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Free online tax preparation 1. Free online tax preparation   Deducting Business Expenses Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: What Can I Deduct?Cost of Goods Sold Capital Expenses Capital versus Deductible Expenses Personal versus Business Expenses How Much Can I Deduct?Not-for-profit limits. Free online tax preparation At-risk limits. Free online tax preparation Passive activities. Free online tax preparation Net operating loss. Free online tax preparation When Can I Deduct an Expense?Economic performance. Free online tax preparation Not-for-Profit ActivitiesGross Income Limit on Deductions What's New Optional safe harbor method to determine the business use of a home deduction. Free online tax preparation  Beginning in 2013, you can use the optional safe harbor method to determine the deduction for the business use of your home. Free online tax preparation See Optional safe harbor method under Business use of your home , later. Free online tax preparation Introduction This chapter covers the general rules for deducting business expenses. Free online tax preparation Business expenses are the costs of carrying on a trade or business, and they are usually deductible if the business is operated to make a profit. Free online tax preparation Topics - This chapter discusses: What you can deduct How much you can deduct When you can deduct Not-for-profit activities Useful Items - You may want to see: Publication 334 Tax Guide for Small Business 463 Travel, Entertainment, Gift, and Car Expenses 525 Taxable and Nontaxable Income 529 Miscellaneous Deductions 536 Net Operating Losses (NOLs) for Individuals, Estates, and Trusts 538 Accounting Periods and Methods 542 Corporations 547 Casualties, Disasters, and Thefts 587 Business Use of Your Home 925 Passive Activity and At-Risk Rules 936 Home Mortgage Interest Deduction 946 How To Depreciate Property Form (and Instructions) Sch A (Form 1040) Itemized Deductions 5213 Election To Postpone Determination as To Whether the Presumption Applies That an Activity Is Engaged in for Profit See chapter 12 for information about getting publications and forms. Free online tax preparation What Can I Deduct? To be deductible, a business expense must be both ordinary and necessary. Free online tax preparation An ordinary expense is one that is common and accepted in your industry. Free online tax preparation A necessary expense is one that is helpful and appropriate for your trade or business. Free online tax preparation An expense does not have to be indispensable to be considered necessary. Free online tax preparation Even though an expense may be ordinary and necessary, you may not be allowed to deduct the expense in the year you paid or incurred it. Free online tax preparation In some cases you may not be allowed to deduct the expense at all. Free online tax preparation Therefore, it is important to distinguish usual business expenses from expenses that include the following. Free online tax preparation The expenses used to figure cost of goods sold, Capital expenses, and Personal expenses. Free online tax preparation Cost of Goods Sold If your business manufactures products or purchases them for resale, you generally must value inventory at the beginning and end of each tax year to determine your cost of goods sold. Free online tax preparation Some of your business expenses may be included in figuring cost of goods sold. Free online tax preparation Cost of goods sold is deducted from your gross receipts to figure your gross profit for the year. Free online tax preparation If you include an expense in the cost of goods sold, you cannot deduct it again as a business expense. Free online tax preparation The following are types of expenses that go into figuring cost of goods sold. Free online tax preparation The cost of products or raw materials, including freight. Free online tax preparation Storage. Free online tax preparation Direct labor (including contributions to pension or annuity plans) for workers who produce the products. Free online tax preparation Factory overhead. Free online tax preparation Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. Free online tax preparation Indirect costs include rent, interest, taxes, storage, purchasing, processing, repackaging, handling, and administrative costs. Free online tax preparation This rule does not apply to personal property you acquire for resale if your average annual gross receipts (or those of your predecessor) for the preceding 3 tax years are not more than $10 million. Free online tax preparation For more information, see the following sources. Free online tax preparation Cost of goods sold—chapter 6 of Publication 334. Free online tax preparation Inventories—Publication 538. Free online tax preparation Uniform capitalization rules—Publication 538 and section 263A of the Internal Revenue Code and the related regulations. Free online tax preparation Capital Expenses You must capitalize, rather than deduct, some costs. Free online tax preparation These costs are a part of your investment in your business and are called “capital expenses. Free online tax preparation ” Capital expenses are considered assets in your business. Free online tax preparation In general, you capitalize three types of costs. Free online tax preparation Business start-up costs (See Tip below). Free online tax preparation Business assets. Free online tax preparation Improvements. Free online tax preparation You can elect to deduct or amortize certain business start-up costs. Free online tax preparation See chapters 7 and 8. Free online tax preparation Cost recovery. Free online tax preparation   Although you generally cannot take a current deduction for a capital expense, you may be able to recover the amount you spend through depreciation, amortization, or depletion. Free online tax preparation These recovery methods allow you to deduct part of your cost each year. Free online tax preparation In this way, you are able to recover your capital expense. Free online tax preparation See Amortization (chapter 8) and Depletion (chapter 9) in this publication. Free online tax preparation A taxpayer can elect to deduct a portion of the costs of certain depreciable property as a section 179 deduction. Free online tax preparation A greater portion of these costs can be deducted if the property is qualified disaster assistance property. Free online tax preparation See Publication 946 for details. Free online tax preparation Going Into Business The costs of getting started in business, before you actually begin business operations, are capital expenses. Free online tax preparation These costs may include expenses for advertising, travel, or wages for training employees. Free online tax preparation If you go into business. Free online tax preparation   When you go into business, treat all costs you had to get your business started as capital expenses. Free online tax preparation   Usually you recover costs for a particular asset through depreciation. Free