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IRS Releases Procedures for Fuel Tax Credit Refunds

The IRS has released procedures for claiming the biodiesel and alternative fuel tax credit that it retroactively reinstated. Taxpayers can now claim tax credits dating back to 2018 and 2019 using the new procedures. Similar to the procedures offered on previous extensions, these new procedures involve the completion of just one form. Taxpayers must complete Form 8849 to claim most 2018 and 2019 tax credits in retrospect. Known as the “Claim for Refund of Excise Taxes” form, taxpayers must file it by August 11, 2020.

Which fuel tax credit can taxpayers now claim?

Several fuel tax credits expired originally at the end of 2017. These included:

  • Section 6426 alternative fuel credit
  • Section 6426 alternative fuel mixture credit
  • Section 6426 biodiesel mixture credit
  • Section 40 second-generation biofuel credit
  • Section 40A credits for agri-biodiesel, biodiesel mixtures, and biodiesel

The 2019 Taxpayer Certainty & Disaster Tax Relief Act reinstated the fuel tax credits retroactively for 2018 and 2019. Certain credits are also prospectively extended through 2020 or 2022.

Alternative Fuel and Biodiesel Mixture

Section 6426 covered fuel tax credit on alternative fuels and biodiesel mixtures. Taxpayers can now have these refunded and claim them under Section 6427 as a refundable payment. Form 8849 Section 3 enables taxpayers to claim these credits for both 2018 and 2019. To do so, they must file the form between February 14 and August 11, 2020.

Taxpayers can also use Form 4149 to claim these credits as a credit on their income tax under Section 34. Taxpayers must use normal procedures to file Form 4139 to 2019’s return for claims for 2019. Individuals must, then, amend 2018’s returns to receive the tax credit on 2018 claims. While partnerships cannot use Form 4139, they can report credit amounts so partners may claim credits on their income tax returns.

The Act has extended alternative fuel credits through 2020 and biodiesel tax credits through 2022. Taxpayers must use normal procedures to make prospective claims. They must still adjust alternative fuel credits by the fuel’s energy equivalency when compared with traditional fuel. Credit also remains available for propane used in forklifts.

Generally, the IRS does not require fuel credit refundable portions to reduce fuel deductions. Otherwise, a taxpayer must include it as income. However, should the credit offset a liability for fuel excise taxes, a taxpayer must include it as income. Alternatively, there should be an exponential reduction of the cost of the goods sold or fuel deduction by the same amount. Currently, this position is under litigation.

For more information about this article, please contact our tax professionals at or toll free at 844.4WINDES (844.494.6337).
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