IRS Paid Over $151 Million in Fraudulent Qualified Motor Vehicle Deductions in 2009

According to a new report by the Treasury Inspector General for Tax Administration, under-age minors, deceased people and incarcerated prisoners received tax breaks through the 2009 qualified motor vehicle (QMV) deduction program. The program, which expired on December 31, 2009, was included in the Obama administration’s economic stimulus package and was intended to spur new vehicle purchases.

In a report released today the IRS watchdog agency, which is run by the federal government, claims the IRS paid out $151.1 million in fraudulent claims filed through the QVM deduction program.

According to the Inspector General, some taxpayers who claimed the QMV deduction were not required to provide proof of their new vehicle purchases.

The report also claims the IRS failed to identify 4,257 individuals whose QMV claims were above the allowable limit and states, “Identification of those individuals might have prevented the issuance of erroneous refunds.”

The report claims that approximately $1 million in QMV deductions were given to 437 individuals “because the IRS did not have processes to identify the individuals were in prison, deceased or underage.”

Deductions totaling $955,843 were given to incarcerated prisoners “even though they were in prison for a full year in 2009 when the vehicle was purportedly purchased.” An additional $36,490 in deductions was given to people who had died prior to the qualified motor vehicle program’s launch in mid-February 2009 and $31,139 in QMV deductions was given to 18 underage individuals.

The QMV program is credited with boosting light vehicle sales during the economic downturn and was highly promoted by automobile dealers.

In its defense, the IRS released a statement that argued, “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 statement went on to say, “In instances where there are questionable deductions, the IRS will take steps to review the claims and conduct audits as warranted.”

The agency also claims that it has strengthened controls to avoid similar problems in the future.

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