online tax preparation Generally, you cannot recover other costs until you sell the business or otherwise go out of business. Free online tax preparation However, you can choose to amortize certain costs for setting up your business. Free online tax preparation See Starting a Business in chapter 8 for more information on business start-up costs. Free online tax preparation If your attempt to go into business is unsuccessful. Free online tax preparation   If you are an individual and your attempt to go into business is not successful, the expenses you had in trying to establish yourself in business fall into two categories. Free online tax preparation The costs you had before making a decision to acquire or begin a specific business. Free online tax preparation These costs are personal and nondeductible. Free online tax preparation They include any costs incurred during a general search for, or preliminary investigation of, a business or investment possibility. Free online tax preparation The costs you had in your attempt to acquire or begin a specific business. Free online tax preparation These costs are capital expenses and you can deduct them as a capital loss. Free online tax preparation   If you are a corporation and your attempt to go into a new trade or business is not successful, you may be able to deduct all investigatory costs as a loss. Free online tax preparation   The costs of any assets acquired during your unsuccessful attempt to go into business are a part of your basis in the assets. Free online tax preparation You cannot take a deduction for these costs. Free online tax preparation You will recover the costs of these assets when you dispose of them. Free online tax preparation Business Assets There are many different kinds of business assets; for example, land, buildings, machinery, furniture, trucks, patents, and franchise rights. Free online tax preparation You must fully capitalize the cost of these assets, including freight and installation charges. Free online tax preparation Certain property you produce for use in your trade or business must be capitalized under the uniform capitalization rules. Free online tax preparation See Regulations section 1. Free online tax preparation 263A-2 for information on these rules. Free online tax preparation Improvements Improvements are generally major expenditures. Free online tax preparation Some examples are: new electric wiring, a new roof, a new floor, new plumbing, bricking up windows to strengthen a wall, and lighting improvements. Free online tax preparation The costs of making improvements to a business asset are capital expenses if the improvements add to the value of the asset, appreciably lengthen the time you can use it, or adapt it to a different use. Free online tax preparation Beginning in 2014, you must capitalize as improvements costs that are for the betterment of a unit of property, restore the unit of property, or adapt the unit of property to a new or different use. Free online tax preparation Temporary regulations allow you to capitalize costs meeting the above criteria for tax years beginning after 2011. Free online tax preparation However, you can currently deduct repairs that keep your property in a normal efficient operating condition as a business expense. Free online tax preparation Treat as repairs amounts paid to replace parts of a machine that only keep it in a normal operating condition. Free online tax preparation Restoration plan. Free online tax preparation   Capitalize the cost of reconditioning, improving, or altering your property as part of a general restoration plan to make it suitable for your business. Free online tax preparation This applies even if some of the work would by itself be classified as repairs. Free online tax preparation Capital versus Deductible Expenses To help you distinguish between capital and deductible expenses, different examples are given below. Free online tax preparation Motor vehicles. Free online tax preparation   You usually capitalize the cost of a motor vehicle you use in your business. Free online tax preparation You can recover its cost through annual deductions for depreciation. Free online tax preparation   There are dollar limits on the depreciation you can claim each year on passenger automobiles used in your business. Free online tax preparation See Publication 463. Free online tax preparation   Generally, repairs you make to your business vehicle are currently deductible. Free online tax preparation However, amounts you pay to recondition and overhaul a business vehicle are capital expenses and are recovered through depreciation. Free online tax preparation Roads and driveways. Free online tax preparation    The cost of building a private road on your business property and the cost of replacing a gravel driveway with a concrete one are capital expenses you may be able to depreciate. Free online tax preparation The cost of maintaining a private road on your business property is a deductible expense. Free online tax preparation Tools. Free online tax preparation   Unless the uniform capitalization rules apply, amounts spent for tools used in your business are deductible expenses if the tools have a life expectancy of less than 1 year or their cost is minor. Free online tax preparation Machinery parts. Free online tax preparation   Unless the uniform capitalization rules apply, the cost of replacing short-lived parts of a machine to keep it in good working condition, but not add to its life, is a deductible expense. Free online tax preparation Heating equipment. Free online tax preparation   The cost of changing from one heating system to another is a capital expense. Free online tax preparation Personal versus Business Expenses Generally, you cannot deduct personal, living, or family expenses. Free online tax preparation However, if you have an expense for something that is used partly for business and partly for personal purposes, divide the total cost between the business and personal parts. Free online tax preparation You can deduct the business part. Free online tax preparation For example, if you borrow money and use 70% of it for business and the other 30% for a family vacation, you generally can deduct 70% of the interest as a business expense. Free online tax preparation The remaining 30% is personal interest and generally is not deductible. Free online tax preparation See chapter 4 for information on deducting interest and the allocation rules. Free online tax preparation Business use of your home. Free online tax preparation   If you use part of your home for business, you may be able to deduct expenses for the business use of your home. Free online tax preparation These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation. Free online tax preparation   To qualify to claim expenses for the business use of your home, you must meet both of the following tests. Free online tax preparation The business part of your home must be used exclusively and regularly for your trade or business. Free online tax preparation