Have you ever been through an IFTA audit?
If you haven’t been through one, would you be stressed if you received a call or a letter stating you are due for one?
We have helped many clients through IFTA audits. If you are keeping accurate mileage and fuel receipts, you have nothing to worry about. But sometimes that is easier said than done.
Clients have contracted with Compliance Navigation Specialists (CNS) to complete a mock audit or represent them in an actual audit and have come across some common problems.
Read our blog post on What to expect and how to prepare for an IFTA Audit
Some of the more frequent challenges and how to avoid them, include:
- The first common problem we come across has to do with fuel receipts.
- It is important to know that drivers must provide documentation proving the miles they ran, as well as the fuel purchased. Often times drivers are either missing fuel receipts or using a credit card that doesn’t show gallons purchased.
- We have even witnessed a client bringing their fuel receipts down from their attic and open up the box to find that the heat erased the ink on the thermal receipts. All of these issues cause challenges in an IFTA audit and can be prevented.
Our recommendation: Obtain a fuel card to keep accurate records of fuel purchased per gallon per truck.
- When it comes to miles, the main problems we see are missing trip sheets, inaccurate mileage recorded by the driver, or inaccurate mileage for a GPS system.
- Drivers are responsible for ensuring their GPS is reading the odometer mileage and working consistently.
Our recommendation: Make it a habit of testing the GPS system periodically to ensure it is working properly. If the GPS system fails for any reason, the driver must recreate their trips to complete their taxes.
- Drivers are required to keep supporting records and documents for four years from the tax return due date or filing date (whichever is later) plus any time period included as a result of waivers or jeopardy assessments. If a driver is reporting their IFTA taxes wrong or is just bad at record keeping, they could get hit with back taxes and interest.
For example, if a driver is bad at record keeping and can’t prove their mileage, the state has the right to calculate their miles per gallon by 4.0 mpg. This can cause serious back taxes, plus interest. In Pennsylvania, a trucker challenged the 4.0 mpg factor in Nedeljko Gunjak, Inc. v. Commonwealth, docket no. 455 F.R. 2013. The Pennsylvania Commonwealth Court has denied the appeal of a motor carrier’s assessment for additional fuel use tax that was more than $300,000 under the International Fuel Tax Agreement. Due to the carrier’s absence of records that IFTA requires a motor carrier to keep, the state, following an audit, had imposed a 4.0 miles-per-gallon factor on all the carrier’s operations, and made such other audit adjustments as were warranted by the best information available. The taxpayer’s argument was that they presented the required records. PA court said that the records the carrier had shared were so obviously inaccurate as to preclude any reliance. While this finding is by no means novel, it is a good time emphasize how important it will be when a carrier faces an IFTA audit that its records be reasonably complete and accurate.
Our recommendation: Contact one of our IFTA Specialists to discuss the tools and management processes to keep you in compliance with IFTA. So, if you do get notified of an IFTA audit you will not have to worry.