File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

1040 X

Irs Tax Return Forms 2011Turbo Tax Free OnlineState Taxes Online Free2012 Form 1040Search IrsIrs Tax Forms For 2012Tax Act 2012 ReturnFederal Income Tax Forms 2011Income Tax Software1040easyAmend 1040xWhere To File A 2011 Tax Return1040 XFree State Federal Tax FilingMyfreetaxes Com TucsonTax Forms 1040 EzIrs Free File Fillable FormsFiling State Income Taxes OnlineTaxact 2009H & R Block Free FileFiling Late Taxes OnlineHow To Ammend Your TaxesWhere's My Amended ReturnHow Far Back Can I Amend My TaxesEztaxformI Need To Amend My 2010 TaxesFile Federal And State Tax For FreeWww Irs Gov 1040x1040ezformH R Block Tax ServiceAmmend A Tax Return2010 Tax SoftwareIncome Tax Forms 1040ezHow Can I Efile My 2010 TaxesIrs Form 1040x 2012Can You File 2012 Taxes Online2012income TaxCan I File My 2012 Taxes In 2013Taxslayer Free For MilitaryWhere Can I File Just My State Taxes

1040 X

1040 x 5. 1040 x   Additional Rules for Listed Property Table of Contents Introduction Useful Items - You may want to see: What Is Listed Property?Passenger Automobiles Other Property Used for Transportation Computers and Related Peripheral Equipment Can Employees Claim a Deduction? What Is the Business-Use Requirement?How To Allocate Use Qualified Business Use Recapture of Excess Depreciation Lessee's Inclusion Amount Do the Passenger Automobile Limits Apply?Maximum Depreciation Deduction Deductions After the Recovery Period Deductions For Passenger Automobiles Acquired in a Trade-in What Records Must Be Kept?Adequate Records How Is Listed Property Information Reported? Introduction This chapter discusses the deduction limits and other special rules that apply to certain listed property. 1040 x Listed property includes cars and other property used for transportation, property used for entertainment, and certain computers. 1040 x Deductions for listed property (other than certain leased property) are subject to the following special rules and limits. 1040 x Deduction for employees. 1040 x If your use of the property is not for your employer's convenience or is not required as a condition of your employment, you cannot deduct depreciation or rent expenses for your use of the property as an employee. 1040 x Business-use requirement. 1040 x If the property is not used predominantly (more than 50%) for qualified business use, you cannot claim the section 179 deduction or a special depreciation allowance. 1040 x In addition, you must figure any depreciation deduction under the Modified Accelerated Cost Recovery System (MACRS) using the straight line method over the ADS recovery period. 1040 x You may also have to recapture (include in income) any excess depreciation claimed in previous years. 1040 x A similar inclusion amount applies to certain leased property. 1040 x Passenger automobile limits and rules. 1040 x Annual limits apply to depreciation deductions (including section 179 deductions and any special depreciation allowance) for certain passenger automobiles. 1040 x You can continue to deduct depreciation for the unrecovered basis resulting from these limits after the end of the recovery period. 1040 x This chapter defines listed property and explains the special rules and depreciation deduction limits that apply, including the special inclusion amount rule for leased property. 1040 x It also discusses the recordkeeping rules for listed property and explains how to report information about the property on your tax return. 1040 x Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 535 Business Expenses 587 Business Use of Your Home (Including Use by Daycare Providers) Form (and Instructions) 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 4562 Depreciation and Amortization 4797 Sales of Business Property See chapter 6 for information about getting publications and forms. 1040 x What Is Listed Property? Listed property is any of the following. 1040 x Passenger automobiles (as defined later). 1040 x Any other property used for transportation, unless it is an excepted vehicle. 1040 x Property generally used for entertainment, recreation, or amusement (including photographic, phonographic, communication, and video-recording equipment). 1040 x Computers and related peripheral equipment, unless used only at a regular business establishment and owned or leased by the person operating the establishment. 1040 x A regular business establishment includes a portion of a dwelling unit that is used both regularly and exclusively for business as discussed in Publication 587. 1040 x Improvements to listed property. 1040 x   An improvement made to listed property that must be capitalized is treated as a new item of depreciable property. 1040 x The recovery period and method of depreciation that apply to the listed property as a whole also apply to the improvement. 1040 x For example, if you must depreciate the listed property using the straight line method, you also must depreciate the improvement using the straight line method. 1040 x Passenger Automobiles A passenger automobile is any four-wheeled vehicle made primarily for use on public streets, roads, and highways and rated at 6,000 pounds or less of unloaded gross vehicle weight (6,000 pounds or less of gross vehicle weight for trucks and vans). 1040 x It includes any part, component, or other item physically attached to the automobile at the time of purchase or usually included in the purchase price of an automobile. 1040 x The following vehicles are not considered passenger automobiles for these purposes. 1040 x An ambulance, hearse, or combination ambulance-hearse used directly in a trade or business. 1040 x A vehicle used directly in the trade or business of transporting persons or property for pay or hire. 1040 x A truck or van that is a qualified nonpersonal use vehicle. 1040 x Qualified nonpersonal use vehicles. 1040 x   Qualified nonpersonal use vehicles are vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes. 1040 x They include the trucks and vans listed as excepted vehicles under Other Property Used for Transportation , next. 1040 x They also include trucks and vans that have been specially modified so that they are not likely to be used more than a minimal amount for personal purposes, such as by installation of permanent shelving and painting the vehicle to display advertising or the company's name. 1040 x For a detailed discussion of passenger automobiles, including leased passenger automobiles, see  Publication 463. 1040 x Other Property Used for Transportation Although vehicles used to transport persons or property for pay or hire and vehicles rated at more than the 6,000-pound threshold are not passenger automobiles, they are still “other property used for transportation” and are subject to the special rules for listed property. 1040 x Other property used for transportation includes trucks, buses, boats, airplanes, motorcycles, and any other vehicles used to transport persons or goods. 1040 x Excepted vehicles. 1040 x   Other property used for transportation does not include the following qualified nonpersonal use vehicles (defined earlier under Passenger Automobiles ). 1040 x Clearly marked police and fire vehicles. 1040 x Unmarked vehicles used by law enforcement officers if the use is officially authorized. 1040 x Ambulances used as such and hearses used as such. 1040 x Any vehicle with a loaded gross vehicle weight of over 14,000 pounds that is designed to carry cargo. 1040 x Bucket trucks (cherry pickers), cement mixers, dump trucks (including garbage trucks), flatbed trucks, and refrigerated trucks. 1040 x Combines, cranes and derricks, and forklifts. 1040 x Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat. 1040 x Qualified moving vans. 1040 x Qualified specialized utility repair trucks. 1040 x School buses used in transporting students and employees of schools. 1040 x Other buses with a capacity of at least 20 passengers that are used as passenger buses. 1040 x Tractors and other special purpose farm vehicles. 1040 x Clearly marked police and fire vehicle. 1040 x   A clearly marked police or fire vehicle is a vehicle that meets all the following requirements. 1040 x It is owned or leased by a governmental unit or an agency or instrumentality of a governmental unit. 1040 x It is required to be used for commuting by a police officer or fire fighter who, when not on a regular shift, is on call at all times. 1040 x It is prohibited from being used for personal use (other than commuting) outside the limit of the police officer's arrest powers or the fire fighter's obligation to respond to an emergency. 1040 x It is clearly marked with painted insignia or words that make it readily apparent that it is a police or fire vehicle. 1040 x A marking on a license plate is not a clear marking for these purposes. 1040 x Qualified moving van. 1040 x   A qualified moving van is any truck or van used by a professional moving company for moving household or business goods if the following requirements are met. 1040 x No personal use of the van is allowed other than for travel to and from a move site or for minor personal use, such as a stop for lunch on the way from one move site to another. 1040 x Personal use for travel to and from a move site happens no more than five times a month on average. 1040 x Personal use is limited to situations in which it is more convenient to the employer, because of the location of the employee's residence in relation to the location of the move site, for the van not to be returned to the employer's business location. 1040 x Qualified specialized utility repair truck. 1040 x   A truck is a qualified specialized utility repair truck if it is not a van or pickup truck and all the following apply. 1040 x The truck was specifically designed for and is used to carry heavy tools, testing equipment, or parts. 1040 x Shelves, racks, or other permanent interior construction has been installed to carry and store the tools, equipment, or parts and would make it unlikely that the truck would be used, other than minimally, for personal purposes. 1040 x The employer requires the employee to drive the truck home in order to be able to respond in emergency situations for purposes of restoring or maintaining electricity, gas, telephone, water, sewer, or steam utility services. 1040 x Computers and Related Peripheral Equipment A computer is a programmable, electronically activated device capable of accepting information, applying prescribed processes to the information, and supplying the results of those processes with or without human intervention. 1040 x It consists of a central processing unit with extensive storage, logic, arithmetic, and control capabilities. 1040 x Related peripheral equipment is any auxiliary machine which is designed to be controlled by the central processing unit of a computer. 1040 x The following are neither computers nor related peripheral equipment. 1040 x Any equipment that is an integral part of other property that is not a computer. 1040 x Typewriters, calculators, adding and accounting machines, copiers, duplicating equipment, and similar equipment. 1040 x Equipment of a kind used primarily for the user's amusement or entertainment, such as video games. 1040 x Can Employees Claim a Deduction? If you are an employee, you can claim a depreciation deduction for the use of your listed property (whether owned or rented) in performing services as an employee only if your use is a business use. 1040 x The use of your property in performing services as an employee is a business use only if both the following requirements are met. 1040 x The use is for your employer's convenience. 1040 x The use is required as a condition of your employment. 1040 x If these requirements are not met, you cannot deduct depreciation (including the section 179 deduction) or rent expenses for your use of the property as an employee. 1040 x Employer's convenience. 1040 x   Whether the use of listed property is for your employer's convenience must be determined from all the facts. 1040 x The use is for your employer's convenience if it is for a substantial business reason of the employer. 1040 x The use of listed property during your regular working hours to carry on your employer's business generally is for the employer's convenience. 1040 x Condition of employment. 1040 x   Whether the use of listed property is a condition of your employment depends on all the facts and circumstances. 1040 x The use of property must be required for you to perform your duties properly. 1040 x Your employer does not have to require explicitly that you use the property. 1040 x However, a mere statement by the employer that the use of the property is a condition of your employment is not sufficient. 1040 x Example 1. 1040 x Virginia Sycamore is employed as a courier with We Deliver, which provides local courier services. 1040 x She owns and uses a motorcycle to deliver packages to downtown offices. 1040 x We Deliver explicitly requires all delivery persons to own a car or motorcycle for use in their employment. 1040 x Virginia's use of the motorcycle is for the convenience of We Deliver and is required as a condition of employment. 1040 x Example 2. 1040 x Bill Nelson is an inspector for Uplift, a construction company with many sites in the local area. 1040 x He must travel to these sites on a regular basis. 1040 x Uplift does not furnish an automobile or explicitly require him to use his own automobile. 1040 x However, it pays him for any costs he incurs in traveling to the various sites. 1040 x The use of his own automobile or a rental automobile is for the convenience of Uplift and is required as a condition of employment. 1040 x Example 3. 1040 x Assume the same facts as in Example 2 except that Uplift furnishes a car to Bill, who chooses to use his own car and receive payment for using it. 1040 x The use of his own car is neither for the convenience of Uplift nor required as a condition of employment. 1040 x Example 4. 1040 x Marilyn Lee is a pilot for Y Company, a small charter airline. 1040 x Y requires pilots to obtain 80 hours of flight time annually in addition to flight time spent with the airline. 1040 x Pilots usually can obtain these hours by flying with the Air Force Reserve or by flying part-time with another airline. 1040 x Marilyn owns her own airplane. 1040 x The use of her airplane to obtain the required flight hours is neither for the convenience of the employer nor required as a condition of employment. 1040 x Example 5. 1040 x David Rule is employed as an engineer with Zip, an engineering contracting firm. 1040 x He occasionally takes work home at night rather than work late in the office. 1040 x He owns and uses a home computer which is virtually identical to the office model. 1040 x His use of the computer is neither for the convenience of his employer nor required as a condition of employment. 1040 x What Is the Business-Use Requirement? You can claim the section 179 deduction and a special depreciation allowance for listed property and depreciate listed property using GDS and a declining balance method if the property meets the business-use requirement. 1040 x To meet this requirement, listed property must be used predominantly (more than 50% of its total use) for qualified business use. 1040 x If this requirement is not met, the following rules apply. 1040 x Property not used predominantly for qualified business use during the year it is placed in service does not qualify for the section 179 deduction. 1040 x Property not used predominantly for qualified business use during the year it is placed in service does not qualify for a special depreciation allowance. 1040 x Any depreciation deduction under MACRS for property not used predominantly for qualified business use during any year must be figured using the straight line method over the ADS recovery period. 