I just got a notice from IRS which disallowed the tax credit that I claimed for the Prius. How do I fight them?

I finally got through to a human being at IRS. The tax credit for the Prius was allowed.

Can you explain how the tax credit was allowed? Who did you talk to, what exactly did they say, what did you have to do with respect to the correspondence from the IRS, etc.?<br><br>Please elaborate.

I called the IRS 800 number, skipped all the automated stuff, spoke with an individual they selected when I described the problem. She looked up my tax return and said that the clean air deduction was OK.

I assume in your response below, that you meant "clean air credit" and not "clean air deduction." George<br><br>Your response:<br>I called the IRS 800 number, skipped all the automated stuff, spoke with an individual they selected when I described the problem. She looked up my tax return and said that the clean air deduction was OK.

You are correct.

SEE MESSAGE 4383

I guess that I am a coward when it comes to IRS. They are allowing me a deduction from income on line 32. If I put the same $2000 on line 49, it would be worth a lot more. If other people do this and succeed (and report the results here), I may file an amended tax return. As of now, I am happy that I got something.

After many, many minutes on the IRS line I was connected to an agent whose number I have who assured me that it belongs on line 49. And I have directions for form 8834 that indicate the same thing. I'm going for the big one, Sidney, fool that I may be. Wish me luck!

Did the IRS person ask you the following qualification question for the credit:<br><br>Is the vehicle: "Powered primarily by an electric motor drawing current from rechargeable batteries, fuel cells, or other portable sources of electrical current"<br><br>That seems to be the problematic qualification. The Prius's primary power source is the ICE with the electic motor used as an assist/fill-in.<br><br>Did they forget to ask you this, or (hopefully) they discussed it with you and the IRS rep gave you the thumbs up on this qualification.

Loosethread said: "The Prius's primary power source is the ICE with the electic motor used as an assist/fill-in." <br><br>Is this your opinion or do you have a reference? Consider this: if you remove the ICE, the car will run; if you remove the electric motors, the car won't run. This is almost a rhetorical question - the car is a system and it makes little sense to ask how the car will run when one component is removed. <br><br>Also, take a look at this reference: toyota-prius@yahoogroups.com message 6045 which explains how and why the Prius runs primarily on ELECTRIC power during the car's warmup period. (first 5-10 minutes of driving).<br><br>Sam Williams

And you can't back it out of the driveway with the ICE either.<br><br>I guess if you agree to only drive it in reverse it qualifies easily for the credit.<br><br>George

Sam: The cross-reference to message 6045 doesn't appear correct. George

The IRS agent asked me if the vehicle was "powered primarily by an electric motor drawing current from rechargeable batteries, fuel cells, or other portable sources of electrical current." I responded that the car has two electric motor/generators, a very large bank of batteries, and a small gas engine which kept the batteries charged. His response was that the car definitely qualified.<br><br>His observation was that since the car had a "portable source of electric current" it was not relevant that the source was an ICE.<br><br>The fact that the car is also rated as a SULEV was a contributing factor, I believe.

Now, now, now...<br><br>Ok, look. First of all I would love to be able to claim the Prius as a credit, and I believe that Bush's tax cut should be 16 trillion not 1.6, and I resent every buck I have to pay in taxes. Second, we are all "brothers and sisters in Prius" so please know that my comments are spoken with brotherly love...<br><br>Ok. <br><br>Are you guys nuts??!!! If you read (I know you have) the IRS form, its intent is clearly aimed at electric cars whose primary source of power is electric. I just can't see any valid argument that the Prius' primary power source is electric. Starting up, going in reverse (a joke, i know), going downhill, driving in a parking lot, these are simply not the main operating modes. The ICE is the main source of energy and its primary responsibility is propulsion, not charging the battery. According to Toyota's own web site: <a href=http://prius.toyota.com/details/specs.html target=new>http://prius.toyota.com/details/specs.html</a><br><br>

Prius runs on electric below 15-20 MPH, hot or cold, ICE running or not.<br><br>Bill P. and I proved this by drag racing, him in Drive, me in Reverse.<br><br>Jeff (ICE running does not always = ICE providing torque to wheels)

The answer to the tax question is obvious:<br><br>1) Drain the gas from your Prius.<br>2) Place an IRS agent in a Yugo.<br>3) Claim the tax credit.<br>4) Start both cars.<br><br>If you can outrun the agent you get to keep the credit. Otherwise, alas, an audit.<br><br>It seems the only fair way to resolve it. :)

Couple of thoughts on this.<br><br>First, the caution language "Caution: Gasoline/electric hybrid vehicles that are not powered primarily by an electric motor are not qualified electric vehicles." makes quite a bit of sense if the hybrid they looked at was the Insight.<br><br>Second, the language is "primarily," not solely. This creates a bit of a problem. Is the Prius powered "primarily" by the ICE? If it is not, then it has to be powered primarily by something else. The ICE lacks many of the usual attributes that one would expect from a "primarily" powered ICE vehicle (including reverse, yes, it is a joke, but all good jokes have a bit of truth to them). Yes, you can drive for a while without gas (not far, but does the battery capacity matter).<br><br>You can also drive electric (slowly), then park and let the ICE recharge the battery, then drive electric again.<br><br>When you take this approach you can reach the conclusion that the ICE does not necessarily meet the "primarily" powered standard. If it doesn't then it may make sense to take the credit, unless you decide that it is not "primarily" powered by either. <br><br>Another issue is what is meant by powered. Does it mean source of power or does it go to the type of engine/motor. I assume it means the type of engine/motor. Should there be a problem with having your generating source of energy on board, versus plugging it in. The reality is that all electric cars are supplied with fossil fuels (assume all hydro gets used, so when one charges an electic car, it is the incremental power that gets consumed).<br><br>The fact that the Prius has an SULEV rating (a clean power source) supports on a policy level the treatment of the Prius for the credit.<br><br>I personally do not need to make a decision on the credit/deduction issue until spring of 2002, and have not decided on which approach to take. At this stage I would be inclined to take the credit,