IRS Backlog Sparks U.S. EV Sales Slump: Dealers Left Holding $100K+ in Unpaid Tax Credits (2025 Update)

• Why Are EV Dealers Losing Sleep Over IRS Paperwork?
• How the EV Tax Credit System Broke Down
• The Domino Effect on EV Sales
• Why This Hurts More Than Just Dealers
• What the IRS and White House Are Saying
• The Bigger Picture for EV Adoption
• What's Next for the EV Tax Credit Program?
• FAQs About the EV Tax Credit Backlog

Electric vehicle dealers across America are sounding the alarm as an IRS processing backlog leaves them footing the bill for thousands in unpaid EV tax credits. What began as a September rush to beat the federal incentive deadline has turned into a financial nightmare, with dealerships reporting six-figure losses and customers caught in bureaucratic limbo. The situation reveals cracks in what was supposed to be a smooth transition away from the popular $7,500 new EV and $4,000 used EV tax credit program.

Why Are EV Dealers Losing Sleep Over IRS Paperwork?

Imagine selling a dozen electric cars, giving each customer an instant $7,500 discount, and then waiting weeks for the government to reimburse you. That's exactly what's happening to Jesse Lore at Green Wave Electric Vehicles in New Hampshire, who showed documentation proving the IRS owes him nearly $100,000. "We're continuing to pay the tax credit, though with a lot of anxiety," Lore admitted. "We're in the dark." Three of his applications finally got approved last week, but the money still hasn't hit his bank account.

How the EV Tax Credit System Broke Down

The process was designed to be simple: dealers submit applications through the Energy Credits Online portal after each qualifying EV sale. Pre-September, approvals came through within days, with payments following shortly after. But since mid-September 2025, the system has ground to a halt. Dealers report:

• No approval notifications
• Zero communication from IRS representatives
• Pending applications stacking up like rush hour traffic

The Domino Effect on EV Sales

Gary Pretzfeld of AutoTrust USA in Florida put it bluntly: "There are definitely some dealers who can't afford to do it this way." He's currently floating $80,000-$90,000 in unpaid rebates. The uncertainty has caused some dealerships to:

• Stop offering instant rebates entirely
• Hold vehicles hostage until IRS payments clear
• Walk away from the EV market completely

Why This Hurts More Than Just Dealers

Al Salas, CEO of Eco Auto, explained how the upfront rebate made EVs accessible: "Without that instant rebate, customers can end up paying $80 to $100 more each month." The alternative—having buyers claim the credit during tax season—comes with its own hurdles. Customers need sufficient tax liability to qualify, a requirement that didn't exist with the point-of-sale rebate.

What the IRS and White House Are Saying

IRS spokesperson Robyn Capehart maintains that "any submissions through the Energy Credits Online portal have always been subject to IRS review." The WHITE House confirmed all valid claims submitted before September 30 will be honored, but offered no explanation for the delays that have left dealers scrambling.

The Bigger Picture for EV Adoption

This bureaucratic snafu couldn't come at a worse time for EV adoption. Dealers were counting on smooth processing during the final weeks of the program, which was originally slated to run until 2032 before being axed early. Now, the very incentive designed to boost EV sales has become a roadblock, with:

• Smaller dealers particularly vulnerable to cash flow issues
• Consumer confidence shaken by the uncertainty
• The entire EV market facing unnecessary headwinds

What's Next for the EV Tax Credit Program?

While the National Automobile Dealers Association reports "cooperative" discussions with the IRS and Treasury, dealers remain in limbo. The situation serves as a cautionary tale about how bureaucratic delays can undermine even the most well-intentioned policies. For now, dealers like Lore continue fronting the money, hoping the IRS will eventually make good on its promises.

FAQs About the EV Tax Credit Backlog

How much money are dealers currently waiting on from the IRS?

Dealers report outstanding balances ranging from $50,000 to nearly $100,000 in unpaid EV tax credits.

Can customers still get the EV tax credit if dealers stop offering it upfront?

Yes, but buyers WOULD need to claim it during tax season and must have sufficient tax liability to qualify—a hurdle many lower-income buyers can't clear.

Is there any guarantee dealers will get reimbursed?

The White House has confirmed all valid claims submitted before September 30 will be honored, but hasn't provided a timeline for payments.

How long were EV tax credits supposed to last originally?

The program was designed to continue through 2032 before being terminated early by legislation signed in July 2025.