1040 x This rule applies each year of the recovery period. 1040 x Excess depreciation on property previously used predominantly for qualified business use must be recaptured (included in income) in the first year in which it is no longer used predominantly for qualified business use. 1040 x A lessee must add an inclusion amount to income in the first year in which the leased property is not used predominantly for qualified business use. 1040 x Being required to use the straight line method for an item of listed property not used predominantly for qualified business use is not the same as electing the straight line method. 1040 x It does not mean that you have to use the straight line method for other property in the same class as the item of listed property. 1040 x Exception for leased property. 1040 x   The business-use requirement generally does not apply to any listed property leased or held for leasing by anyone regularly engaged in the business of leasing listed property. 1040 x   You are considered regularly engaged in the business of leasing listed property only if you enter into contracts for the leasing of listed property with some frequency over a continuous period of time. 1040 x This determination is made on the basis of the facts and circumstances in each case and takes into account the nature of your business in its entirety. 1040 x Occasional or incidental leasing activity is insufficient. 1040 x For example, if you lease only one passenger automobile during a tax year, you are not regularly engaged in the business of leasing automobiles. 1040 x An employer who allows an employee to use the employer's property for personal purposes and charges the employee for the use is not regularly engaged in the business of leasing the property used by the employee. 1040 x How To Allocate Use To determine whether the business-use requirement is met, you must allocate the use of any item of listed property used for more than one purpose during the year among its various uses. 1040 x For passenger automobiles and other means of transportation, allocate the property's use on the basis of mileage. 1040 x You determine the percentage of qualified business use by dividing the number of miles you drove the vehicle for business purposes during the year by the total number of miles you drove the vehicle for all purposes (including business miles) during the year. 1040 x For other listed property, allocate the property's use on the basis of the most appropriate unit of time the property is actually used (rather than merely being available for use). 1040 x For example, you can determine the percentage of business use of a computer by dividing the number of hours you used the computer for business purposes during the year by the total number of hours you used the computer for all purposes (including business use) during the year. 1040 x Entertainment use. 1040 x   Treat the use of listed property for entertainment, recreation, or amusement purposes as a business use only to the extent you can deduct expenses (other than interest and property tax expenses) due to its use as an ordinary and necessary business expense. 1040 x Commuting use. 1040 x   The use of an automobile for commuting is not business use, regardless of whether work is performed during the trip. 1040 x For example, a business telephone call made on a car telephone while commuting to work does not change the character of the trip from commuting to business. 1040 x This is also true for a business meeting held in a car while commuting to work. 1040 x Similarly, a business call made on an otherwise personal trip does not change the character of a trip from personal to business. 1040 x The fact that an automobile is used to display material that advertises the owner's or user's trade or business does not convert an otherwise personal use into business use. 1040 x Use of your automobile by another person. 1040 x   If someone else uses your automobile, do not treat that use as business use unless one of the following conditions applies. 1040 x That use is directly connected with your business. 1040 x You properly report the value of the use as income to the other person and withhold tax on the income where required. 1040 x You are paid a fair market rent. 1040 x Treat any payment to you for the use of the automobile as a rent payment for purposes of item (3). 1040 x Employee deductions. 1040 x   If you are an employee, do not treat your use of listed property as business use unless it is for your employer's convenience and is required as a condition of your employment. 1040 x See Can Employees Claim a Deduction , earlier. 1040 x Qualified Business Use Qualified business use of listed property is any use of the property in your trade or business. 1040 x However, it does not include the following uses. 1040 x The leasing of property to any 5% owner or related person (to the extent the property is used by a 5% owner or person related to the owner or lessee of the property). 1040 x The use of property as pay for the services of a 5% owner or related person. 1040 x The use of property as pay for services of any person (other than a 5% owner or related person), unless the value of the use is included in that person's gross income and income tax is withheld on that amount where required. 1040 x Property does not stop being used predominantly for qualified business use because of a transfer at death. 1040 x Exception for leasing or compensatory use of aircraft. 1040 x   Treat the leasing of any aircraft by a 5% owner or related person, or the compensatory use of any aircraft, as a qualified business use if at least 25% of the total use of the aircraft during the year is for a qualified business use. 1040 x 5% owner. 1040 x   For a business entity that is not a corporation, a 5% owner is any person who owns more than 5% of the capital or profits interest in the business. 1040 x   For a corporation, a 5% owner is any person who owns, or is considered to own, either of the following. 1040 x More than 5% of the outstanding stock of the corporation. 1040 x Stock possessing more than 5% of the total combined voting power of all stock in the corporation. 1040 x Related persons. 1040 x   For a description of related persons, see Related persons in the discussion on property owned or used in 1986 under What Method Can You Use To Depreciate Your Property in chapter 1 . 1040 x For this purpose, however, treat as related persons only the relationships listed in items (1) through (10) of that discussion and substitute “50%” for “10%” each place it appears. 1040 x Examples. 1040 x   The following examples illustrate whether the use of business property is qualified business use. 1040 x Example 1. 1040 x John Maple is the sole proprietor of a plumbing contracting business. 1040 x John employs his brother, Richard, in the business. 1040 x As part of Richard's pay, he is allowed to use one of the company automobiles for personal use. 1040 x The company includes the value of the personal use of the automobile in Richard's gross income and properly withholds tax on it. 1040 x The use of the automobile is pay for the performance of services by a related person, so it is not a qualified business use. 1040 x Example 2. 1040 x John, in Example 1, allows unrelated employees to use company automobiles for personal purposes. 1040 x He does not include the value of the personal use of the company automobiles as part of their compensation and he does not withhold tax on the value of the use of the automobiles. 1040 x This use of company automobiles by employees is not a qualified business use. 1040 x Example 3. 1040 x James Company Inc. 1040 x owns several automobiles that its employees use for business purposes. 1040 x The employees also are allowed to take the automobiles home at night. 1040 x The fair market value of each employee's use of an automobile for any personal purpose, such as commuting to and from work, is reported as income to the employee and James Company withholds tax on it. 1040 x This use of company automobiles by employees, even for personal purposes, is a qualified business use for the company. 1040 x Investment Use The use of property to produce income in a nonbusiness activity (investment use) is not a qualified business use. 1040 x However, you can treat the investment use as business use to figure the depreciation deduction for the property in a given year. 1040 x Example 1. 1040 x Sarah Bradley uses a home computer 50% of the time to manage her investments. 1040 x She also uses the computer 40% of the time in her part-time consumer research business. 1040 x Sarah's home computer is listed property because it is not used at a regular business establishment. 1040 x She does not use the computer predominantly for qualified business use. 1040 x Therefore, she cannot elect a section 179 deduction or claim a special depreciation allowance for the computer. 1040 x She must depreciate it using the straight line method over the ADS recovery period. 1040 x Her combined business/investment use for determining her depreciation deduction is 90%. 1040 x Example 2. 1040 x If Sarah uses her computer 30% of the time to manage her investments and 60% of the time in her consumer research business, it is used predominantly for qualified business use. 1040 x She can elect a section 179 deduction and, if she does not deduct all the computer's cost, she can claim a special depreciation allowance and depreciate the computer using the 200% declining balance method over the GDS recovery period. 1040 x Her combined business/investment use for determining her depreciation deduction is 90%. 1040 x Recapture of Excess Depreciation If you used listed property more than 50% in a qualified business use in the year you placed it in service, you must recapture (include in income) excess depreciation in the first year you use it 50% or less. 1040 x You also increase the adjusted basis of your property by the same amount. 1040 x Excess depreciation is: The depreciation allowable for the property (including any section 179 deduction and special depreciation allowance claimed) for years before the first year you do not use the property predominantly for qualified business use, minus The depreciation that would have been allowable for those years if you had not used the property predominantly for qualified business use in the year you placed it in service. 1040 x To determine the amount in (2) above, you must refigure the depreciation using the straight line method and the ADS recovery period. 1040 x Example. 1040 x In June 2009, Ellen Rye purchased and placed in service a pickup truck that cost $18,000. 1040 x She used it only for qualified business use for 2009 through 2012. 1040 x Ellen claimed a section 179 deduction of $10,000 based on the purchase of the truck. 1040 x She began depreciating it using the 200% DB method over a 5-year GDS recovery period. 1040 x The pickup truck's gross vehicle weight was over 6,000 pounds, so it was not subject to the passenger automobile limits discussed later under Do the Passenger Automobile Limits Apply. 1040 x During 2013, she used the truck 50% for business and 50% for personal purposes. 1040 x She includes $4,018 excess depreciation in her gross income for 2013. 1040 x The excess depreciation is determined as follows. 1040 x Total section 179 deduction ($10,000) and depreciation claimed ($6,618) for 2009 through 2012. 1040 x (Depreciation is from Table A-1. 1040 x ) $16,618 Minus: Depreciation allowable (Table A-8):     2009 – 10% of $18,000 $1,800   2010 – 20% of $18,000 3,600   2011 – 20% of $18,000 3,600   2012 – 20% of $18,000 3,600 12,600 Excess depreciation $4,018 If Ellen's use of the truck does not change to 50% for business and 50% for personal purposes until 2015, there will be no excess depreciation. 1040 x The total depreciation allowable using Table A-8 through 2015 will be $18,000, which equals the total of the section 179 deduction and depreciation she will have claimed. 1040 x Where to figure and report recapture. 1040 x   Use Form 4797, Part IV, to figure the recapture amount. 1040 x Report the recapture amount as other income on the same form or schedule on which you took the depreciation deduction. 1040 x For example, report the recapture amount as other income on Schedule C (Form 1040) if you took the depreciation deduction on Schedule C. 1040 x If you took the depreciation deduction on Form 2106, report the recapture amount as other income on Form 1040, line 21. 1040 x Lessee's Inclusion Amount If you use leased listed property other than a passenger automobile for business/investment use, you must include an amount in your income in the first year your qualified business-use percentage is 50% or less. 1040 x Your qualified business-use percentage is the part of the property's total use that is qualified business use (defined earlier). 1040 x For the inclusion amount rules for a leased passenger automobile, see Leasing a Car in chapter 4 of Publication 463. 1040 x The inclusion amount is the sum of Amount A and Amount B, described next. 1040 x However, see the special rules for the inclusion amount, later, if your lease begins in the last 9 months of your tax year or is for less than one year. 1040 x Amount A. 1040 x   Amount A is: The fair market value of the property, multiplied by The business/investment use for the first tax year the qualified business-use percentage is 50% or less, multiplied by The applicable percentage from Table A-19 in Appendix A . 1040 x   The fair market value of the property is the value on the first day of the lease term. 1040 x If the capitalized cost of an item of listed property is specified in the lease agreement, you must treat that amount as the fair market value. 1040 x Amount B. 1040 x   Amount B is: The fair market value of the property, multiplied by The average of the business/investment use for all tax years the property was leased that precede the first tax year the qualified business-use percentage is 50% or less, multiplied by The applicable percentage from Table A–20 in Appendix A . 1040 x Maximum inclusion amount. 1040 x   The inclusion amount cannot be more than the sum of the deductible amounts of rent for the tax year in which the lessee must include the amount in gross income. 1040 x Inclusion amount worksheet. 1040 x   The following worksheet is provided to help you figure the inclusion amount for leased listed property. 1040 x Inclusion Amount Worksheet for Leased Listed Property 1. 1040 x Fair market value   2. 1040 x Business/investment use for first year business use is 50% or less   3. 1040 x Multiply line 1 by line 2. 1040 x   4. 1040 x Rate (%) from Table A-19   5. 1040 x Multiply line 3 by line 4. 1040 x This is Amount A. 1040 x   6. 1040 x Fair market value   7. 1040 x Average business/investment use for years property leased before the first year business use is 50% or less . 1040 x . 1040 x . 1040 x . 1040 x . 1040 x . 1040 x . 1040 x . 1040 x . 1040 x . 1040 x . 1040 x . 1040 x . 1040 x   8. 1040 x Multiply line 6 by line 7   9. 1040 x Rate (%) from Table A-20   10. 1040 x Multiply line 8 by line 9. 1040 x This is Amount B. 1040 x   11. 1040 x Add line 5 and line 10. 1040 x This is your inclusion amount. 1040 x Enter here and as other income on the form or schedule on which you originally took the deduction (for example, Schedule C or F (Form 1040), Form 1040, Form 1120, etc. 1040 x )         Example. 1040 x On February 1, 2011, Larry House, a calendar year taxpayer, leased and placed in service a computer with a fair market value of $3,000. 1040 x The lease is for a period of 5 years. 1040 x Larry does not use the computer at a regular business establishment, so it is listed property. 