IRS issues interim guidance on backlog of fuel credit claims


Authored by RSM US LLP

On Dec. 9, 2020 the IRS Small Business/Self Employed (SBSE) Division issued a memorandum on new interim guidance to the Cincinnati campus excise tax operations for processing interest bearing fuel excise tax claims for end user and some ultimate vendors. The purpose of the guidance is to help alleviate the backlog of end-user fuel credit claims, which accrue interest after being unpaid for 45 days. Due to COVID-19, a backlog of 7,405 interest bearing fuel claims requiring interest have not been processed yet by the IRS. This includes one-time claims filed on IRS Form 8849 related to the alternative fuel credit and biodiesel mixture credit pursuant to Notice 2020-8.

The recommended actions for processing the backlog of fuel credit claims is to first process the principal amount of the claim via normal Master File Transaction procedures. The taxpayer will then receive a 76C letter explaining the current payment of principal and interest to be paid at a later date. Manual refunds will be prepared in order to calculate the interest on principal and interest due. IRS excise operations personnel will verify and track the manual refund interest payment with their associated principal-paid fuel claims.

The memo proposes using normal manual refund procedures for large dollar claims. Large dollar claims are those over $10 million for individuals or $100 million of businesses.

WNT takeaways

Many taxpayers are reporting delays in receiving their fuel credit claims – including retroactive 2018-2019 one-time claims for the alternative fuel credit and biodiesel mixture credit. The IRS guidance is intended to streamline the payment process of such claim to ensure that at least the principal of the claim is paid.

Taxpayers who submitted their fuel credit claims can anticipate further delays in processing due to COVID but should be aware that the IRS is trying a workaround to reduce its backlog. Taxpayers whose claims were submitted and still do not have their credits after 45 days should know that they are entitled to interest on these claims.