The business part of your home must be: Your principal place of business, or A place where you meet or deal with patients, clients, or customers in the normal course of your trade or business, or A separate structure (not attached to your home) used in connection with your trade or business. Free online tax preparation   You generally do not have to meet the exclusive use test for the part of your home that you regularly use either for the storage of inventory or product samples, or as a daycare facility. Free online tax preparation   Your home office qualifies as your principal place of business if you meet the following requirements. Free online tax preparation You use the office exclusively and regularly for administrative or management activities of your trade or business. Free online tax preparation You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. Free online tax preparation   If you have more than one business location, determine your principal place of business based on the following factors. Free online tax preparation The relative importance of the activities performed at each location. Free online tax preparation If the relative importance factor does not determine your principal place of business, consider the time spent at each location. Free online tax preparation Optional safe harbor method. Free online tax preparation   Beginning in 2013, individual taxpayers can use the optional safe harbor method to determine the amount of deductible expenses attributable to certain business use of a residence during the tax year. Free online tax preparation This method is an alternative to the calculation, allocation, and substantiation of actual expenses. Free online tax preparation   The deduction under the optional method is limited to $1,500 per year based on $5 a square foot for up to 300 square feet. Free online tax preparation Under this method, you claim your allowable mortgage interest, real estate taxes, and casualty losses on the home as itemized deductions on Schedule A (Form 1040). Free online tax preparation You are not required to allocate these deductions between personal and business use, as is required under the regular method. Free online tax preparation If you use the optional method, you cannot depreciate the portion of your home used in a trade or business. Free online tax preparation   Business expenses unrelated to the home, such as advertising, supplies, and wages paid to employees, are still fully deductible. Free online tax preparation All of the requirements discussed earlier under Business use of your home still apply. Free online tax preparation   For more information on the deduction for business use of your home, including the optional safe harbor method, see Publication 587. Free online tax preparation    If you were entitled to deduct depreciation on the part of your home used for business, you cannot exclude the part of the gain from the sale of your home that equals any depreciation you deducted (or could have deducted) for periods after May 6, 1997. Free online tax preparation Business use of your car. Free online tax preparation   If you use your car exclusively in your business, you can deduct car expenses. Free online tax preparation If you use your car for both business and personal purposes, you must divide your expenses based on actual mileage. Free online tax preparation Generally, commuting expenses between your home and your business location, within the area of your tax home, are not deductible. Free online tax preparation   You can deduct actual car expenses, which include depreciation (or lease payments), gas and oil, tires, repairs, tune-ups, insurance, and registration fees. Free online tax preparation Or, instead of figuring the business part of these actual expenses, you may be able to use the standard mileage rate to figure your deduction. Free online tax preparation Beginning in 2013, the standard mileage rate is 56. Free online tax preparation 5 cents per mile. Free online tax preparation   If you are self-employed, you can also deduct the business part of interest on your car loan, state and local personal property tax on the car, parking fees, and tolls, whether or not you claim the standard mileage rate. Free online tax preparation   For more information on car expenses and the rules for using the standard mileage rate, see Publication 463. Free online tax preparation How Much Can I Deduct? Generally, you can deduct the full amount of a business expense if it meets the criteria of ordinary and necessary and it is not a capital expense. Free online tax preparation Recovery of amount deducted (tax benefit rule). Free online tax preparation   If you recover part of an expense in the same tax year in which you would have claimed a deduction, reduce your current year expense by the amount of the recovery. Free online tax preparation If you have a recovery in a later year, include the recovered amount in income in that year. Free online tax preparation However, if part of the deduction for the expense did not reduce your tax, you do not have to include that part of the recovered amount in income. Free online tax preparation   For more information on recoveries and the tax benefit rule, see Publication 525. Free online tax preparation Payments in kind. Free online tax preparation   If you provide services to pay a business expense, the amount you can deduct is limited to your out-of-pocket costs. Free online tax preparation You cannot deduct the cost of your own labor. Free online tax preparation   Similarly, if you pay a business expense in goods or other property, you can deduct only what the property costs you. Free online tax preparation If these costs are included in the cost of goods sold, do not deduct them again as a business expense. Free online tax preparation Limits on losses. Free online tax preparation   If your deductions for an investment or business activity are more than the income it brings in, you have a loss. Free online tax preparation There may be limits on how much of the loss you can deduct. Free online tax preparation Not-for-profit limits. Free online tax preparation   If you carry on your business activity without the intention of making a profit, you cannot use a loss from it to offset other income. Free online tax preparation See Not-for-Profit Activities , later. Free online tax preparation At-risk limits. Free online tax preparation   Generally, a deductible loss from a trade or business or other income-producing activity is limited to the investment you have “at risk” in the activity. Free online tax preparation You are at risk in any activity for the following. Free online tax preparation The money and adjusted basis of property you contribute to the activity. Free online tax preparation Amounts you borrow for use in the activity if: You are personally liable for repayment, or You pledge property (other than property used in the activity) as security for the loan. Free online tax preparation For more information, see Publication 925. Free online tax preparation Passive