1040 x His business use of the property (all of which is qualified business use) is 80% in 2011, 60% in 2012, and 40% in 2013. 1040 x He must add an inclusion amount to gross income for 2013, the first tax year his qualified business-use percentage is 50% or less. 1040 x The computer has a 5-year recovery period under both GDS and ADS. 1040 x 2013 is the third tax year of the lease, so the applicable percentage from Table A-19 is −19. 1040 x 8%. 1040 x The applicable percentage from Table A-20 is 22. 1040 x 0%. 1040 x Larry's deductible rent for the computer for 2013 is $800. 1040 x Larry uses the Inclusion amount worksheet. 1040 x to figure the amount he must include in income for 2013. 1040 x His inclusion amount is $224, which is the sum of −$238 (Amount A) and $462 (Amount B). 1040 x Inclusion Amount Worksheet for Leased Listed Property 1. 1040 x Fair market value $3,000   2. 1040 x Business/investment use for first year business use is 50% or less 40 % 3. 1040 x Multiply line 1 by line 2. 1040 x 1,200   4. 1040 x Rate (%) from Table A-19 −19. 1040 x 8 % 5. 1040 x Multiply line 3 by line 4. 1040 x This is Amount A. 1040 x −238   6. 1040 x Fair market value 3,000   7. 1040 x Average business/investment use for years property leased before the first year business use is 50% or less 70 % 8. 1040 x Multiply line 6 by line 7 2,100   9. 1040 x Rate (%) from Table A-20 22. 1040 x 0 % 10. 1040 x Multiply line 8 by line 9. 1040 x This is Amount B. 1040 x 462   11. 1040 x Add line 5 and line 10. 1040 x This is your inclusion amount. 1040 x Enter here and as other income on the form or schedule on which you originally took the deduction (for example, Schedule C or F (Form 1040), Form 1040, Form 1120, etc. 1040 x ) $224           Lease beginning in the last 9 months of your tax year. 1040 x    The inclusion amount is subject to a special rule if all the following apply. 1040 x The lease term begins within 9 months before the close of your tax year. 1040 x You do not use the property predominantly (more than 50%) for qualified business use during that part of the tax year. 1040 x The lease term continues into your next tax year. 1040 x Under this special rule, add the inclusion amount to income in the next tax year. 1040 x Figure the inclusion amount by taking into account the average of the business/investment use for both tax years (line 2 of the Inclusion Amount Worksheet for Leased Listed Property) and the applicable percentage for the tax year the lease term begins. 1040 x Skip lines 6 through 9 of the worksheet and enter zero on line 10. 1040 x Example 1. 1040 x On August 1, 2012, Julie Rule, a calendar year taxpayer, leased and placed in service an item of listed property. 1040 x The property is 5-year property with a fair market value of $10,000. 1040 x Her property has a recovery period of 5 years under ADS. 1040 x The lease is for 5 years. 1040 x Her business use of the property was 50% in 2012 and 90% in 2013. 1040 x She paid rent of $3,600 for 2012, of which $3,240 is deductible. 1040 x She must include $147 in income in 2013. 1040 x The $147 is the sum of Amount A and Amount B. 1040 x Amount A is $147 ($10,000 × 70% × 2. 1040 x 1%), the product of the fair market value, the average business use for 2012 and 2013, and the applicable percentage for year one from Table A-19 . 1040 x Amount B is zero. 1040 x Lease for less than one year. 1040 x   A special rule for the inclusion amount applies if the lease term is less than one year and you do not use the property predominantly (more than 50%) for qualified business use. 1040 x The amount included in income is the inclusion amount (figured as described in the preceding discussions) multiplied by a fraction. 1040 x The numerator of the fraction is the number of days in the lease term and the denominator is 365 (or 366 for leap years). 1040 x   The lease term for listed property other than residential rental or nonresidential real property includes options to renew. 1040 x If you have two or more successive leases that are part of the same transaction (or a series of related transactions) for the same or substantially similar property, treat them as one lease. 1040 x Example 2. 1040 x On October 1, 2012, John Joyce, a calendar year taxpayer, leased and placed in service an item of listed property that is 3-year property. 1040 x This property had a fair market value of $15,000 and a recovery period of 5 years under ADS. 1040 x The lease term was 6 months (ending on March 31, 2013), during which he used the property 45% in business. 1040 x He must include $71 in income in 2013. 1040 x The $71 is the sum of Amount A and Amount B. 1040 x Amount A is $71 ($15,000 × 45% × 2. 1040 x 1% × 183/365), the product of the fair market value, the average business use for both years, and the applicable percentage for year one from Table A-19 , prorated for the length of the lease. 1040 x Amount B is zero. 1040 x Where to report inclusion amount. 1040 x   Report the inclusion amount figured as described in the preceding discussions as other income on the same form or schedule on which you took the deduction for your rental costs. 1040 x For example, report the inclusion amount as other income on Schedule C (Form 1040) if you took the deduction on Schedule C. 1040 x If you took the deduction for rental costs on Form 2106, report the inclusion amount as other income on Form 1040, line 21. 1040 x Do the Passenger Automobile Limits Apply? The depreciation deduction, including the section 179 deduction and special depreciation allowance, you can claim for a passenger automobile (defined earlier) each year is limited. 1040 x This section describes the maximum depreciation deduction amounts for 2013 and explains how to deduct, after the recovery period, the unrecovered basis of your property that results from applying the passenger automobile limit. 1040 x Exception for leased cars. 1040 x   The passenger automobile limits generally do not apply to passenger automobiles leased or held for leasing by anyone regularly engaged in the business of leasing passenger automobiles. 1040 x For information on when you are considered regularly engaged in the business of leasing listed property, including passenger automobiles, see Exception for leased property , earlier, under What Is the Business-Use Requirement . 1040 x Maximum Depreciation Deduction The passenger automobile limits are the maximum depreciation amounts you can deduct for a passenger automobile. 1040 x They are based on the date you placed the automobile in service. 1040 x Passenger Automobiles The maximum deduction amounts for most passenger automobiles are shown in the following table. 1040 x Maximum Depreciation Deduction for Passenger Automobiles Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,1601 $5,100 $3,050 $1,875 2012 11,1601 5,100 3,050 1,875 2011 11,0602 4,900 2,950 1,775 2010 11,0602  4,900 2,950 1,775 2009 10,9603 4,800 2,850 1,775 2008 10,9603  4,800 2,850 1,775 2007 3,060 4,900 2,850 1,775 2006 2,960 4,800 2,850 1,775 2005 2,960 4,700 2,850 1,675 2004 10,6104 4,800 2,850 1,675 5/06/2003– 12/31/2003 10,7105 4,900 2,950 1,775 1/01/2003– 5/05/2003 7,6606 4,900 2,950 1,775 1If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,160. 1040 x 2If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,060. 1040 x 3If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $2,960. 1040 x 4If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $2,960. 1040 x 5If you acquired the vehicle before 5/06/03, the maximum deduction is $7,660. 1040 x If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,060. 1040 x 6If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,060. 1040 x If your business/investment use of the automobile is less than 100%, you must reduce the maximum deduction amount by multiplying the maximum amount by the percentage of business/investment use determined on an annual basis during the tax year. 1040 x If you have a short tax year, you must reduce the maximum deduction amount by multiplying the maximum amount by a fraction. 1040 x The numerator of the fraction is the number of months and partial months in the short tax year and the denominator is 12. 1040 x Example. 1040 x On April 15, 2013, Virginia Hart bought and placed in service a new car for $14,500. 1040 x She used the car only in her business. 1040 x She files her tax return based on the calendar year. 1040 x She does not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. 1040 x Under MACRS, a car is 5-year property. 1040 x Since she placed her car in service on April 15 and used it only for business, she uses the percentages in Table A-1 to figure her MACRS depreciation on the car. 1040 x Virginia multiplies the $14,500 unadjusted basis of her car by 0. 1040 x 20 to get her MACRS depreciation of $2,900 for 2013. 1040 x This $2,900 is below the maximum depreciation deduction of $3,160 for passenger automobiles placed in service in 2013. 1040 x She can deduct the full $2,900. 1040 x Electric Vehicles The maximum depreciation deductions for passenger automobiles that are produced to run primarily on electricity are higher than those for other automobiles. 1040 x The maximum deduction amounts for electric vehicles placed in service after August 5, 1997, and before January 1, 2007, are shown in the following table. 1040 x Owners of electric vehicles placed in service after December 31, 2006, should use the table of maximum deduction amounts later for electric vehicles classified as passenger automobiles or use the table of maximum deduction amounts for trucks and vans later, for electric vehicles classified as trucks and vans. 1040 x Maximum Depreciation Deduction For Electric Vehicles Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2006 $8,980 $14,400 $8,650 $5,225 2005 8,880 14,200 8,450 5,125 2004 31,8301 14,300 8,550 5,125 5/06/2003– 12/31/2003 32,0302 14,600 8,750 5,225 1/01/2003– 5/05/2003 22,8803 14,600 8,750 5,225 1If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $8,880. 1040 x 2If you acquired the vehicle before 5/06/03, the maximum deduction is $22,880. 1040 x If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $9,080. 1040 x 3 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $9,080. 1040 x Trucks and Vans The maximum depreciation deductions for trucks and vans placed in service after 2002 are higher than those for other passenger automobiles. 1040 x The maximum deduction amounts for trucks and vans are shown in the following table. 1040 x Maximum Depreciation Deduction For Trucks and Vans Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,3601 $5,400 $3,250 $1,975 2012 11,3601 5,300 3,150 1,875 2011 11,2602 5,200 3,150 1,875 2010 11,1603 5,100 3,050 1,875 2009 11,0604 4,900 2,950 1,775 2008 11,1605 5,100 3,050 1,875 2007 3,260 5,200 3,050 1,875 2006 3,260 5,200 3,150 1,875 2005 3,260 5,200 3,150 1,875 2004 10,9106 5,300 3,150 1,875 5/06/2003– 12/31/2003 11,0107 5,400 3,250 1,975 1/01/2003– 5/05/2003 7,9608 5,400 3,250 1,975 1 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,360. 1040 x 2 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,260. 1040 x 3 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,160. 1040 x 4 If you elect not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $3,060. 1040 x 5If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $3,160. 1040 x 6If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, or the maximum deduction is $3,260. 1040 x 7 If you acquired the vehicle before 5/06/03, the maximum deduction is $7,960. 1040 x If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,360. 1040 x 8 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,360. 1040 x Depreciation Worksheet for Passenger Automobiles You can use the following worksheet to figure your depreciation deduction using the percentage tables. 1040 x Then use the information from this worksheet to prepare Form 4562. 1040 x Depreciation Worksheet for Passenger Automobiles   Part I   1. 1040 x MACRS system (GDS or ADS)     2. 1040 x Property class     3. 1040 x Date placed in service     4. 1040 x Recovery period     5. 1040 x Method and convention     6. 1040 x Depreciation rate (from tables)     7. 1040 x Maximum depreciation deduction for this year from the appropriate table       8. 1040 x Business/investment-use percentage       9. 1040 x Multiply line 7 by line 8. 1040 x This is your adjusted maximum depreciation deduction       10. 1040 x Section 179 deduction claimed this year (not more than line 9). 1040 x Enter -0- if this is not the year you placed the car in service. 1040 x         Note. 1040 x  1) If line 10 is equal to line 9, stop here. 1040 x Your combined section 179 and depreciation deduction (including your special depreciation allowance) is limited to the amount on line 9. 1040 x  2) If line 10 is less than line 9, complete Part II. 1040 x   Part II   11. 1040 x Subtract line 10 from line 9. 1040 x This is the limit on the amount you can deduct for depreciation (including any special depreciation allowance )       12. 1040 x Cost or other basis (reduced by any alternative motor vehicle credit 1or credit for electric vehicles 2)       13. 1040 x Multiply line 12 by line 8. 1040 x This is your business/investment cost       14. 1040 x Section 179 deduction claimed in the year you placed the car in service       15. 1040 x Subtract line 14 from line 13. 1040 x This is your tentative basis for depreciation       16. 1040 x Multiply line 15 by . 1040 x 50 if the 50% special depreciation allowance applies. 1040 x This is your special depreciation allowance. 1040 x Enter -0- if this is not the year you placed the car in service, the car is not qualified property, or you elected not to claim a special depreciation allowance       Note 1) If line 16 is equal to line 11, stop here. 1040 x Your depreciation deduction (including your special depreciation allowance) is limited to the amount on line 11. 1040 x  2) If line 16 is less than line 11, complete Part III. 1040 x   Part III   17. 1040 x Subtract line 16 from 11. 1040 x This is the limit on the amount you can deduct for MACRS depreciation       18. 1040 x Subtract line 16 from line 15. 1040 x This is your basis for depreciation. 1040 x       19. 1040 x Multiply line 18 by line 6. 1040 x This is your tentative MACRS depreciation deduction. 1040 x       20. 1040 x Enter the lesser of line 17 or line 19. 1040 x This is your MACRS depreciation deduction. 1040 x     1 When figuring the amount to enter on line 12, do not reduce your cost or other basis by any section 179 deduction you claimed for your car. 1040 x 2 Reduce the basis by the lesser of $4,000 or 10% of the cost of the vehicle even if the credit is less than that amount. 1040 x             Deductions After the Recovery Period If the depreciation deductions for your automobile are reduced under the passenger automobile limits, you will have unrecovered basis in your automobile at the end of the recovery period. 1040 x If you continue to use the automobile for business, you can deduct that unrecovered basis after the recovery period ends. 1040 x You can claim a depreciation deduction in each succeeding tax year until you recover your full basis in the car. 1040 x The maximum amount you can deduct each year is determined by the date you placed the car in service and your business/investment-use percentage. 1040 x See Maximum Depreciation Deduction , earlier. 1040 x Unrecovered basis is the cost or other basis of the passenger automobile reduced by any clean-fuel vehicle deduction, electric vehicle credit, depreciation, and section 179 deductions that would have been allowable if you had used the car 100% for business and investment use and the passenger automobile limits had not applied. 