The IRS has released frequently asked questions that provide taxpayers with guidance for claiming various fuel credits for 2012.
These fuel credits originally expired at the end of 2011 but were extended retroactively for 2012 and 2013 by the enactment of the American Taxpayer Relief Act of 2012 Act on Jan. 2, 2013. The alternative fuel credit provides a 50-cent-per-gallon credit for several different kinds of fuel, including compressed natural gas. The alternative fuel mixture credit provides 51 cents per gallon but is no longer refundable under the new legislation. The biodiesel and biodiesel mixture credit generally offers a $1-per-gallon credit. The cellulosic biofuel credit is $1.01 per gallon and has been expanded to include algae-based fuel.
General filing procedures
Generally, taxpayers who otherwise have excise tax to report must claim fuel tax credits against their excise tax liability on Form 720, Quarterly Excise Tax Return. Taxpayers without any excise tax to report or whose credit exceeds their liability generally have different options for obtaining refunds. The alternative fuel tax credit and biodiesel mixture credits can be claimed on either Form 8849, Claim for Refund of Excise Tax, filed quarterly, or Form 4136, Credit for Federal Tax Paid on Fuels, filed with the annual tax return. The cellulosic biofuel and biodiesel refunds are claimed on the annual tax return with either Form 6478, Alcohol and Cellulosic Biofuel Credit, or Form 8864, Biodiesel and Renewable Diesel Fuel Credit.
The FAQs instruct taxpayers to file all Forms 720 and Forms 8849 on paper until further notice.
Alternative fuel credit and biodiesel mixture credit
The procedures for claiming 2012 credits in the FAQ differ significantly from the procedures the IRS provided when the credits were previously extended retroactively for 2010.
Taxpayers who filed Form 720 to report excise tax liabilities must amend their Form 720 with a Form 720-X to claim the alternative fuel credit, alternative fuel mixture credit and biodiesel mixture credit against those liabilities. A single Form 720-X can be used to amend multiple quarters, but each quarter must be separately stated. If the credit exceeds Form 720 liability, taxpayers can claim their refund on Form 4136. The alternative fuel mixture credit can no longer be taken as a refund if it exceeds excise tax liability. Taxpayers who did not report excise tax on a Form 720 can claim their refunds for the alternative fuel credit and biodiesel mixture credit on Form 4136 with their annual return.
The IRS guidance indicates taxpayers generally cannot use the Form 8849 to claim refunds on these credits for the first three quarters of 2012, because the form will not be timely filed. Claims on Form 8849 must be made by the last day of the first quarter following the earliest quarter of the income tax year included in the claim, so it may be possible to claim credits for the fourth quarter of 2012 on Form 8849.
Biodiesel and cellulosic biofuel credits
The cellulosic biofuel credit for 2012 can be claimed as an income tax credit on the 2012 federal income tax return by attaching Form 6478.
The biodiesel credit for 2012 can be claimed as an income tax credit on the 2012 federal income tax return by attaching Form 8864.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.