activities. Free online tax preparation   Generally, you are in a passive activity if you have a trade or business activity in which you do not materially participate, or a rental activity. Free online tax preparation In general, deductions for losses from passive activities only offset income from passive activities. Free online tax preparation You cannot use any excess deductions to offset other income. Free online tax preparation In addition, passive activity credits can only offset the tax on net passive income. Free online tax preparation Any excess loss or credits are carried over to later years. Free online tax preparation Suspended passive losses are fully deductible in the year you completely dispose of the activity. Free online tax preparation For more information, see Publication 925. Free online tax preparation Net operating loss. Free online tax preparation   If your deductions are more than your income for the year, you may have a “net operating loss. Free online tax preparation ” You can use a net operating loss to lower your taxes in other years. Free online tax preparation See Publication 536 for more information. Free online tax preparation   See Publication 542 for information about net operating losses of corporations. Free online tax preparation When Can I Deduct an Expense? When you can deduct an expense depends on your accounting method. Free online tax preparation An accounting method is a set of rules used to determine when and how income and expenses are reported. Free online tax preparation The two basic methods are the cash method and the accrual method. Free online tax preparation Whichever method you choose must clearly reflect income. Free online tax preparation For more information on accounting methods, see Publication 538. Free online tax preparation Cash method. Free online tax preparation   Under the cash method of accounting, you generally deduct business expenses in the tax year you pay them. Free online tax preparation Accrual method. Free online tax preparation   Under an accrual method of accounting, you generally deduct business expenses when both of the following apply. Free online tax preparation The all-events test has been met. Free online tax preparation The test is met when: All events have occurred that fix the fact of liability, and The liability can be determined with reasonable accuracy. Free online tax preparation Economic performance has occurred. Free online tax preparation Economic performance. Free online tax preparation   You generally cannot deduct or capitalize a business expense until economic performance occurs. Free online tax preparation If your expense is for property or services provided to you, or for your use of property, economic performance occurs as the property or services are provided, or the property is used. Free online tax preparation If your expense is for property or services you provide to others, economic performance occurs as you provide the property or services. Free online tax preparation Example. Free online tax preparation Your tax year is the calendar year. Free online tax preparation In December 2013, the Field Plumbing Company did some repair work at your place of business and sent you a bill for $600. Free online tax preparation You paid it by check in January 2014. Free online tax preparation If you use the accrual method of accounting, deduct the $600 on your tax return for 2013 because all events have occurred to “fix” the fact of liability (in this case the work was completed), the liability can be determined, and economic performance occurred in that year. Free online tax preparation If you use the cash method of accounting, deduct the expense on your 2014 return. Free online tax preparation Prepayment. Free online tax preparation   You generally cannot deduct expenses in advance, even if you pay them in advance. Free online tax preparation This rule applies to both the cash and accrual methods. Free online tax preparation It applies to prepaid interest, prepaid insurance premiums, and any other expense paid far enough in advance to, in effect, create an asset with a useful life extending substantially beyond the end of the current tax year. Free online tax preparation Example. Free online tax preparation In 2013, you sign a 10-year lease and immediately pay your rent for the first 3 years. Free online tax preparation Even though you paid the rent for 2013, 2014, and 2015, you can only deduct the rent for 2013 on your 2013 tax return. Free online tax preparation You can deduct the rent for 2014 and 2015 on your tax returns for those years. Free online tax preparation Contested liability. Free online tax preparation   Under the cash method, you can deduct a contested liability only in the year you pay the liability. Free online tax preparation Under the accrual method, you can deduct contested liabilities such as taxes (except foreign or U. Free online tax preparation S. Free online tax preparation possession income, war profits, and excess profits taxes) either in the tax year you pay the liability (or transfer money or other property to satisfy the obligation) or in the tax year you settle the contest. Free online tax preparation However, to take the deduction in the year of payment or transfer, you must meet certain conditions. Free online tax preparation See Regulations section 1. Free online tax preparation 461-2. Free online tax preparation Related person. Free online tax preparation   Under an accrual method of accounting, you generally deduct expenses when you incur them, even if you have not yet paid them. Free online tax preparation However, if you and the person you owe are related and that person uses the cash method of accounting, you must pay the expense before you can deduct it. Free online tax preparation Your deduction is allowed when the amount is includible in income by the related cash method payee. Free online tax preparation See Related Persons in Publication 538. Free online tax preparation Not-for-Profit Activities If you do not carry on your business or investment activity to make a profit, you cannot use a loss from the activity to offset other income. Free online tax preparation Activities you do as a hobby, or mainly for sport or recreation, are often not entered into for profit. Free online tax preparation The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. Free online tax preparation It does not apply to corporations other than S corporations. Free online tax preparation In determining whether you are carrying on an activity for profit, several factors are taken into account. Free online tax preparation No one factor alone is decisive. Free online tax preparation Among the factors to consider are whether: You carry on the activity in a businesslike manner, The time and effort you put into the activity indicate you intend to make it profitable, You depend on the income for your livelihood, Your losses are due to circumstances beyond your control (or are normal in the start-up phase of your type of business), You change your methods of