1040 x You cannot claim a depreciation deduction for listed property other than passenger automobiles after the recovery period ends. 1040 x There is no unrecovered basis at the end of the recovery period because you are considered to have used this property 100% for business and investment purposes during all of the recovery period. 1040 x Example. 1040 x In May 2007, you bought and placed in service a car costing $31,500. 1040 x The car was 5-year property under GDS (MACRS). 1040 x You did not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. 1040 x You used the car exclusively for business during the recovery period (2007 through 2012). 1040 x You figured your depreciation as shown below. 1040 x Year Percentage Amount Limit   Allowed 2007 20. 1040 x 0% $6,300 $2,960   $2,960 2008 32. 1040 x 0 10,080 4,800   4,800 2009 19. 1040 x 2 6,048 2,850   2,850 2010 11. 1040 x 52 3,629 1,675   1,675 2011 11. 1040 x 52 3,629 1,675   1,675 2012 5. 1040 x 76 1,814 1,675   1,675 Total   $15,635 At the end of 2012, you had an unrecovered basis of $15,865 ($31,500 − $15,635). 1040 x If in 2013 and later years you continue to use the car 100% for business, you can deduct each year the lesser of $1,675 or your remaining unrecovered basis. 1040 x If your business use of the car had been less than 100% during any year, your depreciation deduction would have been less than the maximum amount allowable for that year. 1040 x However, in figuring your unrecovered basis in the car, you would still reduce your basis by the maximum amount allowable as if the business use had been 100%. 1040 x For example, if you had used your car 60% for business instead of 100%, your allowable depreciation deductions would have been $9,519 ($15,865 × 60%), but you still would have to reduce your basis by $15,865 to determine your unrecovered basis. 1040 x Deductions For Passenger Automobiles Acquired in a Trade-in If you acquire a passenger automobile in a trade-in, depreciate the carryover basis separately as if the trade-in did not occur. 1040 x Depreciate the part of the new automobile's basis that exceeds its carryover basis (excess basis) as if it were newly placed in service property. 1040 x This excess basis is the additional cash paid for the new automobile in the trade-in. 1040 x The depreciation figured for the two components of the basis (carryover basis and excess basis) is subject to a single passenger automobile limit. 1040 x Special rules apply in determining the passenger automobile limits. 1040 x These rules and examples are discussed in section 1. 1040 x 168(i)-6(d)(3) of the regulations. 1040 x Instead of figuring depreciation for the carryover basis and the excess basis separately, you can elect to treat the old automobile as disposed of and both of the basis components for the new automobile as if placed in service at the time of the trade-in. 1040 x For more information, including how to make this election, see Election out under Property Acquired in a Like-kind Exchange or Involuntary Conversion in chapter 4 and sections 1. 1040 x 168(i)-6(i) and 1. 1040 x 168(i)-6(j) of the regulations. 1040 x What Records Must Be Kept? You cannot take any depreciation or section 179 deduction for the use of listed property unless you can prove your business/investment use with adequate records or with sufficient evidence to support your own statements. 1040 x For listed property, you must keep records for as long as any recapture can still occur. 1040 x Recapture can occur in any tax year of the recovery period. 1040 x Adequate Records To meet the adequate records requirement, you must maintain an account book, diary, log, statement of expense, trip sheet, or similar record or other documentary evidence that, together with the receipt, is sufficient to establish each element of an expenditure or use. 1040 x You do not have to record information in an account book, diary, or similar record if the information is already shown on the receipt. 1040 x However, your records should back up your receipts in an orderly manner. 1040 x Elements of expenditure or use. 1040 x   Your records or other documentary evidence must support all the following. 1040 x The amount of each separate expenditure, such as the cost of acquiring the item, maintenance and repair costs, capital improvement costs, lease payments, and any other expenses. 1040 x The amount of each business and investment use (based on an appropriate measure, such as mileage for vehicles and time for other listed property), and the total use of the property for the tax year. 1040 x The date of the expenditure or use. 1040 x The business or investment purpose for the expenditure or use. 1040 x   Written documents of your expenditure or use are generally better evidence than oral statements alone. 1040 x You do not have to keep a daily log. 1040 x However, some type of record containing the elements of an expenditure or the business or investment use of listed property made at or near the time of the expenditure or use and backed up by other documents is preferable to a statement you prepare later. 1040 x Timeliness. 1040 x   You must record the elements of an expenditure or use at the time you have full knowledge of the elements. 1040 x An expense account statement made from an account book, diary, or similar record prepared or maintained at or near the time of the expenditure or use generally is considered a timely record if, in the regular course of business: The statement is given by an employee to the employer, or The statement is given by an independent contractor to the client or customer. 1040 x   For example, a log maintained on a weekly basis, that accounts for use during the week, will be considered a record made at or near the time of use. 1040 x Business purpose supported. 1040 x   Generally, an adequate record of business purpose must be in the form of a written statement. 1040 x However, the amount of detail necessary to establish a business purpose depends on the facts and circumstances of each case. 1040 x A written explanation of the business purpose will not be required if the purpose can be determined from the surrounding facts and circumstances. 1040 x For example, a salesperson visiting customers on an established sales route will not normally need a written explanation of the business purpose of his or her travel. 1040 x Business use supported. 1040 x   An adequate record contains enough information on each element of every business or investment use. 1040 x The amount of detail required to support the use depends on the facts and circumstances. 1040 x For example, a taxpayer who uses a truck for both business and personal purposes and whose only business use of the truck is to make customer deliveries on an established route can satisfy the requirement by recording the length of the route, including the total number of miles driven during the tax year and the date of each trip at or near the time of the trips. 1040 x   Although you generally must prepare an adequate written record, you can prepare a record of the business use of listed property in a computer memory device that uses a logging program. 1040 x Separate or combined expenditures or uses. 1040 x   Each use by you normally is considered a separate use. 1040 x However, you can combine repeated uses as a single item. 1040 x   Record each expenditure as a separate item. 1040 x Do not combine it with other expenditures. 1040 x If you choose, however, you can combine amounts you spent for the use of listed property during a tax year, such as for gasoline or automobile repairs. 1040 x If you combine these expenses, you do not need to support the business purpose of each expense. 1040 x Instead, you can divide the expenses based on the total business use of the listed property. 1040 x   You can account for uses that can be considered part of a single use, such as a round trip or uninterrupted business use, by a single record. 1040 x For example, you can account for the use of a truck to make deliveries at several locations that begin and end at the business premises and can include a stop at the business in between deliveries by a single record of miles driven. 1040 x You can account for the use of a passenger automobile by a salesperson for a business trip away from home over a period of time by a single record of miles traveled. 1040 x Minimal personal use (such as a stop for lunch between two business stops) is not an interruption of business use. 1040 x Confidential information. 1040 x   If any of the information on the elements of an expenditure or use is confidential, you do not need to include it in the account book or similar record if you record it at or near the time of the expenditure or use. 1040 x You must keep it elsewhere and make it available as support to the IRS director for your area on request. 1040 x Substantial compliance. 1040 x   If you have not fully supported a particular element of an expenditure or use, but have complied with the adequate records requirement for the expenditure or use to the satisfaction of the IRS director for your area, you can establish this element by any evidence the IRS director for your area deems adequate. 1040 x   If you fail to establish to the satisfaction of the IRS director for your area that you have substantially complied with the adequate records requirement for an element of an expenditure or use, you must establish the element as follows. 1040 x By your own oral or written statement containing detailed information as to the element. 1040 x By other evidence sufficient to establish the element. 1040 x   If the element is the cost or amount, time, place, or date of an expenditure or use, its supporting evidence must be direct evidence, such as oral testimony by witnesses or a written statement setting forth detailed information about the element or the documentary evidence. 1040 x If the element is the business purpose of an expenditure, its supporting evidence can be circumstantial evidence. 1040 x Sampling. 1040 x   You can maintain an adequate record for part of a tax year and use that record to support your business and investment use of listed property for the entire tax year if it can be shown by other evidence that the periods for which you maintain an adequate record are representative of the use throughout the year. 1040 x Example 1. 1040 x Denise Williams, a sole proprietor and calendar year taxpayer, operates an interior decorating business out of her home. 1040 x She uses her automobile for local business visits to the homes or offices of clients, for meetings with suppliers and subcontractors, and to pick up and deliver items to clients. 1040 x There is no other business use of the automobile, but she and family members also use it for personal purposes. 1040 x She maintains adequate records for the first 3 months of the year showing that 75% of the automobile use was for business. 1040 x Subcontractor invoices and paid bills show that her business continued at approximately the same rate for the rest of the year. 1040 x If there is no change in circumstances, such as the purchase of a second car for exclusive use in her business, the determination that her combined business/investment use of the automobile for the tax year is 75% rests on sufficient supporting evidence. 1040 x Example 2. 1040 x Assume the same facts as in Example 1, except that Denise maintains adequate records during the first week of every month showing that 75% of her use of the automobile is for business. 1040 x Her business invoices show that her business continued at the same rate during the later weeks of each month so that her weekly records are representative of the automobile's business use throughout the month. 1040 x The determination that her business/investment use of the automobile for the tax year is 75% rests on sufficient supporting evidence. 1040 x Example 3. 1040 x Bill Baker, a sole proprietor and calendar year taxpayer, is a salesman in a large metropolitan area for a company that manufactures household products. 1040 x For the first 3 weeks of each month, he occasionally uses his own automobile for business travel within the metropolitan area. 1040 x During these weeks, his business use of the automobile does not follow a consistent pattern. 1040 x During the fourth week of each month, he delivers all business orders taken during the previous month. 1040 x The business use of his automobile, as supported by adequate records, is 70% of its total use during that fourth week. 1040 x The determination based on the record maintained during the fourth week of the month that his business/investment use of the automobile for the tax year is 70% does not rest on sufficient supporting evidence because his use during that week is not representative of use during other periods. 1040 x Loss of records. 1040 x   When you establish that failure to produce adequate records is due to loss of the records through circumstances beyond your control, such as through fire, flood, earthquake, or other casualty, you have the right to support a deduction by reasonable reconstruction of your expenditures and use. 1040 x How Is Listed Property Information Reported? You must provide the information about your listed property requested in Part V of Form 4562, Section A, if you claim either of the following deductions. 1040 x Any deduction for a vehicle. 1040 x A depreciation deduction for any other listed property. 1040 x If you claim any deduction for a vehicle, you also must provide the information requested in Section B. 1040 x If you provide the vehicle for your employee's use, the employee must give you this information. 1040 x If you provide any vehicle for use by an employee, you must first answer the questions in Section C to see if you meet an exception to completing Section B for that vehicle. 1040 x Vehicles used by your employees. 1040 x   You do not have to complete Section B, Part V, for vehicles used by your employees who are not more-than-5% owners or related persons if you meet at least one of the following requirements. 1040 x You maintain a written policy statement that prohibits one of the following uses of the vehicles. 1040 x All personal use including commuting. 1040 x Personal use, other than commuting, by employees who are not officers, directors, or 1%-or-more owners. 1040 x You treat all use of the vehicles by your employees as personal use. 1040 x You provide more than five vehicles for use by your employees, and you keep in your records the information on their use given to you by the employees. 1040 x For demonstrator automobiles provided to full-time salespersons, you maintain a written policy statement that limits the total mileage outside the salesperson's normal working hours and prohibits use of the automobile by anyone else, for vacation trips, or to store personal possessions. 1040 x Exceptions. 1040 x   If you file Form 2106, 2106-EZ, or Schedule C-EZ (Form 1040), and you are not required to file Form 4562, report information about listed property on that form and not on Form 4562. 1040 x Also, if you file Schedule C (Form 1040) and are claiming the standard mileage rate or actual vehicle expenses (except depreciation) and you are not required to file Form 4562 for any other reason, report vehicle information in Part IV of Schedule C and not on Form 4562. 1040 x Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

Online Videos and Podcasts of the Appeals Process

2011 IRS Nationwide Tax Forum Videos

2009 IRS Nationwide Tax Forum Videos

The Appeals Process-Videos
The first video provides an overview of appealing a tax dispute and the IRS Office of Appeals. The other two videos, each approximately 9 to 10 minutes long, take you through the Appeals process and your appeal rights.

The Appeals Process-Podcasts 
The following audio podcasts, less than 5 minutes long, offers you general information about Appeals.

