Mustang Mach-E electric vehicles are displayed in a long line at a dealership on January 21, 2024. Some purchasers of electric cars in 2024 are discovering that they cannot access an EV tax credit because their dealerships failed to report the sale to the IRS through a new system.
David Zalubowski/AP
hide caption

toggle caption

David Zalubowski/AP

Kristina Meier followed all the right steps.

In September, she bought a plug-in electric minivan and aimed to take advantage of the $7,500 federal EV tax credit. Being a physicist, Meier was no stranger to research. “I had reviewed the IRS website,” she explains, studying the eligibility requirements and necessary paperwork.

As she wrapped up her vehicle purchase, she informed the finance representative that the dealership needed to report the transaction to the IRS and provide her with documentation. The IRS instructions highlighted the necessity of a “seller report” to access the tax credit, and the dealership supplied her with a document that matched that description. She believed she was in good shape.

However, when Meier attempted to claim her EV tax credit a few weeks later, her return was denied by the IRS.

Despite her diligence, it turned out that her dealership had not fulfilled their obligations.

The electric vehicle tax credit experienced a significant overhaul in 2024. This transformation made it easier for many buyers to obtain the credit, but unfortunately, for some, it also opened the door to losing access to it.

Introducing an Up-Front Rebate Option

The EV tax credit, long-standing in the automotive landscape, received a shake-up after the Inflation Reduction Act was enacted during the Biden administration. In addition to stricter battery-sourcing requirements for new vehicles, a credit for used vehicles was also introduced.

Crucially, the credit is now available as an immediate rebate for consumers. This means buyers can apply the credit toward the vehicle’s price right away, rather than waiting for a tax return, making it easier for those with lower incomes to benefit.

To facilitate this change, the IRS established a new online portal for the 2024 tax year, requiring dealers to enroll in the system to process front-end rebate claims.

Moreover, it was vital for dealers to use this system for reporting sales for buyers planning to claim the credit during tax season as the previous forms were no longer acceptable.

The Treasury Department, in collaboration with the IRS, the National Automobile Dealers Association, and state dealer associations, conducted multiple outreach efforts to inform dealers of the changes. A former Treasury staff member noted that the main focus was on how to administer the rebates but clearly communicated that participation required compliance with the new system.

The Treasury and IRS have not provided any comments to NPR regarding the changes.

Steven Barber, a certified public accountant who assists numerous dealers, noted that the information dissemination was effective. He wrote guidance for a state dealer association and helped his clients navigate the new procedures.

“Our dealers have adjusted well to the changes, but it’s understandable that others might not,” he mentioned, emphasizing the importance of staying informed.

Participation in the New System Varies by Dealership

As of last September, over 14,000 car dealerships had registered to report sales through the IRS’s new portal, which encompasses most franchised dealerships in the country, totaling nearly 17,000 nationwide according to the dealers’ trade association.

Nonetheless, around 3,000 dealerships, including the one where Meier purchased her vehicle, were not equipped with the new reporting system.

NPR spoke with several other EV buyers nationwide who also faced challenges in claiming their credits due to similar failures by their dealerships to report sales correctly. Heatmap, a climate-focused news outlet, has also reported on this issue, highlighting various buyers’ experiences and analyzing numerous social media accounts.

Every customer NPR interviewed understood their dealership wasn’t offering immediate rebates but believed they would still qualify for the credit later.

Some, including Meier, requested confirmation from their dealers about the reporting process and received documents labeled as “seller reports.” Unfortunately, these turned out to be outdated forms—valid in 2023 but not in 2024.

Others simply were unaware of the new reporting requirements.

Meier’s dealership, Lithia Chrysler Dodge Jeep Ram Fiat of Santa Fe, admits to an error last fall. Michael Garza, the general manager, mentioned that staff mistakenly used outdated paperwork stored in their system.

“We used the incorrect form,” he stated. “We’re working to resolve this for the customer.”

The challenge is the reporting deadline was tight: dealers had to submit sales within three days of the transaction.

Meier noted that her dealership finally gained access to the new portal—an employee demonstrated it to her—but they were still unable to submit her sale because the system flagged it as too old.

The Scope of Buyers Affected Remains Unclear

While many dealers successfully registered and reported properly, thereby ensuring over 300,000 EV purchases were reported to the IRS, the extent of buyers like Meier who are left in limbo remains uncertain. Over a million new electric vehicles were sold last year in the U.S., though many were not eligible for the credit due to various criteria, including income limits and strict battery sourcing.

“It’s still early in the tax filing season,” observes Alison Flores, who manages the Tax Institute at H&R Block. “We haven’t had enough data yet to assess how prevalent this issue might be.”

Flores reported an uptick in rejected EV credit claims compared to forecasts.

She believes the new rebate system is a substantial improvement but comes with its own set of challenges.

“This is a new framework,” she stated. “Unfortunately, both consumers and dealers are facing difficulties in keeping up with the updated rules.”

Many frustrated customers interviewed by NPR are exploring various remedies, including reaching out to the Taxpayer Advocate Service, contacting Congressional representatives, filing paper returns with explanatory letters, appealing IRS credit denials, or even considering legal action against the dealerships.

They had all envisioned how they would use the money saved from the anticipated credit. Meier hoped to build a savings reserve after her years in graduate school, while another buyer aimed to repay a student loan. A retiree in Maine who purchased a used EV intended to apply the credit towards living expenses such as heating oil.

The IRS does have the option to temporarily allow retroactive reporting to mitigate some of these issues, a measure they have implemented in the past.

However, multiple sources expressed concern that current instability in the federal administration might complicate the resolution of this matter. The IRS is currently undergoing significant layoffs, affecting personnel responsible for helping taxpayers address issues related to the new tax credits.

In the meantime, Flores advises anyone planning to claim the EV tax credit to file their returns promptly to allow time for addressing any potential issues.

Prospective electric vehicle buyers are encouraged to secure the rebate as an immediate discount to avoid unexpected problems during tax filing next year.

Meier remains optimistic about eventually receiving her credit despite the setbacks and has no regrets regarding her vehicle purchase.

“We absolutely love our car,” she says, praising the convenience of home charging, savings on fuel, additional space for car seats, and the inclusion of a backup camera.

Yet, the tax credit experience has left her understandably frustrated. “Both my husband and I conduct research for a living,” she reflects. “Even with our backgrounds, we struggled to navigate this information—and ultimately uncovered very little.”