Publication 378: Fuel Tax Credits and Refunds; Filing Claims

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Table of Contents

This chapter tells you how and when to make a claim for a credit or refund of excise taxes on fuels. This chapter also covers recordkeeping requirements, interest and penalty provisions, and when to include the credit or refund in your income.

General Information

Generally, you will provide all the information needed to claim a credit or refund when you properly complete Form 4136 or Form 8849. In some cases, you will have to attach additional information. You need to keep records that support your claim for a credit or refund.

Keep at your principal place of business all records needed to enable the IRS to verify that you are the person entitled to claim a credit or refund and the amount you claimed. No special method or format is required, but the records should establish all the following information.

Ultimate purchaser.

If you are an ultimate purchaser, you must keep the following records.

The number of gallons purchased and used during the period covered by your claim.
The dates of the purchases.
The names and addresses of suppliers and amounts purchased from each in the period covered by your claim.
The nontaxable use for which you used the fuel.
The number of gallons used for each nontaxable use.

It is important that your records show separately the number of gallons used for each nontaxable use that qualifies as a claim. If the fuel is exported, you must have proof of exportation.

For more information about keeping records, see Publication 583, Starting a Business and Keeping Records, or Publication 552, Recordkeeping for Individuals.

Gasohol blender.

If you are a gasohol blender (as discussed in chapter 1 under Gasohol Blending), you must keep the following information for each batch of gasohol.

The name and address of the person that sold you the gasoline.
The date and location of the purchase of the gasoline.
The number of gallons of gasoline.
The name and address of the person that sold you the alcohol.
The date and location of the purchase of the alcohol.
The number of gallons and type of alcohol.

Registered ultimate vendor.

If you are a registered ultimate vendor (as discussed in chapter 1 under Undyed Diesel Fuel and Undyed Kerosene), you must keep certain information pertaining to the sale of the fuel.

To make a claim, you must have sold the diesel fuel or kerosene at a tax-excluded price, repaid the tax to the buyer, or obtained the buyer's written consent to the allowance of the claim.

In addition, you must have a registration number that has not been revoked or suspended. If you are an ultimate vendor (farming and state use), you must have a UV registration number. If you are an ultimate vendor (blocked pump), you must have a UP registration number. You can get either registration number from the IRS by completing Form 637, Application for Registration (For Certain Excise Tax Activities), and providing the information requested in its instructions.

Farming and state use.

If you sell undyed diesel fuel or undyed kerosene for use on a farm for farming purposes or for use by a state or local government, you must keep the following information.

The name and taxpayer identification number of each person (farmer, custom harvester, or government unit) that bought the fuel.
The number of gallons sold to each person.
An unexpired certificate from the buyer. See the model certificate inTable 3–1 on page 7. The certificate expires on the earlier of one year after the date of the certificate or the date a new certificate is given to the registered ultimate vendor.

Blocked pump.

If you sell undyed kerosene from a pump that qualifies as a blocked pump because it is locked by you after each sale and is unlocked by you at the request of the buyer, you must keep the following information for each sale of more than 5 gallons.

The date of each sale.
The name and address of the buyer.
The number of gallons sold to that buyer.

Blending.

If you sell undyed kerosene for blending with diesel fuel in an area under a declaration of extreme cold and the blend will be sold for use or used for heating purposes, you must keep the following information.

The number of gallons sold to each person.
An unexpired certificate from the buyer for each purchase of kerosene. See the model certificate inTable 3–2 above.

Taxpayer identification number.

To file a claim, you must have a taxpayer identification number. Your taxpayer identification number can be any of the following.

Employer identification number (EIN).
Social security number (SSN).
Individual taxpayer identification number (ITIN), if you are an alien individual and do not have and are not eligible to get an SSN.

If you normally file only a U.S. individual income tax return (such as Form 1040 or 1040NR), use your SSN or ITIN. You get an SSN by filing Form SS–5, Application for a Social Security Card, with the Social Security Administration. To get an ITIN, file Form W–7, Application for IRS Individual Taxpayer Identification Number, with the IRS.

If you operate a business, use your EIN. You get an EIN by filing Form SS–4, Application for Employer Identification Number, with the IRS.

Filing date on holiday or weekend.

If the last day for filing your claim falls on a Saturday, Sunday, or legal holiday, the due date is delayed until the next business day.

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 (discussed later), you can claim a refund during the year.

Credit only.

You can claim the following taxes only as a credit.

Tax on gasoline, gasohol, or aviation gasoline used on a farm for farming purposes.
Tax on fuels 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.

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.

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Model Certificate A

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Model Certificate B

You may be able to make a fuel tax claim on an amended income tax return for the year you used the fuel. Generally you must file an amended return by the later of 3 years from the date you filed your original return or within 2 years from the date you paid the income tax.

How to claim a credit.

How you claim a credit depends on whether you are an individual, partnership, corporation, S corporation, or farmers' cooperative association.

Individuals.

You claim the credit on the “Other payments from” line of Form 1040. Also check box b on that line. If you would not otherwise have to file an income tax return, you must do so to get a fuel tax credit.

Partnership.