Page Last Reviewed or Updated: 21-Mar-2013

The 1040 X

1040 x 2. 1040 x   Fuel Tax Credits and Refunds Table of Contents Gasoline and Aviation Gasoline Undyed Diesel Fuel and Undyed Kerosene (Other Than Kerosene Used in Aviation)Sales by Registered Ultimate Vendors Diesel-Water Fuel Emulsion Kerosene for Use in AviationSales by Registered Ultimate Vendors Other Fuels (Including Alternative Fuels) Refunds of Second TaxOptional reporting. 1040 x Providing information. 1040 x Definitions of Nontaxable UsesCustom application of fertilizer and pesticide. 1040 x Fuel used between airfield and farm. 1040 x Fuel not used for farming. 1040 x Vehicles not considered highway vehicles. 1040 x Biodiesel or Renewable Diesel Mixture Credit, Alternative Fuel Credit, and Alternative Fuel Mixture CreditHow to Claim the Credit Filing Claims Claiming A Refund Claiming a Credit on Form 4136 Including the Credit or Refund in Income Federal excise taxes are imposed on certain fuels as discussed in chapter 1. 1040 x This chapter lists the nontaxable uses of each fuel and defines the nontaxable uses. 1040 x Information on the refund of second tax is included. 1040 x This chapter also explains credits and refunds for the biodiesel or renewable diesel mixture credits, and the alternative fuel mixture and alternative fuel credits. 1040 x Information on how to make a claim for credit or refund is included in this chapter and in the instructions for: Form 720, Form 4136, and Form 8849. 1040 x Exported taxable fuel. 1040 x   The claim rates for exported taxable fuel are listed on Schedule C (Form 720), Schedule 1 (Form 8849), and Form 4136. 1040 x Taxpayers making a claim for exported taxable fuel must include with their records proof of exportation. 1040 x Proof of exportation includes: A copy of the export bill of lading issued by the delivering carrier, A certificate by the agent or representative of the export carrier showing actual exportation of the fuel, A certificate of lading signed by a customs officer of the foreign country to which the fuel is exported, or A statement of the foreign consignee showing receipt of the fuel. 1040 x Gasoline and Aviation Gasoline Ultimate Purchasers. 1040 x   The following are the uses of gasoline (defined earlier) for which a credit or refund may be allowable to an ultimate purchaser. 1040 x On a farm for farming purposes (credit only). 1040 x Off-highway business use. 1040 x Export. 1040 x In a boat engaged in commercial fishing. 1040 x In certain intercity and local buses. 1040 x In a school bus. 1040 x Exclusive use by a qualified blood collector organization. 1040 x In a highway vehicle owned by the United States that is not used on a highway. 1040 x Exclusive use by a nonprofit educational organization (see Sales by registered ultimate vendors and Credit Card Purchases, later). 1040 x Exclusive use by a state, political subdivision of a state, or the District of Columbia (see Sales by registered ultimate vendors and Credit Card Purchases, later). 1040 x In an aircraft or vehicle owned by an aircraft museum. 1040 x   The following are the uses of aviation gasoline for which a credit or refund may be allowable to an ultimate purchaser. 1040 x On a farm for farming purposes (credit only). 1040 x Export. 1040 x In foreign trade. 1040 x Certain helicopter and fixed-wing air ambulance uses. 1040 x In commercial aviation (other than foreign trade). 1040 x Exclusive use by a qualified blood collector organization. 1040 x Exclusive use by a nonprofit education organization (see Sales by registered ultimate vendors and Credit card purchases, later). 1040 x Exclusive use by a state, political subdivision of a state, or the District of Columbia (see Sales by registered ultimate vendors and Credit and purchases, later). 1040 x In an aircraft owned by an aircraft museum. 1040 x In military aircraft. 1040 x Claims by persons who paid the tax to the government. 1040 x   Except for sales to nonprofit educational organizations and states and local governments, a credit or refund is allowable to the person that paid the tax to the government if the gasoline was sold to the ultimate purchaser (including an exporter) by either that person or by a retailer and the fuel was exported; used or sold for use as supplies for vessels or aircraft, including military aircraft, commercial fishing, and foreign trade; sold to a qualified blood collector organization; or used or sold for use in the production of Other Fuels. 1040 x See Filing Claims, later. 1040 x Sales by registered ultimate vendors. 1040 x   This is an ultimate vendor that sells gasoline or aviation gasoline to any of the following and that is purchased without the use of a credit card. 1040 x A state or local government for its exclusive use (including essential government use by an Indian tribal government). 1040 x A nonprofit educational organization for its exclusive use. 1040 x   The registered ultimate vendor may make the claim if the ultimate purchaser did not use a credit card and waives its right to the credit or refund by providing the registered ultimate vendor with a certificate. 1040 x A sample certificate is included as Model Certificate M in the Appendix. 1040 x The registered ultimate vendor must have the certificate at the time the credit or refund is claimed. 1040 x   The ultimate vendor must be registered by the IRS. 1040 x See Registration Requirements, earlier. 1040 x Credit card purchases. 1040 x   If gasoline and aviation gasoline are purchased with a credit card issued to a state or local government for its exclusive use (including essential government use by an Indian tribal government), or a nonprofit educational organization for its exclusive use, the person who extended credit to the ultimate purchaser (the credit card issuer) is treated as the person that paid the tax and makes the claim if the credit card issuer: Is registered by the IRS, Has established that the amount of tax has not been collected from the person who purchased the gasoline or has obtained written consent from the ultimate purchaser to the allowance of the credit or refund, and Has repaid or agreed to repay the amount of the tax to the ultimate vendor, has obtained the written consent of the ultimate vendor to the allowance of the credit or refund, or has made arrangements that provide the ultimate vendor with reimbursement of the tax. 1040 x   If the requirements above are not met by the credit card issuer, the credit card issuer must collect the tax from the ultimate purchaser and only the ultimate purchaser may make the claim. 1040 x How to make the claim. 1040 x   If the claim is made by the credit card issuer, see Schedule C  (Form 720) or Schedule 8 (Form 8849). 1040 x Undyed Diesel Fuel and Undyed Kerosene (Other Than Kerosene Used in Aviation) For conditions to an allowance of a credit or refund on exported dyed diesel fuel and dyed kerosene, see Exported taxable fuel, earlier. 1040 x Ultimate purchasers. 1040 x   The following are nontaxable uses of diesel fuel and kerosene (defined earlier) for which a credit or refund may be allowable to an ultimate purchaser. 1040 x On a farm for farming purposes. 1040 x Off-highway business use. 1040 x Export. 1040 x In a qualified local bus. 1040 x In a school bus. 1040 x Other than as a fuel in a propulsion engine of a diesel-powered highway vehicle (such as home heating oil). 1040 x Exclusive use by a qualified blood collector organization. 1040 x In a highway vehicle owned by the United States that is not used on a highway. 1040 x Exclusive use by a nonprofit educational organization (see Sales by Registered Ultimate Vendors and Credit Card Purchases, later). 1040 x Exclusive use by a state, political subdivision of a state, or the District of Columbia (see Sales by Registered Ultimate Vendors and Credit Card Purchases, later). 1040 x In a vehicle owned by an aircraft museum. 1040 x As a fuel in a propulsion engine of a diesel-powered train. 1040 x Sales by Registered Ultimate Vendors The following are the sales for which a credit or refund may be allowable to the registered ultimate vendor only. 1040 x Undyed diesel fuel or undyed kerosene sold for the exclusive use by a state or local government (if credit card rules (defined later) do not apply), Undyed kerosene sold from a blocked pump (defined below), or Undyed diesel fuel or undyed kerosene used in certain intercity and local buses, only if the ultimate purchaser waives its right to the credit or refund by providing the registered ultimate vendor with a waiver. 1040 x Registered ultimate vendor (state use). 1040 x   This is a person that sells undyed diesel fuel or undyed kerosene to a state or local government for its exclusive use (including essential government use by an Indian tribal government). 1040 x The diesel fuel or kerosene must be purchased by the state without the use of a credit card, issued to the state by the credit card issuer, in order for the ultimate vendor to make the claim. 1040 x The ultimate vendor must be registered by the IRS. 1040 x See Registration Requirements, earlier. 1040 x Registered ultimate vendor (blocked pump). 1040 x   This is an ultimate vendor that sells undyed kerosene from a blocked pump. 1040 x   A credit or refund may be allowable to a registered ultimate vendor (blocked pump) if the vendor sold to a buyer undyed kerosene from a blocked pump for use other than as a fuel in a diesel-powered highway vehicle and the vendor had no reason to believe the kerosene would not be used in that manner. 1040 x Blocked pump. 1040 x   A blocked pump is a fuel pump that meets all the following requirements. 1040 x It is used to make retail sales of undyed kerosene for use by the buyer in any nontaxable use. 1040 x It is at a fixed location. 1040 x It is identified with a legible and conspicuous notice stating, “UNDYED UNTAXED KEROSENE, NONTAXABLE USE ONLY. 1040 x ” It meets either of the following conditions. 1040 x It cannot reasonably be used to dispense fuel directly into the fuel supply tank of a diesel-powered highway vehicle or train. 1040 x It is locked by the vendor after each sale and unlocked by the vendor only in response to a buyer's request for undyed kerosene for use other than as a fuel in a diesel-powered highway vehicle or train. 1040 x Registered ultimate vendor (certain intercity and local buses). 1040 x   This is an ultimate vendor that sells undyed diesel fuel or undyed kerosene to the ultimate purchaser for use in certain intercity and local buses. 1040 x   The registered ultimate vendor may make the claim if the ultimate purchaser waives its right to the credit or refund by providing the registered ultimate vendor with a waiver. 1040 x A sample waiver is included as Model Waiver N in the Appendix. 1040 x The registered ultimate vendor must have the waiver at the time the credit or payment is claimed. 1040 x Credit Card Purchases. 1040 x   If undyed diesel fuel or kerosene is purchased with a credit card issued to a state, the person who extended credit to the state (the credit card issuer) is treated as the person that paid the tax and makes the claim if the credit card issuer: Is registered by the IRS, Has established that the amount of tax has not been collected from the person who purchased the diesel fuel or kerosene, or has obtained written consent from the ultimate purchaser to the allowance of the credit or refund, and Has repaid or agreed to repay the amount of the tax to the ultimate vendor, has obtained the written consent of the ultimate vendor to the allowance of the credit or refund, or has made arrangements that provide the ultimate vendor with reimbursement of the tax. 1040 x   If the requirements above are not met by the credit card issuer, the credit card issuer must collect the tax from the ultimate purchaser and only the ultimate purchaser may make the claim. 1040 x Diesel-Water Fuel Emulsion A claim for credit or refund may be made for the nontaxable use of a diesel-water fuel emulsion and for undyed diesel fuel used to produce a diesel-water fuel emulsion. 1040 x The claim rate for nontaxable use of a diesel-water fuel emulsion taxed at $. 1040 x 198 per gallon is $. 1040 x 197 (if exported, the claim rate is $. 1040 x 198). 1040 x The following are the nontaxable uses for a diesel-water fuel emulsion for which a credit or refund may be allowable to an ultimate purchaser. 1040 x On a farm for farming purposes. 1040 x Off-highway business use. 1040 x Export. 1040 x In a qualified local bus. 1040 x In a school bus. 1040 x Other than as fuel in the propulsion engine of a train or diesel-powered highway vehicle (but not off-highway use). 1040 x Exclusive use by a qualified blood collector organization. 1040 x In a highway vehicle owned by the United States that is not used on a highway. 1040 x Exclusive use by a nonprofit educational organization. 1040 x Exclusive use by a state, political subdivision of a state, or the District of Columbia. 1040 x In an aircraft or vehicle owned by an aircraft museum. 1040 x Blender claims. 1040 x   The claim rate for undyed diesel fuel taxed at $. 1040 x 244 and used to produce a diesel-water fuel emulsion is $. 1040 x 046 per gallon of diesel fuel so used. 1040 x The blender must be registered by the IRS in order to make the claim. 1040 x The blender must attach a statement to the claim certifying that: The diesel-water fuel emulsion contains at least 14% water, The emulsion additive is registered by a United States manufacturer with the EPA under section 211 of the Clean Air Act as in effect on March 31, 2003, Undyed diesel fuel taxed at $. 1040 x 244 was used to produce the diesel-water fuel emulsion, and The diesel-water fuel emulsion was used or sold for use in the blender's trade or business. 1040 x Kerosene for Use in Aviation Ultimate purchasers. 1040 x   Ultimate purchasers of kerosene used in certain aviation uses may make a claim if the rate of tax on their use is less than the rate of tax that was charged on the kerosene. 1040 x   The ultimate purchaser of the kerosene used in commercial aviation (other than foreign trade) and noncommercial aviation (other than nonexempt, noncommercial aviation and exclusive use by a state, political subdivision of a state, or the District of Columbia) is eligible to make a claim if the ultimate purchaser certifies that the right to make the claim has not been waived. 1040 x Generally, the ultimate purchaser is the aircraft operator. 1040 x   The following are the nontaxable uses of kerosene used in noncommercial aviation for which a credit or refund may be allowable to the ultimate purchaser. 1040 x On a farm for farming purposes. 1040 x Certain helicopter and fixed-wing aircraft uses. 1040 x Exclusive use by a qualified blood collector organization. 1040 x Exclusive use by a nonprofit educational organization. 1040 x In an aircraft owned by an aircraft museum. 1040 x In military aircraft. 1040 x Kerosene for use partly in commercial aviation and partly in nonexempt, noncommercial aviation. 1040 x   If the fuel is used partly for use in commercial aviation and partly for use in nonexempt, noncommercial aviation, the operator may identify, either at the time of purchase or after the kerosene has been used, the amount that will be (or has been) used in commercial aviation. 1040 x At the same time, the operator would either make the claim or waive the right to make the claim for credit or refund of the kerosene for use in commercial and nonexempt, noncommercial aviation. 1040 x   If the operator does not identify the amount of kerosene that will be (or has been) used in commercial aviation, the operator may provide a certificate to the ultimate vendor similar to Model Certificate Q in the Appendix. 1040 x For kerosene purchased with the certificate, used in commercial aviation, and taxed at $. 1040 x 244 per gallon, use of the certificate will be treated as a waiver of the right to claim a credit or refund for the $. 1040 x 025 per gallon part of the tax. 1040 x The ultimate vendor may make this claim. 1040 x The operator may make a claim for the $. 1040 x 175 tax per gallon of the kerosene, but cannot waive the right to make the claim for the $. 1040 x 175 tax per gallon. 1040 x Sales by Registered Ultimate Vendors Kerosene for use in commercial aviation or noncommercial aviation. 1040 x   The registered ultimate vendor of kerosene for use in commercial aviation (other than foreign trade) or noncommercial aviation (other than nonexempt, noncommercial aviation and exclusive use by a state, political subdivision of a state, or the District of Columbia) may make this claim if the ultimate purchaser waives its right to the credit or payment by providing the registered ultimate vendor with a waiver. 1040 x A sample waiver is included as Model Waiver L in the Appendix. 1040 x The registered ultimate vendor must have the waiver at the time the credit or payment is claimed. 1040 x   Noncommercial aviation means any use of an aircraft not described as commercial aviation. 1040 x For the definition of commercial aviation, see Commercial aviation on page 11. 1040 x Kerosene for use in nonexempt, noncommercial aviation. 