False Claims for Fuel Tax Credits Makes the IRS’s Dirty Dozen List

The Internal Revenue Service (IRS) warned taxpayers to watch out for  improper claims for Federal Fuel Tax Credits in its annual Dirty Dozen list of tax scams. Fuel taxes generally do not make the Dirty Dozen, but there has been an uptick in examination activity and IRS notices related to these and other fuel- related credits.

This Federal Fuel Tax Credit applies to gasoline or diesel used for an off-highway business purpose or farming. Off-highway business use includes fuels used: in stationary machines such as generators, compressors, power saws, and similar equipment; for cleaning purposes; and in forklift trucks, bulldozers, and earthmovers. It generally does not include such nonbusiness use as fuel for minibikes, snowmobiles, personal power lawn mowers, chain saws, and other personal yard equipment. Farming use of fuel includes carrying on a trade or business of farming on a farm in the United States.

Improper – or fictitious – claims primarily are made on Form 4136, Credit for Federal Tax Paid on Fuels, which is attached to a federal income tax filing. In these scams, promoters or tax return preparers charge taxpayers inflated fees for making credit claims. They make misleading claims on fuel use and create fictitious documents or receipts for fuel, leaving taxpayers subject to tax liability that could result in civil and criminal penalties.

The IRS has implemented new identity theft screening filters and processing systems to thwart suspicious fuel tax credit refund claims.

Taxpayers are advised to find reputable tax professionals for assistance in filing Form 4136, Credit for Federal Tax Paid on Fuels, and in providing proper substantiation for the credits.

For assistance in claiming the Fuel Tax Credit, please contact us. We are here to help.

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