operation in an attempt to improve profitability, You (or your advisors) have the knowledge needed to carry on the activity as a successful business, You were successful in making a profit in similar activities in the past, The activity makes a profit in some years, and You can expect to make a future profit from the appreciation of the assets used in the activity. Free online tax preparation Presumption of profit. Free online tax preparation   An activity is presumed carried on for profit if it produced a profit in at least 3 of the last 5 tax years, including the current year. Free online tax preparation Activities that consist primarily of breeding, training, showing, or racing horses are presumed carried on for profit if they produced a profit in at least 2 of the last 7 tax years, including the current year. Free online tax preparation The activity must be substantially the same for each year within this period. Free online tax preparation You have a profit when the gross income from an activity exceeds the deductions. Free online tax preparation   If a taxpayer dies before the end of the 5-year (or 7-year) period, the “test” period ends on the date of the taxpayer's death. Free online tax preparation   If your business or investment activity passes this 3- (or 2-) years-of-profit test, the IRS will presume it is carried on for profit. Free online tax preparation This means the limits discussed here will not apply. Free online tax preparation You can take all your business deductions from the activity, even for the years that you have a loss. Free online tax preparation You can rely on this presumption unless the IRS later shows it to be invalid. Free online tax preparation Using the presumption later. Free online tax preparation   If you are starting an activity and do not have 3 (or 2) years showing a profit, you can elect to have the presumption made after you have the 5 (or 7) years of experience allowed by the test. Free online tax preparation   You can elect to do this by filing Form 5213. Free online tax preparation Filing this form postpones any determination that your activity is not carried on for profit until 5 (or 7) years have passed since you started the activity. Free online tax preparation   The benefit gained by making this election is that the IRS will not immediately question whether your activity is engaged in for profit. Free online tax preparation Accordingly, it will not restrict your deductions. Free online tax preparation Rather, you will gain time to earn a profit in the required number of years. Free online tax preparation If you show 3 (or 2) years of profit at the end of this period, your deductions are not limited under these rules. Free online tax preparation If you do not have 3 (or 2) years of profit, the limit can be applied retroactively to any year with a loss in the 5-year (or 7-year) period. Free online tax preparation   Filing Form 5213 automatically extends the period of limitations on any year in the 5-year (or 7-year) period to 2 years after the due date of the return for the last year of the period. Free online tax preparation The period is extended only for deductions of the activity and any related deductions that might be affected. Free online tax preparation    You must file Form 5213 within 3 years after the due date of your return (determined without extensions) for the year in which you first carried on the activity, or, if earlier, within 60 days after receiving written notice from the Internal Revenue Service proposing to disallow deductions attributable to the activity. Free online tax preparation Gross Income Gross income from a not-for-profit activity includes the total of all gains from the sale, exchange, or other disposition of property, and all other gross receipts derived from the activity. Free online tax preparation Gross income from the activity also includes capital gains and rents received for the use of property which is held in connection with the activity. Free online tax preparation You can determine gross income from any not-for-profit activity by subtracting the cost of goods sold from your gross receipts. Free online tax preparation However, if you determine gross income by subtracting cost of goods sold from gross receipts, you must do so consistently, and in a manner that follows generally accepted methods of accounting. Free online tax preparation Limit on Deductions If your activity is not carried on for profit, take deductions in the following order and only to the extent stated in the three categories. Free online tax preparation If you are an individual, these deductions may be taken only if you itemize. Free online tax preparation These deductions may be taken on Schedule A (Form 1040). Free online tax preparation Category 1. Free online tax preparation   Deductions you can take for personal as well as for business activities are allowed in full. Free online tax preparation For individuals, all nonbusiness deductions, such as those for home mortgage interest, taxes, and casualty losses, belong in this category. Free online tax preparation Deduct them on the appropriate lines of Schedule A (Form 1040). Free online tax preparation For tax years beginning after December 31, 2008, you can deduct a casualty loss on property you own for personal use only to the extent it is more than $500 and exceeds 10% of your adjusted gross income (AGI). Free online tax preparation The 10% AGI limitation does not apply to net disaster losses resulting from federally declared disasters in 2008 and 2009, and individuals are allowed to claim the net disaster losses even if they do not itemize their deductions. Free online tax preparation The reduction amount returns to $100 for tax years beginning after December 31, 2009. Free online tax preparation See Publication 547 for more information on casualty losses. Free online tax preparation For the limits that apply to home mortgage interest, see Publication 936. Free online tax preparation Category 2. Free online tax preparation   Deductions that do not result in an adjustment to the basis of property are allowed next, but only to the extent your gross income from the activity is more than your deductions under the first category. Free online tax preparation Most business deductions, such as those for advertising, insurance premiums, interest, utilities, and wages, belong in this category. Free online tax preparation Category 3. Free online tax preparation   Business deductions that decrease the basis of property are allowed last, but only to the extent the gross income from the activity exceeds the deductions you take under the first two categories. Free online tax preparation Deductions for depreciation, amortization, and the part of a casualty loss an individual could not deduct in category (1) belong in this category. Free online tax preparation Where more than one asset is involved, allocate depreciation and these other deductions proportionally. Free online tax preparation    Individuals must claim the amounts in categories (2) and (3) as miscellaneous