What Is The Fuel Tax Credit?
The Fuel Tax Credit is a federal subsidy that allows businesses to reduce their taxable income dollar for dollar based on specific types of fuel costs. This credit is designed to offset the tax that the U.S. government charges on fuels such as gasoline and diesel in certain circumstances. However, the IRS has found that this credit is one of the most misused or abused tax credits.
Who is eligible?
Eligibility for the Fuel Tax Credit is limited to specific types of fuel and particular uses. For example, the credit is available for fuel used in off-highway business use, such as fuel used in lawnmowers by a landscaping business. However, it is not available for most taxpayers, and the IRS has seen instances where unscrupulous promoters or return preparers mislead taxpayers about fuel use and create fictitious documents or receipts for fuel.
Misuse of the Fuel Tax Credit
The IRS has issued warnings about false Fuel Tax Credit claims and has implemented new identity theft screening filters and processing systems to stop suspicious claims. The agency has also urged individuals to report any abusive tax practices or tax preparers who intentionally file incorrect returns.
Key takeaway
It’s important for taxpayers to understand the eligibility criteria for the Fuel Tax Credit and to consult a trusted tax professional before claiming the credit. Misuse of the credit can result in penalties and possible jail time. The IRS continues to monitor and address instances of misuse and fraud related to the Fuel Tax Credit.
Disclaimer: The information provided above is not meant to be legal or tax advise. You should consult your CPA and attorney to determine the best course of action for your situation.
Mitzi E. Sullivan, CPA is a cloud based professional services provider
specializing in cloud accounting.