5 Zarwin, Apr 25, 2015
    Last edited: Apr 25, 2015
    Even this tax year the IRS is still making mistakes about TMT and AMT with the EV tax credit. I made this doc with the help of others for the 2011 tax year when mine was refused and still get email from people all the time about it happening again and again. If it was because of AMT/TMT that it was refused, the info in the doc will clear it up for them, just sent it to them, its fixed the issue for many others.

    EV Tax Credit and AMT/TMT - Google Docs

    Edit: might note that the 8936 tax form for 2011 is different from the one for 2014, but the tax code is the same. Still should take care of the issue.
     
  6. ItsNotAboutTheMoney

    ItsNotAboutTheMoney Active Member

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    I think it was because the tax credit it replaced _wasn't_ allowed with AMT. Multiple people have had IRS denials because of the confusion.
     
  7. glhs272

    glhs272 Unnamed plug faced villian

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    I had a similar situation:
    -Filed my return without AMT electronically.
    -Received vague a letter in the mail from the IRS that they are modifying my return amount.
    -Received my return less the $7,500
    -Called and complained to the IRS. The agent said she "didn't see anything wrong with my original return and wasn't sure what the issue was, sorry I can't help."
    -I tried to complain to my tax preparer and they wouldn't do anything.
    -After being frustrated and getting no response from anyone, I recieved an electronic payment from the IRS for the remaining $7,500 about a month later.
    -Bottom line, I got the full return, just took longer than the rest. Perhaps additional review maybe.
     
  8. supratachophobia

    supratachophobia Active Member

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    Were there income requirements? Mine was denied because of my first world problem of having too many write-offs and not hitting some income threshold.
     
  9. clx

    clx Member

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    Does that mean if I don't owe tax (have refund) for year when I purchased the car, I won't be getting anything back?
     
  10. Duma

    Duma Member

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    What is relevant is your total federal tax liability, not the size of the refund per se. As an example, if your tax liability works out to $10K (without the EV credit) and you only had $9K withheld from income (or withholding plus estimated tax payments), then $7.5K tax credit would mean that your net federal tax liability is $2.5K (with the EV credit) so you get a refund of $6.5K rather than owing $1K.

    On the other hand, if your tax liability is $5K, your tax credit is capped at $5K, you owe no net tax, and you would get a refund of all income withholding and/or estimated tax payments for the year. However, your net savings is only $5K.

    Clear as mud?
     
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  11. sorka

    sorka Active Member

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    That's correct. It's only a tax credit against actual tax liability. If you don't have any tax liability due to other losses or write offs then you can't claim the credit.
     
  12. cpa

    cpa Member

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    A little more accurate explanation is that the EV tax credit only applies to the income tax. It cannot be used to offset other taxes like SE Tax, NIIT, additional Medicare Tax, Nanny Tax or the penalty for the early distribution from a qualified plan. One's tax liability includes all the aforementioned additional taxes, and is the amount before withholding, ES payments and refundable credits are subtracted.
     
  13. Incredulocious

    Incredulocious '11 LEAF –> '13 RAV4 EV

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    #13 Incredulocious, Apr 25, 2015
    Last edited: Apr 25, 2015
    Well, probably better to say "That's incorrect."

    To clx: as others are explaining, the tax credit is against your income tax liability for the year, NOT merely the additional amount (if any) that you owe when you file your taxes. So, even if you would get a partial refund when you file, you still can claim the tax credit up to your total income tax liability, thus increasing the size of your refund. "Up to your total income tax liability" means you can't reduce your taxes to less than zero.
     
  14. ItsNotAboutTheMoney

    ItsNotAboutTheMoney Active Member

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    That's really the key limitation. It's a non-refundable tax credit.*
    It's also not deferrable: it must be claimed for the tax year during which the car was put into service.

    * But there are ways for people to create tax liability, like a Roth conversion.
     
  15. clx

    clx Member

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    Thanks for all the replies, everyone! So from my understanding, say if I need to pay $20k tax total for the year, and I've actually paid $30k tax for the year through my monthly paycheck deduction, when I filed my tax, I'll get $10k + $7.5k back. Is this correct? Or does it mean that since I got $10k back already, I will not be getting anything back for the EV credit?
     
  16. wk057

    wk057 Senior Tinkerer

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    Keep in mind the EV credit doesn't apply to the self-employment (SS+Medicare) tax. :(
     
  17. Incredulocious

    Incredulocious '11 LEAF –> '13 RAV4 EV

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    #17 Incredulocious, Apr 25, 2015
    Last edited: Apr 25, 2015
    If without the EV tax credit your liability from income tax would be $20K for the year, then with the tax credit your liability becomes $12,500. Since you've paid $30K, your refund will be $17,500.

    (I'm saying it this way because the credit applies to the year in which you purchased the vehicle and applying for the tax credit is part of filing your taxes... you would not have "got $10k back already" unless you somehow forgot to claim the tax credit in your tax return and are now going to file a correction for your entire tax return.)
     
  18. ahurst

    ahurst Member

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    Not to get into the weeds on this, but are we saying line 44 OR line 63 of Form 1040 must be at or above $7,500?

    And going further, the Federal EV credit is applied to line 54 of Form 1040?
     
  19. AmpedRealtor

    AmpedRealtor Active Member

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    My account was somehow able to get around this because I'm an S Corp.
     
  20. SeminoleFSU

    SeminoleFSU Member

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    Did you contribute or donate money to Republican, Libertarian, or Tea Party related organizations or are your registered to vote as a Republican or Libertarian? ;-)
     

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