deductions on Schedule A (Form 1040). Free online tax preparation They are subject to the 2%-of-adjusted-gross-income limit. Free online tax preparation See Publication 529 for information on this limit. Free online tax preparation Example. Free online tax preparation Adriana is engaged in a not-for-profit activity. Free online tax preparation The income and expenses of the activity are as follows. Free online tax preparation Gross income $3,200 Subtract:     Real estate taxes $700   Home mortgage interest 900   Insurance 400   Utilities 700   Maintenance 200   Depreciation on an automobile 600   Depreciation on a machine 200 3,700 Loss $(500)   Adriana must limit her deductions to $3,200, the gross income she earned from the activity. Free online tax preparation The limit is reached in category (3), as follows. Free online tax preparation Limit on deduction $3,200 Category 1: Taxes and interest $1,600   Category 2: Insurance, utilities, and maintenance 1,300 2,900 Available for Category 3 $ 300   The $800 of depreciation is allocated between the automobile and machine as follows. Free online tax preparation $600 $800 x $300 = $225 depreciation for the automobile             $200 $800 x $300 = $75 depreciation for the machine The basis of each asset is reduced accordingly. Free online tax preparation Adriana includes the $3,200 of gross income on line 21 (other income) of Form 1040. Free online tax preparation The $1,600 for category (1) is deductible in full on the appropriate lines for taxes and interest on Schedule A (Form 1040). Free online tax preparation Adriana deducts the remaining $1,600 ($1,300 for category (2) and $300 for category (3)) as other miscellaneous deductions on Schedule A (Form 1040) subject to the 2%-of-adjusted-gross-income limit. Free online tax preparation Partnerships and S corporations. Free online tax preparation   If a partnership or S corporation carries on a not-for-profit activity, these limits apply at the partnership or S corporation level. Free online tax preparation They are reflected in the individual shareholder's or partner's distributive shares. Free online tax preparation More than one activity. Free online tax preparation   If you have several undertakings, each may be a separate activity or several undertakings may be combined. Free online tax preparation The following are the most significant facts and circumstances in making this determination. Free online tax preparation The degree of organizational and economic interrelationship of various undertakings. Free online tax preparation The business purpose that is (or might be) served by carrying on the various undertakings separately or together in a business or investment setting. Free online tax preparation The similarity of the undertakings. Free online tax preparation   The IRS will generally accept your characterization if it is supported by facts and circumstances. Free online tax preparation    If you are carrying on two or more different activities, keep the deductions and income from each one separate. Free online tax preparation Figure separately whether each is a not-for-profit activity. Free online tax preparation Then figure the limit on deductions and losses separately for each activity that is not for profit. Free online tax preparation Prev  Up  Next   Home   More Online Publications
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SOI Tax Stats – IRS Tax-Exempt Organization Population Data

 

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Financial Data Extract

These microdata files contain selected financial data extracted annually from all Forms 990, 990-EZ and 990-PF filed by active organizations in a given calendar year:

Annual Extracts of Tax-Exempt Organization Financial Data

 

Other Available Data

Selected organizational data, extracted monthly for all tax-exempt organizations, organized by state and region:

Exempt Organizations Business Master File Extract

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The Free Online Tax Preparation

Free online tax preparation 2. Free online tax preparation   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. Free online tax preparation Providing information. Free online tax preparation Definitions of Nontaxable UsesCustom application of fertilizer and pesticide. Free online tax preparation Fuel used between airfield and farm. Free online tax preparation Fuel not used for farming. Free online tax preparation Vehicles not considered highway vehicles. Free online tax preparation 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. Free online tax preparation This chapter lists the nontaxable uses of each fuel and defines the nontaxable uses. Free online tax preparation Information on the refund of second tax is included. Free online tax preparation This chapter also explains credits and refunds for the biodiesel or renewable diesel mixture credits, and the alternative fuel mixture and alternative fuel credits. Free online tax preparation 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. Free online tax preparation Exported taxable fuel. Free online tax preparation   The claim rates for exported taxable fuel are listed on Schedule C (Form 720), Schedule 1 (Form 8849), and Form 4136. Free online tax preparation Taxpayers making a claim for exported taxable fuel must include with their records proof of exportation. Free online tax preparation 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. Free online tax preparation Gasoline and Aviation Gasoline Ultimate Purchasers. Free online tax preparation   The following are the uses of gasoline (defined earlier) for which a credit or refund may be allowable to an ultimate purchaser. Free online tax preparation On a farm for farming purposes (credit only). Free online tax preparation Off-highway business use. Free online tax preparation Export. Free online tax preparation In a boat engaged in commercial fishing. Free online tax preparation In certain intercity and local buses. Free online tax preparation In a school bus. Free online tax preparation Exclusive use by a qualified blood collector organization. Free online tax preparation In a highway vehicle owned by the United States that is not used on a highway. Free online tax preparation Exclusive use by a nonprofit educational organization (see Sales by registered ultimate vendors and Credit Card Purchases, later). Free online tax preparation 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). Free online tax preparation In an aircraft or vehicle owned by an aircraft museum. Free online tax preparation   The following are the uses of aviation gasoline for which a credit or refund may be allowable to an ultimate purchaser. Free online tax preparation On a farm for farming purposes (credit only). Free online tax preparation Export. Free online tax preparation In foreign trade. Free online tax preparation Certain helicopter and fixed-wing air ambulance uses. Free online tax preparation In commercial aviation (other than foreign trade). Free online tax preparation Exclusive use by