1040 x   Only the registered ultimate vendor may claim a credit or payment for sales of kerosene for use in nonexempt, noncommercial aviation. 1040 x The ultimate vendor must be registered by the IRS (activity letter UA) and have the required certificate from the ultimate purchaser. 1040 x A sample certificate is included as Model Certificate Q in the Appendix. 1040 x The registered ultimate vendor must have the certificate at the time the credit or payment is claimed. 1040 x Kerosene for use in aviation by a state or local government. 1040 x   Only the registered ultimate vendor may claim a credit or payment for sales of kerosene for use in aviation to a state or local government for its exclusive use (including essential government use by an Indian tribal government). 1040 x The kerosene for use in aviation must be purchased by the state without the use of a credit card in order for the ultimate vendor to make the claim. 1040 x The ultimate vendor must be registered by the IRS (activity letter UV) and have the required certificate from the ultimate purchaser. 1040 x A sample certificate is included as Model Certificate P in the Appendix. 1040 x The registered ultimate vendor must have the certificate at the time the credit or payment is claimed. 1040 x Credit card purchases. 1040 x   If taxed kerosene for use in aviation is purchased with a credit card issued to a state, the person who extended credit to the state (the credit card issuer) is treated as the person that paid the tax and makes the claim if the credit card issuer: Is registered by the IRS, Has established that the amount of tax has not been collected from the person who purchased the kerosene, or has obtained written consent from the ultimate purchaser to the allowance of the credit or refund, and Has repaid or agreed to repay the amount of the tax to the ultimate vendor, has obtained the written consent of the ultimate vendor to the allowance of the credit or refund, or has made arrangements that provide the ultimate vendor with reimbursement of the tax. 1040 x   If the requirements above are not met by the credit card issuer, the credit card issuer must collect the tax from the ultimate purchaser and only the ultimate purchaser may make the claim. 1040 x Other Fuels (Including Alternative Fuels) Credit or refund for nontaxable use of taxed Other Fuels may be allowable to an ultimate purchaser. 1040 x While tax is generally imposed on delivery, Other Fuels are taxed prior to delivery in the case of certain bulk sales described in chapter 1. 1040 x The following are the nontaxable uses of Other Fuels for which a credit or refund may be allowable to the ultimate purchaser. 1040 x On a farm for farming purposes. 1040 x Off-highway business use. 1040 x In a boat engaged in commercial fishing. 1040 x In certain intercity and local buses. 1040 x In a school bus. 1040 x In a qualified local bus. 1040 x Exclusive use by a qualified blood collector organization. 1040 x Exclusive use by a nonprofit educational organization. 1040 x Exclusive use by a state, political subdivision of a state, or the District of Columbia. 1040 x In an aircraft or vehicle owned by an aircraft museum. 1040 x Use in any boat operated by the United States for its exclusive use or any vessel of war of any foreign nation. 1040 x See Biodiesel or Renewable Diesel Mixture Credit, Alternative Fuel Credit, and Alternative Fuel Mixture Credit, later. 1040 x Refunds of Second Tax The tax on dyed diesel fuel for inland waterways fuel use applies at the rate listed on Form 720. 1040 x This is in addition to all other taxes imposed on the sale or use of the fuel. 1040 x The section 4081(e) refund (discussed below) cannot be claimed. 1040 x If the tax is paid and reported to the government on more than one taxable event for a taxable fuel under section 4081, the person paying the “second tax” may claim a refund (without interest) of that tax if certain conditions and reporting requirements are met. 1040 x No credit against any tax is allowed for this tax. 1040 x For information about taxable events, see the discussions under Gasoline, Diesel Fuel and Kerosene and Kerosene for Use in Aviation in chapter 1. 1040 x Conditions to allowance of refund. 1040 x   A claim for refund of the tax is allowed only if all the following conditions are met. 1040 x A tax on the fuel was paid to the government and not credited or refunded (the “first tax”). 1040 x After the first tax was imposed, another tax was imposed on the same fuel and was paid to the government (the “second tax”). 1040 x The person that paid the second tax filed a timely claim for refund containing the information required (see Refund claim, later). 1040 x The person that paid the first tax has met the reporting requirements, discussed next. 1040 x Reporting requirements. 1040 x   Generally, the person that paid the first tax must file a “First Taxpayer's Report” with its Form 720 for the quarter to which the report relates. 1040 x A model first taxpayer's report is shown in the Appendix as Model Certificate B. 1040 x The report must contain all information needed to complete the model. 1040 x   By the due date for filing the Form 720, you must also send a separate copy of the report to the following address. 1040 x Department of the Treasury Internal Revenue Service  Cincinnati, OH 45999-0555 Write “EXCISE – FIRST TAXPAYER'S REPORT” across the top of that copy. 1040 x Optional reporting. 1040 x   A first taxpayer's report is not required for the tax imposed on: Removal at a terminal rack, Nonbulk entries into the United States, and Removals or sales by blenders. 1040 x However, if the person liable for the tax expects that another tax will be imposed on that fuel, that person should (but is not required to) file a first taxpayer's report. 1040 x Providing information. 1040 x   The first taxpayer must give a copy of the report to the buyer of the fuel within the bulk transfer/terminal system or to the owner of the fuel immediately before the first tax was imposed, if the first taxpayer is not the owner at that time. 1040 x If an optional report is filed, a copy should (but is not required to) be given to the buyer or owner. 1040 x   A person that receives a copy of the first taxpayer's report and later sells the fuel within the bulk transfer/terminal system must give the copy and a “Statement of Subsequent Seller” to the buyer. 1040 x If the later sale is outside the bulk transfer/terminal system and that person expects that another tax will be imposed, that person should (but is not required to) give the copy and the statement to the buyer. 1040 x A model statement of subsequent seller is shown in the Appendix as Model Certificate A. 1040 x The statement must contain all information necessary to complete the model. 1040 x   If the first taxpayer's report relates to fuel sold to more than one buyer, copies of that report must be made when the fuel is divided. 1040 x Each buyer must be given a copy of the report. 1040 x Refund claim. 1040 x   You must have filed Form 720 and paid the second tax before you file for a refund of that tax. 1040 x You must make your claim for refund on Form 8849. 1040 x Complete Schedule 5 (Form 8849) and attach it to your Form 8849. 1040 x Do not include this claim with a claim under another tax provision. 1040 x You must not have included the second tax in the price of the fuel and must not have collected it from the purchaser. 1040 x You must submit the following information with your claim. 1040 x A copy of the first taxpayer's report (discussed earlier). 1040 x A copy of the statement of subsequent seller if the fuel was bought from someone other than the first taxpayer. 1040 x Definitions of Nontaxable Uses This section provides definitions of the terms used in Table 2-1 for nontaxable uses. 1040 x If applicable, the type of use number from Table 2-1 is indicated in each heading. 1040 x Type of use table. 1040 x   The first column of the table is the number you enter on Form 4136, Form 8849, or Schedule C (Form 720) for that type of use. 1040 x For type of use 2, the mobile machinery parenthetical applies only to Form 8849 and Form 720. 1040 x Table 2-1. 1040 x Type of Use Table No. 1040 x Type of Use 1 On a farm for farming purposes 2 Off-highway business use (for business use other than in a highway vehicle registered or required to be registered for highway use) (other than use in mobile machinery) 3 Export 4 In a boat engaged in commercial fishing 5 In certain intercity and local buses 6 In a qualified local bus 7 In a bus transporting students and employees of schools (school buses) 8 For diesel fuel and kerosene (other than kerosene used in aviation) used other than as a fuel in the propulsion engine of a train or diesel-powered highway vehicle (but not off-highway business use) 9 In foreign trade 10 Certain helicopter and fixed-wing aircraft uses 11 Exclusive use by a qualified blood collector organization 12 In a highway vehicle owned by the United States that is not used on a highway 13 Exclusive use by a nonprofit educational organization 14 Exclusive use by a state, political subdivision of a state, or the District of Columbia 15 In an aircraft or vehicle owned by an aircraft museum 16 In military aircraft On a farm for farming purposes (No. 1040 x 1). 1040 x   On a farm for farming purposes means fuel used in carrying on a trade or business of farming, on a farm in the United States, and for farming purposes. 1040 x Farm. 1040 x   A farm includes livestock, dairy, fish, poultry, fruit, fur-bearing animals, and truck farms; orchards; plantations; ranches; nurseries; ranges; and feed yards for fattening cattle. 1040 x It also includes structures such as greenhouses used primarily for the raising of agricultural or horticultural commodities. 1040 x A fish farm is an area where fish are grown or raised — not merely caught or harvested. 1040 x Farming purposes. 1040 x   As an owner, tenant, or operator, you use fuel on a farm for farming purposes if you use it in any of the following ways. 1040 x To cultivate the soil or to raise or harvest any agricultural or horticultural commodity. 1040 x To raise, shear, feed, care for, train, or manage livestock, bees, poultry, fur-bearing animals, or wildlife. 1040 x To operate, manage, conserve, improve, or maintain your farm and its tools and equipment. 1040 x To handle, dry, pack, grade, or store any raw agricultural or horticultural commodity. 1040 x For this use to qualify, you must have produced more than half the commodity so treated during the tax year. 1040 x Commodity means a single raw product. 1040 x For example, apples and peaches are two separate commodities. 1040 x To plant, cultivate, care for, or cut trees or to prepare (other than sawing logs into lumber, chipping, or other milling) trees for market, but only if the planting, etc. 1040 x , is incidental to your farming operations. 1040 x Your tree operations will be incidental only if they are minor in nature when compared to the total farming operations. 1040 x   If any other person, such as a neighbor or custom operator, performs a service for you on your farm for any of the purposes listed in (1) or (2), you are considered to be the ultimate purchaser that used the fuel on a farm for farming purposes. 1040 x However, see Custom application of fertilizer and pesticide, next. 1040 x   If doubt exists whether the owner, the tenant, or the operator of the farm bought the fuel, determine who bore the cost of the fuel. 1040 x For example, if the owner of a farm and the tenant equally share the cost of gasoline that is used on a farm for farming purposes, each can claim a credit for the tax on one-half the fuel used. 1040 x Custom application of fertilizer and pesticide. 1040 x   Fuel used on a farm for farming purposes includes fuel used in the application of fertilizer, pesticides, or other substances, including aerial applications. 1040 x Generally, the applicator is treated as having used the fuel on a farm for farming purposes. 1040 x For aviation gasoline, the aerial applicator makes the claim as the ultimate purchaser. 1040 x For kerosene used in aviation, the ultimate purchaser may make the claim or waive their right to make the claim to the registered ultimate vendor. 1040 x Fuel used between airfield and farm. 1040 x   Fuel used by an aerial applicator for the direct flight between the airfield and one or more farms is treated as a farming purpose. 1040 x Fuel not used for farming. 1040 x   Fuel is not used on a farm for farming purposes if it is used in any of the following ways. 1040 x Off the farm, such as on the highway or in noncommercial aviation, other than fuel used between the airfield and farm described above, even if the fuel is used in transporting livestock, feed, crops, or equipment. 1040 x For personal use, such as mowing the lawn. 1040 x In processing, packaging, freezing, or canning operations. 1040 x In processing crude gum into gum spirits of turpentine or gum resin or in processing maple sap into maple syrup or maple sugar. 1040 x Off-highway business use (No. 1040 x 2). 1040 x   Off-highway business use means fuel used in a trade or business or in an income-producing activity other than as a fuel in a highway vehicle registered or required to be registered for use on public highways. 1040 x The terms “highway vehicle,” “public highway,” and “registered” are defined below. 1040 x Do not consider any use in a boat as an off-highway business use. 1040 x   Off-highway business use includes fuels used in any of the following ways. 1040 x In stationary machines such as generators, compressors, power saws, and similar equipment. 1040 x For cleaning purposes. 1040 x In forklift trucks, bulldozers, and earthmovers. 1040 x   Generally, this use does not include nonbusiness use of fuel, such as use by minibikes, snowmobiles, power lawn mowers, chain saws, and other yard equipment. 1040 x Example. 1040 x Caroline owns a landscaping business. 1040 x She uses power lawn mowers and chain saws in her business. 1040 x The gasoline used in the power lawn mowers and chain saws qualifies as fuel used in an off-highway business use. 1040 x The gasoline used in her personal lawn mower at home does not qualify. 1040 x Highway vehicle. 1040 x   A highway vehicle is any self-propelled vehicle designed to carry a load over public highways, whether or not it is also designed to perform other functions. 1040 x Examples of vehicles designed to carry a load over public highways are passenger automobiles, motorcycles, buses, and highway-type trucks and truck tractors. 1040 x A vehicle is a highway vehicle even though the vehicle's design allows it to perform a highway transportation function for only one of the following. 1040 x A particular type of load, such as passengers, furnishings, and personal effects (as in a house, office, or utility trailer). 1040 x A special kind of cargo, goods, supplies, or materials. 1040 x Some off-highway task unrelated to highway transportation, except as discussed next. 1040 x Vehicles not considered highway vehicles. 1040 x   Generally, the following kinds of vehicles are not considered highway vehicles for purposes of the credit or refund of fuel taxes. 1040 x Specially designed mobile machinery for nontransportation functions. 1040 x A self-propelled vehicle is not a highway vehicle if all the following apply. 1040 x The chassis has permanently mounted to it machinery or equipment used to perform certain operations (construction, manufacturing, drilling, mining, timbering, processing, farming, or similar operations) if the operation of the machinery or equipment is unrelated to transportation on or off the public highways. 1040 x The chassis has been specially designed to serve only as a mobile carriage and mount (and power source, if applicable) for the machinery or equipment, whether or not the machinery or equipment is in operation. 1040 x The chassis could not, because of its special design and without substantial structural modification, be used as part of a vehicle designed to carry any other load. 1040 x The vehicle must have traveled less than 7,500 miles on public highways during the taxable year. 1040 x Vehicles specially designed for off-highway transportation. 1040 x A vehicle is not treated as a highway vehicle if the vehicle is specially designed for the primary function of transporting a particular type of load other than over the public highway and because of this special design, the vehicle's capability to transport a load over a public highway is substantially limited or impaired. 1040 x To make this determination, you can take into account the vehicle's size, whether the vehicle is subject to licensing, safety, or other requirements, and whether the vehicle can transport a load at a sustained speed of at least 25 miles per hour. 1040 x It does not matter that the vehicle can carry heavier loads off highway than it is allowed to carry over the highway. 1040 x Nontransportation trailers and semitrailers. 