Prisoners, dead people got car tax break: report

Prisoners, dead people and children qualified for a 2009 tax break to spur car buying, according to a U.S. report on Wednesday that criticized the Internal Revenue Service for misapplying the refund in some cases.

The IRS should have done more to verify that people who claimed the qualified motor vehicle (QMV) deduction were entitled to it, said the report from the Treasury Inspector General for Tax Administration, a government-run IRS watchdog.

The measure, which expired on December 31, 2009, was part of the Obama administration's economic stimulus package.

Taxpayers who claimed the deduction were not required to provide independent proof that they bought a vehicle, or if they did, how much they paid in deductible sales and excise taxes, said the inspector general.

"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 IRS said in a statement.

The IRS failed to identify 4,257 people who made QMV claims above a level the IRS flagged as excessive, the report said. These people claimed more than $151.1 million in QMV deductions, based on the inspector general's 2010 review of 2009 returns.