Publication 378
Fuel Tax Credits and Refunds
(Revised: 12/2002)

Claiming a Refund

You can 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.

The type of use table in the instructions for Form 8849 includes nontaxable uses that are not discussed in this publication. The ultimate purchaser for these uses is generally a government entity or a tax-exempt organization.

Ultimate Purchasers

If you are an ultimate purchaser, you can claim a refund for the excise tax on fuels you purchase and use for a nontaxable use. 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 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 the fourth quarter of your tax year, you must claim a credit on your income tax return using Form 4136.

How to file.   File the claim for refund by filling out Schedule 1 (Form 8849) and attaching it to Form 8849. Send it to the address shown in the instructions. Only one claim may be filed for a quarter.

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.

Example.   You purchased gasoline and undyed diesel fuel. For the first quarter of your tax year, the excise tax on fuel you use for an off-highway business use is $184 for gasoline and $244 for diesel fuel. You cannot file a claim for refund since the total ($428) is less than $750.

For the second quarter, the excise tax on fuel you use for an off-highway business use is $92 for gasoline and $244 for diesel fuel. You add the amount from the first quarter ($428) to the total amount from the second quarter ($336) and determine you can file a claim for refund since the total is $764.

When to file.   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.

Generally, an annual claim must be made on Form 4136. However, the following must use Schedule 1 (Form 8849) to file an annual claim.

• The United States.
• A state, political subdivision of a state, and the District of Columbia.
• An organization exempt from income tax under section 501(a) of the Internal Revenue Code that is not required to file an income tax return.

Gasohol Blending

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.

• The claim must be for gasohol sold or used during a period of at least 1 week.
• The claim must be for at least $200.
• The claim can only be made by the gasohol blender.

How to file.   File the claim by filling out Schedule 3 (Form 8849) and attaching it to Form 8849. The Form 8849 cannot have any other schedule attached if a Schedule 3 is attached. Send it to the address shown in the instructions. Write Gasohol Claim on the envelope.

When to file.   The claim must be filed by the last day of the first quarter following the earliest quarter included in the claim. If you do not meet the requirements or file a timely refund claim, you will have to claim a credit on your income tax return, as discussed earlier.

You cannot combine this claim with any other claim on Form 8849.

Registered Ultimate Vendors

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. See Sales by Registered Ultimate Vendors under Undyed Diesel Fuel and Undyed Kerosene in chapter 1.

Undyed diesel fuel.   You must meet the following requirements for this claim.

• The claim must be for undyed diesel fuel sold for use on a farm for farming purposes or by a state or local government.
• The claim must be for sales during a period of at least 1 week.
• The claim must be for at least $200. Claims for sales by a registered ultimate vendor of undyed kerosene can be combined with claims for sales of undyed diesel fuel to meet this requirement.

Undyed kerosene.   You must meet the following requirements for this claim.

• The claim must be for undyed kerosene sold for use on a farm for farming purposes, for use by a state or local government, from a blocked pump, or for blending with diesel fuel to be used for heating purposes.
• The claim must be for sales during a period of at least 1 week.
• The claim must be for at least $100.

How to file.   File the claim by filling out Schedule 2 (Form 8849) and attaching it to Form 8849. The Form 8849 cannot have any other schedule attached if a Schedule 2 is attached. Send it to the address shown in the instructions. Write Diesel Fuel/Kerosene Claim on the envelope.

When to file.   The claim must be filed by the last day of the first quarter following the earliest quarter included in the claim. If you do not meet the requirements or file a timely refund claim, you will have to claim a credit on your income tax return, as discussed earlier.

You cannot combine this claim with any other claim on Form 8849.

Interest

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.

Penalties

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.

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.

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 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 1.   Ed Brown, a cash basis farmer, filed his 2002 Form 1040 on March 3, 2003. 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 2003 Schedule F.

Example 2.   March Corporation uses the calendar year as its tax year. For 2002, the following amounts of excise tax were included in the cost of gasoline the corporation used each quarter in a nontaxable use:

Form 4136. The corporation claims the remaining amounts ($400 + $300) as a credit on its 2002 income tax return by attaching Form 4136. It files its tax return in 2003. It includes this credit ($700) in its 2003 gross income.

Accrual method.   If you use an accrual method, include the amount in gross income for the tax year in which you used the fuels (or sold the fuels if you are a registered ultimate vendor). It does not matter whether you filed for a quarterly refund or claimed the entire amount as a credit.

Example 3.   Todd Green uses an accrual method. He files his 2002 return on April 15, 2003. On Schedule C (Form 1040) he deducts the total cost of gasoline (including $155 of excise taxes) used for an off-highway business use during 2002. On Form 4136, Todd claims the $155 as a credit. He reports the $155 as additional income on his 2002 Schedule C.

Example 4.   Use the same facts as in Example 2 above, except that March Corporation uses an accrual method of accounting. Since the nontaxable use occurred in 2002, the corporation reports the $3,100 of excise taxes as income on its 2002 income tax return. This consists of the $2,400 it claimed on Form 8849 and the $700 it claimed on Form 4136.

Example

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 2002 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 2002 income tax return. He fills out Form 4136 (shown later) and attaches it to his 2002 income tax return, which he files in 2003. He enters the $732 on line 68 of his Form 1040.

Steven uses the cash method of accounting. On his 2002 Schedule C (Form 1040), he deducts the total cost of the fuel, including the tax. When Steven files his 2003 Form 1040, he will include the $732 credit shown on his 2002 Form 4136 as additional income on his Schedule C (Form 1040) for 2003.

For the first two quarters of 2003, Steven's records show the following.

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.

Form 4136, page 1, for Steven S. Sands

Form 4136, page 2, for Steven S. Sands

Form 8849 for Steven S. Sands

Schedule 1 (Form 8849) for Steven Sands

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