1040 x A trailer or semi-trailer is not treated as a highway vehicle if it is specially designed to function only as an enclosed stationary shelter for carrying on a nontransportation function at an off-highway site. 1040 x For example, a trailer that is capable only of functioning as an office for an off-highway construction operation is not a highway vehicle. 1040 x Public highway. 1040 x   A public highway includes any road in the United States that is not a private roadway. 1040 x This includes federal, state, county, and city roads and streets. 1040 x Registered. 1040 x   A vehicle is considered registered when it is registered or required to be registered for highway use under the law of any state, the District of Columbia, or any foreign country in which it is operated or situated. 1040 x Any highway vehicle operated under a dealer's tag, license, or permit is considered registered. 1040 x A highway vehicle is not considered registered solely because a special permit allows the vehicle to be operated at particular times and under specified conditions. 1040 x Dual use of propulsion motor. 1040 x   Off-highway business use does not include any fuel used in the propulsion motor of a registered highway vehicle even though that motor also operates special equipment by means of a power take-off or power transfer. 1040 x It does not matter if the special equipment is mounted on the vehicle. 1040 x Example. 1040 x The motor of a registered concrete-mixer truck operates both the engine and the mixing unit by means of a power take-off. 1040 x The fuel used in the motor to run the mixer is not off-highway business use. 1040 x Use in separate motor. 1040 x   Off-highway business use includes fuel used in a separate motor to operate special equipment, such as a refrigeration unit, pump, generator, or mixing unit. 1040 x If you draw fuel from the same tank that supplies fuel to the propulsion motor, you must figure the quantity used in the separate motor operating the special equipment. 1040 x You may make a reasonable estimate based on your operating experience and supported by your records. 1040 x   You can use devices that measure the miles the vehicle has traveled (such as hubometers) to figure the gallons of fuel used to propel the vehicle. 1040 x Add to this amount the fuel consumed while idling or warming up the motor before propelling the vehicle. 1040 x The difference between your total fuel used and the fuel used to propel the vehicle is the fuel used in the separate motor. 1040 x Example. 1040 x Hazel owns a refrigerated truck. 1040 x It has a separate motor for the refrigeration unit. 1040 x The same tank supplies both motors. 1040 x Using the truck's hubometer, Hazel figures that 90% of the fuel was used to propel the truck. 1040 x Therefore, 10% of the fuel is used in an off-highway business use. 1040 x Fuel lost or destroyed. 1040 x   You cannot treat fuel lost or destroyed through spillage, fire, or other casualty as fuel used in an off-highway business use. 1040 x Export (No. 1040 x 3). 1040 x   Export means fuel transported from the United States with the intention that the fuel remain in a foreign country or possession of the United States. 1040 x Fuel is not exported if it is in the fuel supply tank of a vehicle or aircraft. 1040 x In a boat engaged in commercial fishing (No. 1040 x 4). 1040 x   In a boat engaged in commercial fishing means fuel used in taking, catching, processing, or transporting fish, shellfish, or other aquatic life for commercial purposes, such as selling or processing the catch, on a specific trip basis. 1040 x They include boats used in both fresh and salt water fishing. 1040 x They do not include boats used for both sport fishing and commercial fishing on the same trip. 1040 x In certain intercity and local buses (No. 1040 x 5). 1040 x   In certain intercity and local buses means fuel used in a bus engaged in furnishing (for compensation) passenger land transportation available to the general public. 1040 x The bus must be engaged in one of the following activities. 1040 x Scheduled transportation along regular routes. 1040 x Nonscheduled operations if the seating capacity of the bus is at least 20 adults, not including the driver. 1040 x Vans and similar vehicles used for van-pooling or taxi service do not qualify. 1040 x Available to the general public. 1040 x   This means you offer service to more than a limited number of persons or organizations. 1040 x If a bus operator normally provides charter operations through travel agencies but has buses available for chartering by the general public, this service is available to the general public. 1040 x A bus does not qualify when its operator uses it to provide exclusive services to only one person, group, or organization. 1040 x Also, intercity bus transportation does not include transporting students and employees of schools or intercity transportation in a qualified local bus. 1040 x In a qualified local bus (No. 1040 x 6). 1040 x   In a qualified local bus means fuel used in a bus meeting all the following requirements. 1040 x It is engaged in furnishing (for compensation) intracity passenger land transportation available to the general public. 1040 x It operates along scheduled, regular routes. 1040 x It has a seating capacity of at least 20 adults (excluding the driver). 1040 x It is under contract with (or is receiving more than a nominal subsidy from) any state or local government to furnish the transportation. 1040 x Intracity passenger land transportation. 1040 x   This is the land transportation of passengers between points located within the same metropolitan area. 1040 x It includes transportation along routes that cross state, city, or county boundaries if the routes remain within the metropolitan area. 1040 x Under contract. 1040 x   A bus is under contract with a state or local government only if the contract imposes a bona fide obligation on the bus operator to furnish the transportation. 1040 x More than a nominal subsidy. 1040 x   A subsidy is more than nominal if it is reasonably expected to exceed an amount equal to 3 cents multiplied by the number of gallons of fuel used in buses on subsidized routes. 1040 x A company that operates its buses along subsidized and unsubsidized intracity routes may consider its buses qualified local buses only when the buses are used on the subsidized intracity routes. 1040 x In a school bus (No. 1040 x 7). 1040 x   In a school bus means fuel used in a bus engaged in the transportation of students or employees of schools. 1040 x A school is an educational organization with a regular faculty and curriculum and a regularly enrolled body of students who attend the place where the educational activities occur. 1040 x For diesel fuel and kerosene (other than kerosene used in aviation) used other than as a fuel (No. 1040 x 8). 1040 x   Diesel fuel and kerosene (other than kerosene used in aviation) used other than as a fuel in the propulsion engine of a diesel-powered highway vehicle or diesel-powered train (not including off-highway business use) means undyed diesel fuel and undyed kerosene used: For home heating, lighting, and cooking; In boats; In stationary machines, such as generators and compressors; For cleaning purposes; or In minibikes and snowmobiles. 1040 x In foreign trade (No. 1040 x 9). 1040 x   In foreign trade means fuel used in civil aircraft employed in foreign trade or trade between the United States and any of its possessions. 1040 x The term trade includes the transportation of persons or property for hire and the making of the necessary preparations for such transportation. 1040 x In the case of aircraft registered in a foreign country, the country must allow reciprocal benefits for aircraft registered in the United States. 1040 x Certain helicopter and fixed-wing aircraft uses (No. 1040 x 10). 1040 x   Includes: Certain helicopter uses. 1040 x   Certain helicopter uses means fuel used by a helicopter for any of the following purposes. 1040 x Transporting individuals, equipment, or supplies in the exploration for, or the development or removal of, hard minerals, oil, or gas. 1040 x Planting, cultivating, cutting, transporting, or caring for trees (including logging operations). 1040 x Providing emergency medical transportation. 1040 x   During a use described in items (1) and (2), the helicopter must not take off from, or land at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise use services provided pursuant to section 44509 or 44913(b) or subchapter I of chapter 471 of title 49, United States Code. 1040 x For item (1), treat each flight segment as a separate flight. 1040 x Fixed-wing aircraft uses. 1040 x   Fixed-wing aircraft uses means fuel used by a fixed-wing aircraft for any of the following purposes. 1040 x Planting, cultivating, cutting, transporting, or caring for trees (including logging operations). 1040 x Providing emergency medical transportation. 1040 x The aircraft must be equipped for and exclusively dedicated on that flight to acute care emergency medical services. 1040 x During a use described in item (1), the aircraft must not take off from, or land at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise use services provided pursuant to section 44509 or 44913(b) or subchapter I of chapter 471 of title 49, United States Code. 1040 x Exclusive use by a qualified blood collector organization (No. 1040 x 11). 1040 x   Exclusive use by a qualified blood collector organization means fuel used by the qualified blood collector organization for its exclusive use in the collection, storage, or transportation of blood. 1040 x Qualified blood collector organization. 1040 x   A qualified blood collector organization is one that is: Described in section 501(c)(3) and exempt from tax under section 501(a), Primarily engaged in the activity of collecting human blood, Registered by the IRS, and Registered by the Food and Drug Administration to collect blood. 1040 x In a highway vehicle owned by the United States that is not used on a highway (No. 1040 x 12). 1040 x   In a highway vehicle owned by the United States that is not used on a highway means fuel used in a vehicle that was not used on public highways during the period covered by the claim. 1040 x This use applies whether or not the vehicle is registered or required to be registered for highway use. 1040 x Exclusive use by a nonprofit educational organization (No. 1040 x 13). 1040 x   Exclusive use by a nonprofit educational organization means fuel used by an organization exempt from income tax under section 501(a) that meets both of the following requirements. 1040 x It has a regular faculty and curriculum. 1040 x It has a regularly enrolled body of students who attend the place where the instruction normally occurs. 1040 x   A nonprofit educational organization also includes a school operated by a church or other organization described in section 501(c)(3) if the school meets the above requirements. 1040 x Exclusive use by a state, political subdivision of a state, or the District of Columbia (No. 1040 x 14). 1040 x   Exclusive use by a state, political subdivision of a state, or the District of Columbia means fuel purchased by the state or local government for its exclusive use. 1040 x A state or local government is any state, any political subdivision thereof, or the District of Columbia. 1040 x An Indian tribal government is treated as a state only if the fuel is used in an activity that involves the exercise of an essential tribal government function. 1040 x Gasoline, diesel fuel, and kerosene used by the American Red Cross is considered to be the use of these fuels by a state. 1040 x In an aircraft or vehicle owned by an aircraft museum (No. 1040 x 15). 1040 x   In an aircraft or vehicle owned by an aircraft museum means fuel used in an aircraft or vehicle that is owned by an organization that meets all the following requirements. 1040 x It is exempt from income tax as an organization described in section 501(c)(3). 1040 x It is operated as a museum under a state (or District of Columbia) charter. 1040 x It is operated exclusively for acquiring, exhibiting, and caring for aircraft of the type used for combat or transport in  World War II. 1040 x   The aircraft or vehicle (such as a ground servicing vehicle for aircraft) must be used exclusively for the purposes described in item (3). 1040 x In military aircraft (No. 1040 x 16). 1040 x   In a military aircraft means fuel used in an aircraft owned by the United States or any foreign nation and constituting a part of its armed forces. 1040 x In commercial aviation (other than foreign trade). 1040 x   See Commercial aviation, earlier, for the definition. 1040 x Use in a train. 1040 x   Use in a train means fuel used in the propulsion engine of equipment or machinery that rides on rails. 1040 x This includes use in a locomotive, work train, switching engine, and track maintenance machine. 1040 x Biodiesel or Renewable Diesel Mixture Credit, Alternative Fuel Credit, and Alternative Fuel Mixture Credit For alternative fuel mixtures produced after December 31, 2011, see How to Claim the Credit below. 1040 x The section 6426 credit for biodiesel and alternative fuel consists of the biodiesel or renewable diesel mixture credit, alternative fuel credit, and alternative fuel mixture credit. 1040 x Biodiesel or renewable diesel mixture credit claimant. 1040 x   Claimant produced a biodiesel mixture by mixing biodiesel with diesel fuel. 1040 x Claimant produced a renewable diesel mixture by mixing renewable diesel with liquid fuel (other than renewable diesel). 1040 x   The person that produced and sold or used the mixture in their trade or business is the only person eligible to make this claim. 1040 x The credit is based on the gallons of biodiesel or renewable diesel in the mixture. 1040 x Renewable diesel does not include any fuel derived from coprocessing biomass (as defined in section 45K(c)(3)) with a feedstock that is not biomass. 1040 x Claim requirements. 1040 x   See the Instructions for Form 720 for the biodiesel or renewable diesel mixture claim requirements. 1040 x Alternative fuel credit claimant. 1040 x   For the alternative fuel credit, the registered alternative fueler who (1) sold an alternative fuel at retail delivered it into the fuel supply tank of a motor vehicle or motorboat, (2) sold an alternative fuel, delivered it in bulk taxable use in a motor vehicle or motorboat, and received required statement from the buyer, (3) used an alternative fuel (not sold at retail or in bulk as previously described) motor vehicle or motorboat, or (4) sold an alternative fuel used as a fuel in aviation is the only person eligible to make this claim. 1040 x Carbon capture requirement. 1040 x   A credit for Fischer-Tropsch process liquid fuel derived from coal (including peat) can be claimed only if the fuel is derived from coal produced at a gasification facility that separates and sequesters at least 75% of the facility's total carbon dioxide emissions. 1040 x Alternative fuel credit. 1040 x   The registered alternative fueler is the person eligible to make the claim. 1040 x An alternative fueler is the person liable for tax on alternative fuel under the rules for taxable events for Other Fuels (discussed in chapter 1) or would be liable but for an exemption for nontaxable uses. 1040 x An alternative fueler includes a person who sells for use or uses an alternative fuel in aviation. 1040 x Alternative fuel mixture credit claimant. 1040 x   For the alternative fuel mixture credit, the registered alternative fueler that produced and sold or used the mixture as a fuel in their trade or business is the only person eligible to make this claim. 1040 x The credit is based on the gallons of alternative fuel in the mixture. 1040 x An alternative fuel mixture is a mixture of alternative fuel and section 4081 taxable fuel (gasoline, diesel fuel, or kerosene). 1040 x Registration. 1040 x   You must be registered by the IRS to be eligible to claim the section 6426 fuel credit. 1040 x See Registration Requirements in chapter 1. 1040 x Credits for fuel provide incentive for United States production. 1040 x   The section 6426 fuel credit may not be claimed for alternative fuel that is produced outside the United States for use as a fuel outside the United States. 1040 x The United States includes any possession of the United States. 1040 x Credit for fuels derived from paper or pulp production. 1040 x   Credit for alternative fuels and alternative fuel mixtures for any fuel derived from the production of paper or pulp are not available for fuel sold or used on or after December 31, 2009. 1040 x How to Claim the Credit Any biodiesel or renewable diesel mixture credit must first be claimed on Schedule C to reduce your taxable fuel liability reported on Form 720. 1040 x Any excess credit may be claimed on Schedule C (Form 720), Schedule 3 (Form 8849), Form 4136, or Form 8864, Biodiesel and Renewable Diesel Fuels Credit. 1040 x See Notice 2005-4 and the Instructions for Form 720 for more information. 1040 x Also see Notice 2013-26 on page 984 of I. 1040 x R. 1040 x B. 1040 x 2013-18 at www. 1040 x irs. 1040 x gov/pub/irs-irbs/irb13-18. 