How Do You Claim Fuel Tax Credits and Refunds?

You may be eligible to claim a credit on your income tax return for federal excise tax imposed on certain fuels used for a nontaxable use. You also may be eligible to claim a quarterly refund of the fuel taxes during the year, instead of waiting to claim a credit on your income tax return.

Instead of paying the fuel tax and filing for a credit or refund, you may be able to buy certain fuel tax free. For more information, see How To Buy Fuel Tax Free, later.

Nontaxable Uses

This section discusses the nontaxable uses that may be of particular interest to fishermen. The nontaxable uses of fuel for which a fisherman may claim a credit or refund are generally the following.

• Use in a boat engaged in commercial fishing.
• Off-highway business use.

For information about other nontaxable uses (not discussed in this section) for which a credit or refund may be claimed, see Publication 378.

Commercial fishing.   You may be eligible to claim a credit or refund of excise tax on gasoline used in a boat engaged in commercial fishing.

Boats engaged in commercial fishing include only watercraft used in taking, catching, processing, or transporting fish, shellfish, or other aquatic life for commercial purposes, such as selling or processing the catch, on a specific trip basis. They include boats used in both fresh and salt water fishing. They do not include boats used for both sport fishing and commercial fishing on the same trip.

Fuel used in aircraft to locate fish is not fuel used in commercial fishing.
 

Off-highway business use.   You may be eligible to claim a credit or refund of excise tax on fuel if you use the fuel for off-highway business use.

What is off-highway business use?   It is any use of fuel in a trade or business or in any income-producing activity other than use in a highway vehicle registered or required to be registered for use on public highways. Off-highway business use includes fuels used in the following ways.

• In stationary engines to operate generators, compressors, and similar equipment.
• For cleaning purposes.

Fuel used in a motorboat does not qualify as fuel used for an off-highway business use.
 

How To Claim a Credit or Refund

This section tells you when and how to claim a credit or refund of excise taxes on fuels you use for a nontaxable use.

Credit or refund.   A credit is an amount you claim on your income tax return when you file it at the end of the year. If you meet certain requirements, you can claim a refund during the year instead of waiting until you file your tax return. See Claiming a Refund, later.

Credit only.   The following taxes can be claimed only as a credit.

• Tax on fuels you used for nontaxable uses if the total for the tax year is less than $750.
• Tax on fuel you did not include in any claim for refund previously filed for any quarter of the tax year.

Claiming a Credit

You make a claim for credit on Form 4136 and attach it to your income tax return. Do not claim a credit for any amount for which you have filed a refund claim.

When to claim a credit.   You can claim a fuel tax credit on your income tax return for the year you used the fuel.

Once you have filed a Form 4136, you cannot file an amended return to show an increase in the number of gallons of fuel reported on a line of that form. See the following discussion for when you can file a claim on an amended return.

Fuel tax claim on amended return.   You may be able to make a fuel tax claim on an amended return for the year you used the fuel. Generally, if you are allowed to file an amended return, you must file it by the later of 3 years from the date you filed your original income tax return or within 2 years from the time you paid the income tax. A return filed early is considered to have been filed on the due date.

You can file an amended return to claim a fuel tax credit if any of the following apply.

• You did not claim any credit for fuel taxes on Form 4136 for the tax year.
• Your credit is for gasohol blending, as discussed in Publication 378.
• Your credit is for a claim group, explained next, for which you did not previously file a claim on Form 4136 for the tax year.

Table 2. Claim Groups for Tax Years 1999-2000

Group	Line Number	Type of Use
I	1b, 1d-f, 2b	1
II	1a, 1d-f	2
	2a	See line instructions
III	1c-f	5, 7
IV	1c-f	3, 4
	2b	3, 9
V	7	See line instructions
VI	3, 4, 5, 6	See line instructions
VII	2b	10

Table 3. Claim Groups for Tax Years After 2000

Group	Line Number	Type of Use
I	1b, 1d-f, 2b	1
II	1a, 1d-f	2
	2a	See line instructions
III	1c-f	5, 7
IV	1c-f	3, 4
	2b	3, 9
V	8	See line instructions
VI	3, 4, 5, 6, 7	See line instructions
VII	2b	10

Claims on Form 4136 (other than for gasohol blending) are separated into seven claim groups. Once you file Form 4136 with a claim for a group, you cannot file an amended return with another claim for that group. However, you can file an amended return with a claim for another group.

Claim group table.   Tables 2 and 3 show which claims are in each group. The numbers in the second column of each table refer to the line numbers on Form 4136. The numbers in the third column are from the Type of Use Table in the Form 4136 instructions. For each tax year, you can make only one claim for each group.

