10 Common IFTA Mistakes & Reoccurring Fuel Tax Problems

10 COMMON IFTA MISTAKES & REOCURRING FUEL TAX PROBLEMS

Fuel tax recordkeeping and reporting mistakes can bring on an IFTA audit.

Does your trucking company travel across state lines?

Then you may have heard about IFTA and know that you must report fuel taxes quarterly.

But who are you reporting this information to and what happens if you make mistakes in your quarterly fuel tax reports?

That is what we will discuss as we unravel IFTA and fuel tax compliance.

What is IFTA?

The International Fuel Tax Agreement (IFTA) is a multi-jurisdictional fuel tax agreement that simplifies the reporting of fuel taxes by interjurisdictional motor carriers.

In other words, IFTA is a program to collect and distribute fuel tax revenue between states and provinces based upon where the fuel was used, helping carriers by consolidating reporting requirements through the carrier’s home state.

A “qualified motor vehicle” means a motor vehicle used, designed or maintained for transportation of persons or property and:

  • Has two axles and a gross vehicle weight or registered gross vehicle weight exceeding 26,000 pounds, or
  • Has three or more axles regardless of weight, or
  • Is used in combination, when the weight of such combination exceeds 26,000 pounds gross vehicle or registered gross vehicle weight

Under IFTA, motor carriers register with their home state, and receive credentials, which allow them to travel through other IFTA member jurisdictions.

Carriers then file a single quarterly fuel tax return with a single payment to their home state that covers all of their travel in other IFTA member jurisdictions.

The home state then processes the IFTA tax return and forwards funds to each jurisdiction or requests funds for net fuel taxes, so you don’t have to.

IFTA filing record keeping requirements

IFTA members are responsible for:

  • Maintaining Distance Records
  • Maintaining Fuel Records
  • Trip Permits
  • Monthly / Quarterly Summaries
  • Supporting Information for IVDRs (Individual Vehicle Distance Records)
  • Lessor Responsibility
  • Program Compliance Reviews, and
  • Records Retention

Recordkeeping requirements include:

  • An accurate breakdown of your mileage:
    • by date
    • by unit
    • by state along with routes used
    • odometer readings, and
    • beginning and ending trip locations
  • Fuel receipts must contain all the following:
    • State where fuel was purchased
    • Fuel vendor name and address
    • Date
    • Type of fuel
    • Unit Number
    • Number of gallons purchased

IFTA members are required to preserve the records upon which the quarterly tax return is based for four years from the return due date or filing date, whichever is later, plus any time period included as a result of waivers or jeopardy assessments.

What is an IFTA Audit?

Each IFTA jurisdiction is required to audit 3% of its accounts and can come from random selection or reporting errors.

An audit program is therefore an important and essential compliance measure and ensures that proper revenues are being collected by each jurisdiction.

When your fleet is selected for an IFTA audit, the process will generally look like this:

  1. Receive a notification letter that your fleet will be subject to an audit
  2. Within 30 days of receiving the letter, the auditor assigned to your fleet will reach out you
  3. The auditor asks for preliminary information about your fleet to get context for the audit
  4. You then share the records used for your IFTA reports (fuel receipts, fuel card statements and mileage summaries)
  5. Once this information is compiled and shared, the auditor will have an initial visit with your organization.
  6. Once the audit is complete, you will have 30 days to respond:
    • No action if no discrepancies are found
    • Accept the results and make a payment
    • Challenge the results if you disagree by preparing records that disprove the results

10 common IFTA mistakes or reoccurring problems with fuel taxes

Before submitting your quarterly report, check your numbers to make sure there are no data entry errors or inaccurate trip records.

When auditors process fuel taxes, they often come across these ten issues:

  1. Filing IFTA report late or forgetting to report, which will:
    • lead to a fine of $50 or 10 percent of the net tax liability, whichever is greater, and
    • potentially result in an audit
  2. Multiple amended returns signal potential audit risk
  3. Estimating fuel calculations
  4. Not reporting every mile, including personal or unloading miles
  5. Impossible miles per gallon (MPG), which is expected to fall between 5 to 10 MPG for trucks and remain relatively the same each reporting period
  6. Bad GPS data
    • improper state geofencing
    • odometer readings put into the GPS don’t match the odometer on the vehicle
    • longitude and latitude for every ping is not recorded to the fourth decimal point
  7. Insufficient GPS information coming through
  8. GPS pings are not set to the correct intervals of less than five minutes
  9. Broken GPS hardware: once it’s broken the data normally can’t be retrieved
  10. Poor fuel tax reporting: faded, unorganized fuel receipts or fuel purchase pre-authorization slips that cannot be read

If you can resolve these common fuel tax issues, you will be well-prepared for an IFTA audit!

Other important tips:

  • You can request a time extension to pull the required information needing in the audit
  • Auditors may request access to all fleet vehicles, but you can request to provide access to a sample of your vehicles
  • Auditors may want to see original driver records, even if your fleet uses a recording software
  • Auditors have access to more information than you realize, like dates bridges were out of service. So, don’t use routes of travel to estimate your mileage, your records may come up short.

Keep your record-keeping accurate with CNS

Fuel tax compliance and management can be difficult, time-consuming, and costly with more and more DOT Audits and IFTA Audits, penalties are exceeding millions of dollars.

We can handle Fuel Tax Permitting and Fuel Tax Compliance for a single owner-operator or fleet of 500 trucks.

The fuel tax service at CNS stands out because it offers carriers these benefits:

  • Compiled and filed IFTA tax returns
  • Compiled and filed Mileage tax returns for KY, NM, NY and OR
  • Detailed Fuel Tax Reports
  • Paper driver trip reports, or “paperless” (GPS) data management
  • Access to you own online portal
  • Online back up for fuel receipts and trip permits
  • Fuel Tax Training
  • Tax reduction strategies
  • and more

The thought of an audit should not scare you if you are prepared. Use your electronic record-keeping as a resource to keep you prepared for any inspection or audit situation.

When your records are accurate and secure, your business will be too!

For more information, contact us at 888.260.9448 or info@cnsprotects.com.

Questions about DOT Compliance, Licensing, Audits, Programs, etc.?

Our DOT Specialists are here to help!

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