1040 x pdf; and see chapter 2, later. 1040 x Coordination with income tax credit. 1040 x   Only one credit may be taken for any amount of biodiesel or renewable diesel. 1040 x If any amount is claimed (or will be claimed) for any amount of biodiesel or renewable diesel on Form 720, Form 8849, or Form 4136, then a claim cannot be made on Form 8864 for that amount of biodiesel or renewable diesel. 1040 x   Any alternative fuel credit must first be claimed on Schedule C (Form 720) to reduce your section 4041 taxable fuel liability for alternative fuel and CNG reported on Form 720. 1040 x Any excess credit may claimed on Schedule C (Form 720), Schedule 3 (Form 8849), or Form 4136. 1040 x   For alternative fuel mixtures produced after December 31, 2011, the alternative fuel mixture credit can be claimed on Schedule C (Form 720), not on Form 4136 or Schedule 3 (Form 8849), and only to the extent of your section 4081 taxable fuel liability for gasoline, diesel fuel and kerosene reported on Form 720. 1040 x   Calculate the limitation for alternative fuel mixtures separately and enter on Schedule C (Form 720), line 14, only the gallons of mixtures that do not exceed your section 4081 taxable fuel liability. 1040 x Filing Claims This section tells you how to make a claim for a credit or refund of excise taxes on fuels. 1040 x This section also covers recordkeeping requirements and when to include the credit or refund in your income. 1040 x Generally, you will provide all the information needed to claim a credit or refund when you properly complete Form 8849, Form 4136, Schedule C (Form 720), Form 6478, or Form 8864. 1040 x In some cases, you will have to attach additional information. 1040 x You need to keep records that support your claim for a credit or refund. 1040 x Keep at your principal place of business all records needed to enable the IRS to verify that you are the person entitled to claim a credit or refund and the amount you claimed. 1040 x Ultimate purchaser. 1040 x   Ultimate purchasers may make claims for the nontaxable use of fuels on Form 4136, Schedule 1 (Form 8849), and Schedule C (Form 720) if reporting excise tax liability on that return. 1040 x If you are an ultimate purchaser, you must keep the following records. 1040 x The number of gallons purchased and used during the period covered by your claim. 1040 x The dates of the purchases. 1040 x The names and addresses of suppliers and amounts purchased from each in the period covered by your claim. 1040 x The nontaxable use for which you used the fuel. 1040 x The number of gallons used for each nontaxable use. 1040 x It is important that your records show separately the number of gallons used for each nontaxable use that qualifies as a claim. 1040 x If the fuel is exported, you must have proof of exportation. 1040 x   For more information about keeping records, see Publication 583, Starting a Business and Keeping Records, or chapter 1 of Publication 17, Your Federal Income Tax for Individuals. 1040 x Exceptions. 1040 x    Generally, the ultimate purchaser may not claim a credit or refund for undyed diesel fuel, undyed kerosene, or kerosene for use in aviation sold for the exclusive use of a state or local government. 1040 x However, see Claims by credit card issuers, later, for an exception. 1040 x The ultimate purchaser may not claim a credit or refund as follows. 1040 x The ultimate purchaser of gasoline or aviation gasoline used by a state or local government for its exclusive use or by a nonprofit educational organization for its exclusive use may waive its right to make a claim by providing a certificate that is signed under penalties of perjury by a person authorized to bind the ultimate purchaser and is in the same format as the Model Certificate M. 1040 x A new certificate is required each year or when any information in the current certificate expires. 1040 x The ultimate purchaser of kerosene for use in commercial aviation or noncommercial aviation (other than nonexempt, noncommercial aviation and exclusive use by a state, political subdivision of a state, or the District of Columbia) may waive its right to make a claim by providing a waiver that is signed under penalties of perjury by a person authorized to bind the ultimate purchaser and is in the same format as the Model Waiver L. 1040 x A new waiver is required each year or when any information in the current waiver expires. 1040 x The ultimate purchaser of undyed diesel fuel or undyed kerosene used in certain intercity and local buses may waive its right to make a claim by providing a waiver that is signed under penalties of perjury by a person authorized to bind the ultimate purchaser and is in the same format as the Model Waiver N. 1040 x A new waiver is required each year or when any information in the current waiver expires. 1040 x The ultimate purchaser of kerosene for use in nonexempt, noncommercial aviation must provide a certificate that is signed under penalties of perjury by a person authorized to bind the ultimate purchaser and is in the same format as the Model Certificate Q. 1040 x A new certificate is required each year or when any information in the current certificate expires. 1040 x Registered ultimate vendor. 1040 x   Registered ultimate vendors may make claims for certain sales of fuels on Form 4136, Schedule 2 (Form 8849), and Schedule C (Form 720) if reporting excise tax liability on that return. 1040 x If you are a registered ultimate vendor, you must keep certain information pertaining to the sale of the fuel. 1040 x   To make a claim, you must have sold the fuel at a tax-excluded price, repaid the tax to the buyer, or obtained the buyer's written consent to the allowance of the claim. 1040 x You are required to have a valid certificate or waiver in your possession in order to make the claim. 1040 x   In addition, you must have a registration number that has not been revoked or suspended. 1040 x See Form 637. 1040 x State use. 1040 x   To make a claim as an ultimate vendor (state), you must have a UV registration number and the fuel cannot be purchased with a credit card as explained below. 1040 x If you sell undyed diesel fuel, undyed kerosene, or kerosene for use in aviation for use by a state or local government, you must keep the following information. 1040 x The name and taxpayer identification number of each person (government unit) that bought the fuel. 1040 x The number of gallons sold to each person. 1040 x An unexpired certificate from the buyer. 1040 x See Model Certificate P in the Appendix. 1040 x The certificate expires on the earlier of 1 year after the date of the certificate or the date a new certificate is given to the registered ultimate vendor. 1040 x Nonprofit educational organization and state use. 1040 x   To make a claim as an ultimate vendor (nonprofit educational organization or state), you must have a UV registration number and the fuel cannot be purchased with a credit card as explained later. 1040 x If you sell gasoline or aviation gasoline to a nonprofit educational organization for its exclusive use or to a state or local government for its exclusive use, you must keep the following information. 1040 x The name and taxpayer identification number of each person (nonprofit educational organization or government unit) that bought the fuel. 1040 x The number of gallons sold to each person. 1040 x An unexpired certificate from the buyer. 1040 x See Model Certificate M in the Appendix. 1040 x  The certificate expires on the earlier of 1 year after the date of the certificate or the date a new certificate is given to the registered ultimate vendor. 1040 x Blocked pump. 1040 x   To make a claim as an ultimate vendor (blocked pump), you must have a UP registration number. 1040 x If you sell undyed kerosene (other than kerosene for use in aviation) from a pump that qualifies as a blocked pump because it is locked by you after each sale and is unlocked by you at the request of the buyer, you must keep the following information for each sale of more than 5 gallons. 1040 x The date of each sale. 1040 x The name and address of the buyer. 1040 x The number of gallons sold to that buyer. 1040 x Certain intercity and local bus use. 1040 x   To make a claim as an ultimate vendor of undyed diesel fuel or undyed kerosene used in certain intercity and local buses, you must have a UB registration number. 1040 x You must keep the following information. 1040 x The date of each sale. 1040 x The name and address of the buyer. 1040 x The number of gallons sold to the buyer. 1040 x A copy of the waiver signed by the buyer at the time the credit or payment is claimed. 1040 x See Model Waiver N in the Appendix. 1040 x Kerosene for use in commercial aviation or noncommercial aviation. 1040 x   To make a claim as an ultimate vendor of kerosene for use in commercial aviation (other than foreign trade) or noncommercial aviation (other than nonexempt, noncommercial aviation and exclusive use by a state, political subdivision of a state, or the District of Columbia), you must have a UA registration number. 1040 x See Kerosene for use in aviation, earlier, for a list of nontaxable uses. 1040 x You must keep the following information. 1040 x The date of each sale. 1040 x The name and address of the buyer. 1040 x The number of gallons sold to the buyer. 1040 x A copy of the waiver signed by the buyer at the time the credit or payment is claimed. 1040 x See Model Waiver L in the Appendix. 1040 x Kerosene for use in nonexempt, noncommercial aviation. 1040 x   To make a claim as an ultimate vendor of kerosene for use in nonexempt, noncommercial aviation, you must have a UA registration number. 1040 x You must keep the following information. 1040 x The date of each sale. 1040 x The name and address of the buyer. 1040 x The number of gallons sold to the buyer. 1040 x A copy of the certificate signed by the buyer at the time the credit or payment is claimed. 1040 x See Model Certificate Q in the Appendix. 1040 x Claims by credit card issuers. 1040 x   For sales of gasoline, aviation gasoline, diesel fuel, kerosene, or kerosene for use in aviation that are purchased by an exempt user with the use of a credit card, the registered credit card issuer is the only person who can make the claim. 1040 x An exempt user for this purpose is: For gasoline or aviation gasoline, a state or local government (including essential government use by an Indian tribal government) or a nonprofit educational organization; or For diesel fuel, kerosene, or kerosene for use in aviation, a state or local government (including essential government use by an Indian tribal government). 1040 x   If gasoline is purchased without the use of a credit card, then the registered ultimate vendor of the gasoline may make the claim for refund or credit. 1040 x However, if the gasoline is purchased with a credit card issued to a state, but the credit card issuer is not registered by the IRS or does not meet the conditions described, the credit card issuer must collect the tax and the state may make the claim. 1040 x   If diesel fuel, kerosene, or kerosene for use in aviation is purchased without the use of a credit card, the registered ultimate vendor may make the claim for refund or credit. 1040 x A state is not allowed to make a claim for these fuels. 1040 x However, if the diesel fuel or kerosene is purchased with a credit card issued to a state, but the credit card issuer is not registered by the IRS or does not meet the conditions described, the credit card issuer must collect the tax and the state may make the claim. 1040 x   The claim from the credit card issuer must contain the following information as it applies to the fuel covered in the claim. 1040 x The total number of gallons. 1040 x Its registration number. 1040 x A statement that it has not collected the amount of tax from the ultimate purchaser or has obtained the written consent of the ultimate purchaser to make the claim. 1040 x A statement that it has repaid or agreed to repay the amount of tax to the ultimate vendor, has obtained the written consent of the ultimate vendor to make the claim, or has otherwise made arrangements which directly or indirectly provide the ultimate vendor with reimbursement of the tax. 1040 x Has in its possession an unexpired certificate similar to Model Certificate R in the Appendix and has no reason to believe any of the information in the certificate is false. 1040 x Taxpayer identification number. 1040 x   To file a claim, you must have a taxpayer identification number. 1040 x Your taxpayer identification number can be an: Employer identification number (EIN), Social security number (SSN), or Individual taxpayer identification number (ITIN), if you are an alien individual and do not have and are not eligible to get an SSN. 1040 x   If you normally file only a U. 1040 x S. 1040 x individual income tax return (such as Form 1040 or 1040NR), use your SSN or ITIN. 1040 x You get an SSN by filing Form SS-5, Application for a Social Security Card, with the Social Security Administration. 1040 x To get an ITIN, file Form W-7, Application for IRS Individual Taxpayer Identification Number, with the IRS. 1040 x   If you operate a business, use your EIN. 1040 x If you do not have an EIN, you may apply for one online. 1040 x Go to the IRS website at irs. 1040 x gov/businesses/small and click on the “Employer ID Numbers (EINs)” link. 1040 x You may also apply for an EIN by calling 1-800-829-4933, or you can fax or mail Form SS-4, Application for Employer Identification Number, to the IRS. 1040 x Claiming A Refund Generally, you may claim a refund of excise taxes on Form 8849. 1040 x Complete and attach to Form 8849 the appropriate Form 8849 schedules. 1040 x The instructions for Form 8849 and the separate instructions for each schedule explain the requirements for making a claim for refund. 1040 x If you file Form 720, you can use the Schedule C (Form 720) for your refund claims for the quarter. 1040 x See the Instructions for Form 720. 1040 x Do not claim a refund on Form 8849 for any amount for which you have filed or will file a claim on Schedule C (Form 720) or Form 4136. 1040 x The alternative fuel mixture credit must be claimed on Schedule C (Form 720) against your section 4081 taxable fuel liability for gasoline, diesel, and kerosene and any excess is not allowed. 1040 x The alternative fuel credit must first be claimed on Schedule C (Form 720) against your section 4041 taxable fuel liability for alternative fuel and CNG. 1040 x To the extent the alternative fuel credit exceeds this taxable fuel liability, a payment is allowed and may be claimed as a credit on Schedule C (Form 720), or as an income tax credit on Forms 4136, 6478, or 8864, as applicable. 1040 x Only one claim may be made for any particular amount of alternative fuel. 1040 x Claiming a Credit on Form 4136 For alternative fuel mixtures produced after December 31, 2011, the alternative fuel mixture credit cannot be claimed on Form 4136. 1040 x See Biodiesel or Renewable Diesel Mixture Credit, Alternative Fuel Credit and Alternative Fuel Mixture Credit in chapter 2, earlier. 1040 x A credit may be claimed for certain uses and sales of fuels on Form 4136 when you file your income tax return at the end of the year. 1040 x If you meet certain requirements (discussed earlier), you may be able to make a claim during the year. 1040 x Credit only. 1040 x   You can claim the following taxes only as a credit on Form 4136. 1040 x Tax on fuels used for nontaxable uses if the total for your tax year is less than $750. 1040 x Tax on fuel you did not include in any claim for refund previously filed for any quarter of your tax year. 1040 x Tax on fuel you used in mobile machinery (off-highway business use) that traveled less than 7,500 miles on public highways. 1040 x Do not claim a credit for any amount for which you have filed a refund claim on Form 8849 or credit on Schedule C (Form 720). 1040 x When to file. 1040 x   You can claim a fuel tax credit on your income tax return for the year you used the fuel (or sold the fuel in the case of a registered ultimate vendor claim). 1040 x You may be able to make a fuel tax claim on an amended income tax return for the year you used the fuel. 1040 x Generally, you must file an amended return by the later of 3 years from the date you filed your original return or within 2 years from the date you paid the income tax. 1040 x How to claim a credit. 1040 x   How you claim a credit depends on whether you are an individual, partnership, corporation, S corporation, or farmers' cooperative association. 1040 x Individuals. 1040 x   You claim the credit on the “Credits from” line of Form 1040. 1040 x Also check box b on that line. 1040 x If you would not otherwise have to file an income tax return, you must do so to get a fuel tax credit. 1040 x Partnerships. 1040 x   Partnerships (other than electing large partnerships) claim the credit by including a statement on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. 1040 x , showing each partner's share of the number of gallons of each fuel sold or used for a non