Example.   You file your 2002 income tax return and claim a fuel tax credit. Form 4136 shows an amount on line 1c for use of gasoline in a boat engaged in commercial fishing. This is a Group IV claim. You cannot amend your return to claim a credit for an amount on line 1d for use of gasohol in a boat engaged in commercial fishing (Type of Use 4), because that is also a Group IV claim. However, if you used the gasohol in an off-highway business use, you can amend your return to claim the credit for that fuel tax because that would be a Group II claim.

Table 4. Sample Exemption Certificate

EXEMPTION CERTIFICATE
(To support vendor's claim for credit or payment under section 6421 of the Internal Revenue Code)
Name and Address of Seller
The undersigned buyer (Buyer) hereby certifies the following under penalties of perjury:
A.	Buyer will use the gasoline to which this certificate relates in a boat engaged in commercial fishing.
B.	Buyer bought or will buy the gasoline to which this certificate relates from the above named seller at a price that does not include the excise tax.
C.	This certificate applies to the following (complete as applicable):
	1.	If this is a single purchase certificate, check here and enter the number of gallons of gasoline
	2.	If this is a certificate covering all purchases, check here .
	If Buyer uses the gasoline to which this certificate relates for a use other than stated in the certificate, Buyer will so notify the person to whom Buyer gives this certificate.
	Buyer has not and will not claim a refund or credit under section 6421 of the Internal Revenue Code for the excise tax on the gasoline to which this certificate relates.
	Buyer understands that the fraudulent use of this certificate may subject Buyer and all parties making such fraudulent use of this certificate to a fine or imprisonment, or both, together with the costs of prosecution.
Signature and Date Signed
Printed or Typed Name and Title of Buyer
Name, Address, and Taxpayer Identification Number of Buyer

How to claim a credit.   As an individual, you claim the credit on line 68 of Form 1040. Check box b on line 68. If you would not otherwise have to file an income tax return, you must do so to claim a fuel tax credit.

Claiming a Refund

You can file a claim for refund for any quarter of your tax year for which you can claim $750 or more. This amount is the excise tax on all fuels used for any nontaxable use during that quarter or any prior quarter (for which no other claim has been filed) during the tax year.

If you cannot claim at least $750 at the end of a quarter, you carry the amount over to the next quarter of your tax year to determine if you can claim at least $750 for that quarter. If you cannot claim at least $750 at the end of the fourth quarter of your tax year, you must claim a credit on your income tax return, using Form 4136. Only one claim can be filed for a quarter.

How to file a quarterly claim.   You make a claim for a refund on Form 8849. File the claim by filling out Schedule 1 (Form 8849) and attaching it to Form 8849. Send it to the address shown in the instructions. Do not claim a refund on Form 8849 for any amount for which you have filed or will file a claim on Schedule C (Form 720) or Form 4136.

When to file a quarterly claim.   You must file a quarterly claim by the last day of the first quarter following the last quarter included in the claim. If you do not file a timely refund claim for the fourth quarter of your tax year, you will have to claim a credit for that amount on your income tax return, as discussed earlier.

Including the Credit or Refund in Income

Include any credit or refund of excise taxes on fuels in your gross income if you claimed the total cost of the fuel (including the excise taxes) as an expense deduction that reduced your income tax liability.

If you use the cash method of accounting and file a claim for refund, include the refund in your gross income for the tax year in which you receive the refund. If you claim a credit on your income tax return, include the credit in gross income for the tax year in which you file Form 4136. If you file an amended return and claim a credit, include the credit in gross income for the tax year in which you receive the credit.

Example.   Ed Brown, a cash basis fisherman, filed his 2001 Form 1040 on March 1, 2002. On his Schedule C, Ed deducted the total cost of gasoline (including $110 of excise taxes) used in his boat while engaged in commercial fishing operations. Then, on Form 4136, he claimed the $110 as a credit. Ed reports the $110 as additional income on his 2002 Schedule C.

How To Buy Fuel Tax Free

Instead of paying the fuel tax and filing a claim for credit or refund when the fuel is used for a nontaxable use, you may be eligible to buy it tax free.

Gasoline.   Your supplier may be able to sell you gasoline at a tax-free price only for use in a boat engaged in commercial fishing.

Your supplier may be eligible to claim a credit or refund of the excise tax on the gasoline sold to you at a tax-free price. Refer your supplier to Credits or Refunds under Gasoline in Publication 510, Excise Taxes for 2003, for details.

