Fuel Tax Credit - Form 4136

Fuels including diesel, kerosene and gasoline are taxed by the federal government, but some organizations use these fuels for purposes that are nontaxable. Anyone who uses fuels in a nontaxable manner and is filing their individual or business tax return should file IRS Form 4136 to claim a credit. Understanding eligibility and learning how to properly claim this credit is a must before 2014 tax returns are filed.

Nontaxable Fuel Uses

The first step to determining whether an individual or business is eligible for a fuel tax credit is evaluating the use of fuels purchased throughout the tax year. Nontaxable fuel uses include:

  • Running public transit or school buses
  • Fueling equipment used in farming
  • Fueling aircraft operated by a museum
  • Powering off-highway vehicles or stationary equipment

Diesel sellers may also be able to claim a tax credit, and companies that sell fuels to government entities are eligible. Use of renewable diesel is typically considered to be a nontaxable fuel use, but there are detailed requirements related to this use that should be discussed with a tax professional before a credit is claimed.

Form 4136

The Internal Revenue Service uses IRS Form 4136 to collect information about nontaxable uses of fuel in order to determine whether a taxpayer is eligible for a credit. This form asks taxpayers to provide information about the type of fuel and number of gallons used throughout the tax year.

Each type of nontaxable fuel use comes with an individual tax credit calculation. Taxpayers can complete these calculations by filling in the number of gallons used of each fuel type and multiplying by the applicable rate per gallon provided on the form.

Quarterly Fuel Tax Refunds

Anyone who expects that the fuel tax credit will exceed tax liability in any given quarter throughout the tax year should file IRS Form 8849 each quarter to receive a refund. IRS Form 4136 will result in the reduction of tax liability, but taxpayers who are owed a refund must utilize the Claim For Refund of Excise Taxes form in order to receive payment from the IRS.

Taxpayers can fill out this form if their fuel tax payment exceeds $750 per quarter. This form is also beneficial for taxpayers who have paid more than $750 over two or more quarters.

Tips For Claiming a Fuel Tax Credit

OThe best method for ensuring that a taxpayer can claim their fuel tax credit is keeping accurate records related to the purchase and use of fuel. These records should detail information including the names and addresses of fuel suppliers, the number of gallons purchased from each individual supplier and the date the fuel purchase was made. Taxpayers who use fuel for both taxable and nontaxable uses should make a note related to the number of gallons that were used for qualified nontaxable uses.

The amount of the fuel tax credit that is calculated using IRS Form 4136 must be entered on line 70 of IRS Form 1040. It is essential for taxpayers to check box B of line 70 in order to qualify for the credit.

Ultimate Vendors

Special considerations must be made by companies that are registered as Ultimate Vendors. Registered vendors should have a UV number from the IRS, and tax credits will not be approved if fuel is purchased with a credit card. Ultimate Vendors are required to keep detailed records about buyers. These records should include tax identification numbers, dates of sale and number of gallons sold.