The Internal Revenue Service is getting peeved over bogus claims for tax credits on fuel purchases. The IRS is so annoyed right now that it lists them among its “Dirty Dozen” tax scams for the 2015 filing season – alongside offshore tax cheating, fake charities and false documents.
Fuel tax credits probably are an obscure issue for most taxpayers. That’s because individual taxpayers typically can’t claim the credit on their personal income taxes.
But the federal government does allow credits for federal taxes paid on gasoline and other fuels for certain business uses. (They are declared on Form 4136.) A key requirement is that the fuel must be used for off-highway or off-road driving. One large exception is for school buses and transit buses.
For example, the IRS will give fuel tax credits for gasoline, diesel and kerosene used to power farming vehicles. However it will reject claims for all-terrain vehicles or boats that are used for sports or recreation.
We at EricJohn Ltd. have been able to apply for fuel tax credits for off-road, heavy machinery and for commercial lawnmowers. Fuel tax credits also scale up into operations of aircraft and train locomotives.
Nonetheless, the IRS says it computerized filters blocked $33 million worth of faulty credit claims in 2013 alone.
So, if the rumor mill or a tax avoidance company suggests using the fuel for your personal ATV for a tax credit, think twice. It might be a good time to seek some advice from EricJohn Ltd. or a reputable tax preparer.