Raising concerns with IRS vehicle loan reporting form
Urging the IRS to clarify instructions, prioritize standardized electronic reporting, and ease compliance requirements, America’s Credit Unions sent a comment letter about the proposed Form 1098-VLI, which is related to the temporary deduction for vehicle loan interest.
The letter responds to the agency’s Paperwork Reduction Act notice for the proposed form and warns that credit unions do not always have access to key information needed to determine whether a loan qualifies as a “specified passenger vehicle loan,” such as final assembly location or first-use status.
To account for this, America’s Credit Unions Regulatory Advocacy Counsel John Vatian asks the IRS to clarify that borrowers remain responsible for determining whether their loan qualifies for the deduction and to allow lenders to report interest for all vehicle loans above the reporting threshold, even when eligibility is uncertain. “This approach would help ensure that borrowers do not miss out on potential tax benefits simply because certain details were unavailable at the time of reporting,” wrote Vatian.
In addition, there are concerns that the IRS has underestimated the true compliance burden, citing system upgrades, vendor coordination, staff training, and new compliance processes.
“These activities require significant time and financial investment, especially for small and mid-sized credit unions that rely on third-party service providers. We encourage the IRS to revise its burden estimates so they better reflect the full cost of system changes and operational implementation,” he added, calling for transition relief, phased implementation, and safe-harbor protections for lenders making good-faith compliance efforts.