To buy gasoline at a tax-free price, give your supplier a signed certificate identifying you and stating that you will use the gasoline in a boat engaged in commercial fishing. You do not need to renew the certificate as long as the information it contains continues to be correct. See Table 4, earlier, for a sample exemption certificate.

Schedule C Example

Frank Carter is a sole proprietor who owns and operates a fishing boat. He uses the cash method of accounting and files his return on a calendar year basis. He keeps his business records with a single-entry bookkeeping system, similar to the sample record system illustrated in Publication 583.

Frank has two crew members, Nan Brown and Sandy Green, who are considered self-employed for social security, Medicare, and federal income tax withholding purposes. After certain boat operating expenses are paid, the proceeds from the sale of the catch are divided 75% to Frank and 25% to his crew members.

Frank figures his net profit or loss from his fishing business by subtracting his fishing expenses from his gross income from fishing on Schedule C. He then reports the net profit or loss on line 12, Form 1040.

Schedule C, Page 1

Schedule C (Form 1040)

First, Frank fills in the information required at the top of Schedule C. On line A he enters Fishing and on line B he enters 114110, the 6-digit business code for commercial fishing shown in the instructions for Schedule C. He then completes items C through H.

Part I - Income

Frank figures his gross income from fishing in Part I.

Line 1.   Frank had sales of $60,288 for the year. This includes all the fish he caught and sold during the year. He enters his total sales on line 1.

Line 3.   Frank did not have any returns and allowances to report on line 2, so line 3 is the same as line 1.

Line 5.   Because Frank did not have any cost of goods sold to report on line 4, line 5 is the same as line 3.

Line 6.   Frank's entry of $712 represents a $612 patronage dividend he received from his local cooperative and a $100 fuel tax credit he claimed on the 2001 Form 1040 he filed on March 1, 2002. The patronage dividend was reported to him on Form 1099-PATR, Taxable Distributions Received From Cooperatives.

Line 7.   Frank's gross income from fishing includes his gross profit from line 5 and his other income from line 6.

Part II - Expenses

Frank enters his fishing expenses in Part II.

Line 10.   Frank used his truck 65% for business during the year. He spent a total of $4,250 for gas, oil, insurance, tags, repairs, and upkeep. He can deduct $2,763 (65% × $4,250), the business portion of these expenses, on line 10.

Line 11.   Frank paid his crew members total crew shares of $10,992 for the year.

Line 13.   Frank enters $6,534 depreciation from Form 4562 (not shown).

Line 15.   Frank's $3,291 deduction is for insurance on his business property (65% of his truck insurance is included on line 10). The deduction is only for premiums that give him coverage for the year.

Line 16b.   Frank borrowed money to buy his fishing boat. The interest on this loan was $800 for the year.

Line 20b.   His rent for his mooring space was $50 a month, or $600 for the year.

Line 21.   He spent $3,600 for boat repairs and $993 for gear repairs for a total cost of $4,593.

Line 22.   He spent $1,713 for boat supplies and $4,751 for bait and ice for a total cost of $6,464.

Line 23.   Frank renewed his fishing license. He enters the $35 state fee on this line.

Line 27.   Frank enters the total of his other fishing expenses on this line. These expenses are not included on lines 8-26. He lists the type and the amount of the expenses separately in Part V of page 2 (not shown) and carries the total entered on line 48 to line 27. His only entry on this line is the $6,367 he spent on fuel for his fishing boat.

Line 28.   Frank adds all his expenses listed in Part II and enters the total on this line.

Line 29.   He subtracts his total expenses, $42,439 (line 28) from his gross income from fishing, $61,000 (line 7). Frank has a tentative profit of $18,561.

Line 30.   Frank did not use any part of his home for business, so he does not make an entry here.

Line 31.   Frank has a net profit of $18,561 (line 29 minus line 30). He enters his net profit here, on line 12 of Form 1040, and on line 2, Section A of Schedule SE (Form 1040), not shown.

How To Get Tax Help

You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get more information from the IRS in several ways. By selecting the method that is best for you, you will have quick and easy access to tax help.

Contacting your Taxpayer Advocate.   If you have attempted to deal with an IRS problem unsuccessfully, you should contact your Taxpayer Advocate.

The Taxpayer Advocate represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal channels. While Taxpayer Advocates cannot change the tax law or make a technical tax decision, they can clear up problems that resulted from previous contacts and ensure that your case is given a complete and impartial review.

To contact your Taxpayer Advocate:

• Call the Taxpayer Advocate at
  1-877-777-4778.
• Call, write, or fax the Taxpayer Advocate office in your area.
• Call 1-800-829-4059 if you are a
  TTY/TDD user.

