On March 23, 2023, the IRS included improper fuel tax credit claims in its growing 2023 Dirty Dozen list of abusive tax scams. IR-2023-55.
The fuel tax credit is reserved for off-highway businesses and farming use and is claimed by filing Form 4136, Credit for Federal Tax Paid on Fuels. Promoters are luring ineligible taxpayers to fraudulently claim the fuel tax credit with promises of a windfall refund, while the promoters profit from large fees.
Improper claims for the fuel tax credit are the latest in abusive tax schemes targeted by the IRS. On March 20, 2023, the IRS added abusive claims for the Employee Retention Credit, available under the CARES Act, as the first enforcement priority on the 2023 Dirty Dozen list. See our previous client alert on the Employee Retention Credit here.
IRS Commissioner Daniel Werfel issued the following warning: “People should watch out for erroneous fuel tax credit claims and the scammers that promote them. . . These scammers will often charge a hefty fee for these bogus claims, and participants also face the possibility of identity theft.” IR-2023-55.
The IRS has enhanced its processing systems to identify suspicious fuel tax credit claims and is encouraging individuals to report illegal activities relating to these claims to the IRS Lead Development Center in the Office of Promoter Investigations. This invitation will lead to whistleblower claims, which are certain to contribute to civil audits, promoter investigations, and criminal prosecutions. The subjects and targets of these enforcement actions are certain to face substantial direct and collateral consequences and should consider engaging legal representation well in advance of any contact by the government.
For more than 75 years, Kostelanetz LLP has built a global reputation as the law firm of choice for clients facing high-stakes controversies and negotiations with government agencies. Our attorneys have unparalleled experience in tax controversies and white-collar criminal defense and are regularly called upon to handle the most challenging and sensitive cases and internal investigations. Important parts of the firm’s practice include tax and estate planning, commercial litigation, government procurement, and government contracting.