Partnerships (other than electing large partnerships) claim the credit by including a statement on Schedule K-1 (Form 1065), Partner's Share of Income, Credits, Deductions, etc., showing each partners share of the number of gallons of each fuel sold or used for a nontaxable use, the type of use, and the applicable credit per gallon. Each partner claims the credit on his or her income tax return for the partners share of the fuel used by the partnership.

Other entities.

Corporations, S corporations, farmers' cooperative associations, and trusts must make the claim on the line for “credit for Federal tax paid on fuels” of the applicable income tax return.

Federal, state, and local governments, and certain tax-exempt organizations (as discussed below under Claiming a Refund) must use Form 8849, not Form 4136, to make an annual claim.

You may claim a refund on Form 8849. Complete and attach to Form 8849 the appropriate Form 8849 schedules. If you file Form 720, you can use the Schedule C portion of Form 720 for your refund claims. (See the Form 720 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.

If you are an ultimate purchaser, you may claim a refund for the excise tax on fuels you purchase and use for a nontaxable use. You may file a claim for refund for any quarter of your tax year for which you can claim at least $750. This amount is the excise tax on all fuels used for a 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. If you cannot claim at least $750 at the end of your tax year, you must claim a credit on your income tax return using Form 4136.

Only the registered ultimate vendor can claim a refund for the excise tax on undyed diesel fuel and undyed kerosene in certain situations, as discussed later.

If you are a gasohol blender, you can make a claim to get a refund of part of the excise tax on gasoline used to produce gasohol. See Gasohol Blending under Gasoline and Gasohol in chapter 1. The following claim requirements apply.

If you are a registered ultimate vendor, you can make a claim to get a refund of the excise tax on undyed diesel fuel or undyed kerosene that you sold for certain uses. See Sales by Registered Ultimate Vendors under Undyed Diesel Fuel and Undyed Kerosene in chapter 1.

IRS pays no interest on refunds described in this publication other than refunds to gasohol blenders and registered ultimate vendors (discussed earlier) not paid within 20 days. Refunds resulting from credits claimed on income tax returns may qualify for interest.

There are criminal penalties for false or fraudulent claims. In addition, any person who files a refund claim, discussed earlier, for an excessive amount (without reasonable cause) may have to pay a penalty. An excessive amount is the amount claimed that is more than the allowable amount. The penalty is the greater of two times the excessive amount or $10.

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.

The year you include a credit or refund in gross income depends on whether you use the cash or an accrual method of accounting.

Cash method.

If you use the cash method and file a claim for refund, include the refund amount 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 amount 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 amount in gross income for the tax year in which you receive the credit.

Example 1.

Ed Brown, a cash basis farmer, filed his 2003 Form 1040 on March 3, 2004. On his Schedule F, Ed deducted the total cost of gasoline (including $110 of excise taxes) used on the farm. Then, on Form 4136, Ed claimed the $110 as a credit. Ed reports the $110 as additional income on his 2004 Schedule F.

Example 2.

March Corporation uses the calendar year as its tax year. For 2003, the following amounts of excise tax were included in the cost of gasoline the corporation used each quarter in a nontaxable use:

January 1 through March 31	$1,300
April 1 through June 30	1,100
July 1 through September 30	400
October 1 through December 31	300
Total	$3,100

The corporation deducts the entire cost of the gasoline (including the $3,100 in excise taxes) it used during the year as a business expense on its corporation income tax return, thereby reducing its corporate income tax liability for that year.

Form 8849. March Corporation files quarterly refund claims for the first two quarters (ending March 31 and June 30). It cannot file a quarterly refund claim for the third or fourth quarter because it did not meet the $750 minimum requirement.

Since March Corporation uses the cash method of accounting, the corporation includes $2,400 ($1,300 + $1,100) in its gross income for the tax year in which it receives the refunds (2003).

Form 4136. The corporation claims the remaining amounts ($400 + $300) as a credit on its 2003 income tax return by attaching Form 4136. It files its tax return in 2004. It includes this credit ($700) in its 2004 gross income.

Steven S. Sands used undyed diesel fuel in vehicles used in his construction business. The vehicles were not registered (or required to be registered) for highway use. In the fourth quarter of his 2003 income tax year, which ends in December, he used 3,000 gallons of fuel. The excise tax on the 3,000 gallons of fuel he used was $732 (24.4 cents per gallon).

Because the tax is less than $750, Steven must claim a credit for the tax on his 2003 income tax return. He fills out Form 4136 (shown later) and attaches it to his 2003 income tax return, which he files in 2004. He enters the $732 on line 67 of his Form 1040 and checks box b.

Steven uses the cash method of accounting. On his 2003 Schedule C (Form 1040), he deducts the total cost of the fuel, including the tax. When Steven files his 2004 Form 1040, he will include the $732 credit shown on his 2003 Form 4136 as additional income on his Schedule C (Form 1040) for 2004.

Steven could not file a claim for a refund for the first quarter because the amount of the claim was less than $750. He adds the first quarter amount ($671) to the second quarter amount ($610) and claims a refund of $1,281 by filing Form 8849 and Schedule 1 (Form 8849), which are shown later. He will have to include the $1,281 excise tax refund as additional income on his Schedule C (Form 1040) for 2003.