For more information, see Publication 1546, The Taxpayer Advocate Service of the IRS.

Free tax services.   To find out what services are available, get Publication 910, Guide to Free Tax Services. It contains a list of free tax publications and an index of tax topics. It also describes other free tax information services, including tax education and assistance programs and a list of TeleTax topics.

Personal computer. With your personal computer and modem, you can access the IRS on the Internet at www.irs.gov. While visiting our web site, you can:

• See answers to frequently asked tax questions or request help by e-mail.
• Download forms and publications or search for forms and publications by topic or keyword.
• Order IRS products on-line.
• View forms that may be filled in electronically, print the completed form, and then save the form for recordkeeping.
• View Internal Revenue Bulletins published in the last few years.
• Search regulations and the Internal Revenue Code.
• Receive our electronic newsletters on hot tax issues and news.
• Learn about the benefits of filing electronically (IRS e-file).
• Get information on starting and operating a small business.

You can also reach us with your computer using File Transfer Protocol at ftp.irs.gov.

TaxFax Service. Using the phone attached to your fax machine, you can receive forms and instructions by calling 703-368-9694. Follow the directions from the prompts. When you order forms, enter the catalog number for the form you need. The items you request will be faxed to you.

For help with transmission problems, call the FedWorld Help Desk at 703-487-4608.

Phone. Many services are available by phone.
 

• Ordering forms, instructions, and publications. Call 1-800-829-3676 to order current and prior year forms, instructions, and publications.
• Asking tax questions. Call the IRS with your tax questions at 1-800-829-1040.
• Solving problems. Take advantage of Everyday Tax Solutions service by calling your local IRS office to set up an in-person appointment at your convenience. Check your local directory assistance or www.irs.gov for the numbers.
• TTY/TDD equipment. If you have access to TTY/TDD equipment, call 1-800-829- 4059 to ask tax questions or to order forms and publications.
• TeleTax topics. Call 1-800-829-4477 to listen to pre-recorded messages covering various tax topics.

Evaluating the quality of our telephone services. To ensure that IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. One method is for a second IRS representative to sometimes listen in on or record telephone calls. Another is to ask some callers to complete a short survey at the end of the call.

Walk-in. Many products and services are available on a walk-in basis.
 

• Products. You can walk in to many post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Some IRS offices, libraries, grocery stores, copy centers, city and county governments, credit unions, and office supply stores have an extensive collection of products available to print from a CD-ROM or photocopy from reproducible proofs. Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes.
• Services. You can walk in to your local IRS office to ask tax questions or get help with a tax problem. Now you can set up an appointment by calling your local IRS office number and, at the prompt, leaving a message requesting Everyday Tax Solutions help. A representative will call you back within 2 business days to schedule an in-person appointment at your convenience.

Mail. You can send your order for forms, instructions, and publications to the Distribution Center nearest to you and receive a response within 10 workdays after your request is received. Find the address that applies to your part of the country.

• Western part of U.S.:
  Western Area Distribution Center
  Rancho Cordova, CA 95743-0001
• Central part of U.S.:
  Central Area Distribution Center
  P.O. Box 8903
  Bloomington, IL 61702-8903
• Eastern part of U.S. and foreign addresses:
  Eastern Area Distribution Center
  P.O. Box 85074
  Richmond, VA 23261-5074

CD-ROM for tax products. You can order IRS Publication 1796, Federal Tax Products on CD-ROM, and obtain:

• Current tax forms, instructions, and publications.
• Prior-year tax forms and instructions.
• Popular tax forms that may be filled in electronically, printed out for submission, and saved for recordkeeping.
• Internal Revenue Bulletins.

The CD-ROM can be purchased from National Technical Information Service (NTIS) by calling 1-877-233-6767 or on the Internet at http://www.irs.gov/cdorders. The first release is available in early January and the final release is available in late February.

CD-ROM for small businesses. IRS Publication 3207, Small Business Resource Guide, is a must for every small business owner or any taxpayer about to start a business. This handy, interactive CD contains all the business tax forms, instructions and publications needed to successfully manage a business. In addition, the CD provides an abundance of other helpful information, such as how to prepare a business plan, finding financing for your business, and much more. The design of the CD makes finding information easy and quick and incorporates file formats and browsers that can be run on virtually any desktop or laptop computer.

It is available in March. You can get a free copy by calling 1-800-829-3676 or by visiting the website at www.irs.gov/smallbiz.

List of Business Publications

Previous | First

Publication Index | 2002 Tax Help Archives | Tax Help Archives | Home