The IRS is stepping up its efforts to stop fraudulent fuel tax credit claims, and this time, they mean business. The credit is intended for off-road fuel use in farming and commercial operations, but too many filers—often encouraged by misleading social media posts and bad advice from tax preparers—have been trying to claim it on their personal tax returns. For years, the IRS has been criticized for not doing enough to enforce penalties on improper claims. Now, they’re tightening the rules with new documentation requirements that make it harder for ineligible filers to slip through.

 

Who Actually Qualifies for the Fuel Tax Credit?

 

The federal fuel tax credit is meant for businesses that use fuel for off-highway purposes. This includes farms using fuel for tractors and other equipment, as well as certain businesses operating construction or industrial machinery. The key requirement? You must have a legitimate business purpose for claiming the credit. Despite this, tax preparers and social media influencers have been spreading misinformation, telling everyday taxpayers to take the credit on their Form 1040—even though most people don’t qualify. Filing a false claim not only increases your chances of an audit but can also lead to penalties.

 

The IRS is Now Requiring More Proof

 

To deter improper claims, the IRS now requires filers to submit a detailed statement with their tax return. According to the Form 4136 instructions, taxpayers claiming the credit must include:

• Their business name and employer identification number (EIN)
• The model and type of vehicle or equipment that used the fuel
• The total gallons of fuel purchased
• An explanation of how the fuel was used for a qualifying business purpose

 

Without this supporting documentation, the IRS will likely deny the claim.

 

The Risks of Filing a False Fuel Tax Credit Claim

 

Claiming a fuel tax credit without a valid business reason is considered a frivolous tax position, which can lead to penalties. The IRS has long listed faulty fuel tax credit claims on its Dirty Dozen list of top tax scams, warning filers that improper claims could result in audits, repayment of fraudulent refunds, and even legal action.

 

Historically, the IRS has been criticized for failing to enforce these penalties aggressively, but that’s changing. With the new reporting rules in place, the agency is making it clear that they’re watching closely—and they’re ready to take action against improper claims.

 

What You Need to Do

 

If you’re a business owner using fuel for off-highway purposes, make sure you have detailed records to back up your claim. Keep logs of fuel purchases, receipts, and documentation of how the fuel was used. If you’re unsure whether you qualify for the credit, don’t rely on social media or questionable tax advice—consult a tax professional instead. The IRS is cracking down, and the last thing you want is to get caught up in an audit over a credit you weren’t supposed to take in the first place.

 

The days of casually claiming the fuel tax credit without scrutiny are over. The IRS is finally enforcing penalties on false claims and requiring more documentation from those who take the credit. If you qualify, be ready to prove it. If you don’t, don’t risk it—the IRS is watching, and this year, they’re taking action.