a qualified blood collector organization. Free online tax preparation Exclusive use by a nonprofit education organization (see Sales by registered ultimate vendors and Credit card purchases, later). Free online tax preparation 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). Free online tax preparation In an aircraft owned by an aircraft museum. Free online tax preparation In military aircraft. Free online tax preparation Claims by persons who paid the tax to the government. Free online tax preparation   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. Free online tax preparation See Filing Claims, later. Free online tax preparation Sales by registered ultimate vendors. Free online tax preparation   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. Free online tax preparation A state or local government for its exclusive use (including essential government use by an Indian tribal government). Free online tax preparation A nonprofit educational organization for its exclusive use. Free online tax preparation   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. Free online tax preparation A sample certificate is included as Model Certificate M in the Appendix. Free online tax preparation The registered ultimate vendor must have the certificate at the time the credit or refund is claimed. Free online tax preparation   The ultimate vendor must be registered by the IRS. Free online tax preparation See Registration Requirements, earlier. Free online tax preparation Credit card purchases. Free online tax preparation   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. Free online tax preparation   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. Free online tax preparation How to make the claim. Free online tax preparation   If the claim is made by the credit card issuer, see Schedule C  (Form 720) or Schedule 8 (Form 8849). Free online tax preparation 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. Free online tax preparation Ultimate purchasers. Free online tax preparation   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. Free online tax preparation On a farm for farming purposes. Free online tax preparation Off-highway business use. Free online tax preparation Export. Free online tax preparation In a qualified local bus. Free online tax preparation In a school bus. Free online tax preparation Other than as a fuel in a propulsion engine of a diesel-powered highway vehicle (such as home heating oil). Free online tax preparation Exclusive use by a qualified blood collector organization. Free online tax preparation In a highway vehicle owned by the United States that is not used on a highway. Free online tax preparation Exclusive use by a nonprofit educational organization (see Sales by Registered Ultimate Vendors and Credit Card Purchases, later). Free online tax preparation 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). Free online tax preparation In a vehicle owned by an aircraft museum. Free online tax preparation As a fuel in a propulsion engine of a diesel-powered train. Free online tax preparation 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. Free online tax preparation 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. Free online tax preparation Registered ultimate vendor (state use). Free online tax preparation   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). Free online tax preparation 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. Free online tax preparation The ultimate vendor must be registered by the IRS. Free online tax preparation See Registration Requirements, earlier. Free online tax preparation Registered ultimate vendor (blocked pump). Free online tax preparation   This is an ultimate vendor that sells undyed kerosene from a blocked pump. Free online tax preparation   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. Free online tax preparation Blocked pump. Free online tax preparation   A blocked pump is a fuel pump that meets all the following requirements. Free online tax preparation It is used to make retail sales of undyed kerosene for use by the buyer in any nontaxable use. Free online tax preparation It is at a fixed location. Free online tax preparation It is identified with a legible and conspicuous notice stating, “UNDYED UNTAXED KEROSENE, NONTAXABLE USE ONLY. Free online tax preparation ” It meets either of the following conditions. Free online tax preparation It cannot reasonably be used to dispense fuel directly into the fuel supply tank of a diesel-powered highway vehicle or train. Free online tax preparation 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. Free online tax preparation Registered ultimate vendor (certain intercity and local buses). Free online tax preparation   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. Free online tax preparation   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. Free online tax preparation A sample waiver is included as Model Waiver N in the Appendix. Free online tax preparation The registered ultimate vendor must have the waiver at the time the credit or payment is claimed. Free online tax preparation Credit Card Purchases. Free online tax preparation   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. Free online tax preparation   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. Free online tax preparation 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. Free online tax preparation The claim rate for nontaxable use of a diesel-water fuel emulsion taxed at $. Free online tax preparation 198 per gallon is $. Free online tax preparation 197 (if exported, the claim rate is $. Free online tax preparation 198). Free online tax preparation 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. Free online tax preparation On a farm for farming purposes. Free online tax preparation Off-highway business use. Free online tax preparation Export. Free online tax preparation In a qualified local bus. Free online tax preparation In a school bus. Free online tax preparation Other than as fuel in the propulsion engine of a train or diesel-powered highway vehicle (but not off-highway use). Free online tax preparation Exclusive use by a qualified blood collector organization. Free online tax preparation In a highway vehicle owned by the United States that is not used on a highway. Free online tax preparation Exclusive use by a nonprofit educational organization. Free online tax preparation Exclusive use by a state, political subdivision of a state, or the District of Columbia. Free online tax preparation In an aircraft or vehicle owned by an aircraft museum. Free online tax preparation Blender claims. Free online tax preparation   The claim rate for undyed diesel fuel taxed at $. Free online tax preparation 244 and used to produce a diesel-water fuel emulsion is $. Free online tax preparation 046 per gallon of diesel fuel so used. Free online tax preparation The blender must be registered by the IRS in order to make the claim. Free online tax preparation 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 $. Free online tax preparation 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. Free online tax preparation Kerosene for Use in Aviation Ultimate purchasers. Free online tax preparation   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. Free online tax preparation   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. Free online tax preparation Generally, the ultimate purchaser is the aircraft operator. Free online tax preparation   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. Free online tax preparation On a farm for farming purposes. Free online tax preparation Certain helicopter and fixed-wing aircraft uses. Free online tax preparation Exclusive use by a qualified blood collector organization. Free online tax preparation Exclusive use by a nonprofit educational organization. Free online tax preparation In an aircraft owned by an aircraft museum. Free online tax preparation In military aircraft. Free online tax preparation Kerosene for use partly in commercial aviation and partly in nonexempt, noncommercial aviation. Free online tax preparation   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. Free online tax preparation 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. Free online tax preparation   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. Free online tax preparation For kerosene purchased with the certificate, used in commercial aviation, and taxed at $. Free online tax preparation 244 per gallon, use of the certificate will be treated as a waiver of the right to claim a credit or refund for the $. Free online tax preparation 025 per gallon part of the tax. Free online tax preparation The ultimate vendor may make this claim. Free online tax preparation The operator may make a claim for the $. Free online tax preparation 175 tax per gallon of the kerosene, but cannot waive the right to make the claim for the $. Free online tax preparation 175 tax per gallon. Free online tax preparation Sales by Registered Ultimate Vendors Kerosene for use in commercial aviation or noncommercial aviation. Free online tax preparation   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. Free online tax preparation A sample waiver is included as Model Waiver L in the Appendix. Free online tax preparation The registered ultimate vendor must have the waiver at the time the credit or payment is claimed. Free online tax preparation   Noncommercial aviation means any use of an aircraft not described as commercial aviation. Free online tax preparation For the definition of commercial aviation, see Commercial aviation on page 11. Free online tax preparation Kerosene for use in nonexempt, noncommercial aviation. Free online tax preparation   Only the registered ultimate vendor may claim a credit or payment for sales of kerosene for use in nonexempt, noncommercial aviation. Free online tax preparation The ultimate vendor must be registered by the IRS (activity letter UA) and have the required certificate from the ultimate purchaser. Free online tax preparation A sample certificate is included as Model Certificate Q in the Appendix. Free online tax preparation The registered ultimate vendor must have the certificate at the time the credit or payment is claimed. Free online tax preparation Kerosene for use in aviation by a state or local government. Free online tax preparation   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). Free online tax preparation 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. Free online tax preparation The ultimate vendor must be registered by the IRS (activity letter UV) and have the required certificate from the ultimate purchaser. Free online tax preparation A sample certificate is included as Model Certificate P in the Appendix. Free online tax preparation The registered ultimate vendor must have the certificate at the time the credit or payment is claimed. Free online tax preparation Credit card purchases. Free online tax preparation   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. Free online tax preparation   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. Free online tax preparation Other Fuels (Including Alternative Fuels) Credit or refund for nontaxable use of taxed Other Fuels may be allowable to an ultimate purchaser. Free online tax preparation 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. Free online tax preparation The following are the nontaxable uses of Other Fuels for which a credit or refund may be allowable to the ultimate purchaser. Free online tax preparation On a farm for farming purposes. Free online tax preparation Off-highway business use. Free online tax preparation In a boat engaged in commercial fishing. Free online tax preparation In certain intercity and local buses. Free online tax preparation In a school bus. Free online tax preparation In a qualified local bus. Free online tax preparation Exclusive use by a qualified blood collector organization. Free online tax preparation Exclusive use by a nonprofit educational organization. Free online tax preparation Exclusive use by a state, political subdivision of a state, or the District of Columbia. Free online tax preparation In an aircraft or vehicle owned by an aircraft museum. Free online tax preparation Use in any boat operated by the United States for its exclusive use or any vessel of war of any foreign nation. Free online tax preparation See Biodiesel or Renewable Diesel Mixture Credit, Alternative Fuel Credit, and Alternative Fuel Mixture Credit, later. Free online tax preparation Refunds of Second Tax The tax on dyed diesel fuel for inland waterways fuel use applies at the rate listed on Form 720. Free online tax preparation This is in addition to all other taxes imposed on the sale or use of the fuel. Free online tax preparation The section 4081(e) refund (discussed below) cannot be claimed. Free online tax preparation 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. Free online tax preparation No credit against any tax is allowed for this tax. Free online tax preparation For information about taxable events, see the discussions under Gasoline, Diesel Fuel and Kerosene and Kerosene for Use in Aviation in chapter 1. Free online tax preparation Conditions to allowance of refund. Free online tax preparation   A claim for refund of the tax is allowed only if all the following conditions are met. Free online tax preparation A tax on the fuel was paid to the government and not credited or refunded (the “first tax”). Free online tax preparation After the first tax was imposed, another tax was imposed on the same fuel and was paid to the government (the “second tax”). Free online tax preparation The person that paid the second tax filed a timely claim for refund containing the information required (see Refund claim, later). Free online tax preparation The person that paid the first tax has met the reporting requirements, discussed next. Free online tax preparation Reporting requirements. Free online tax preparation   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. Free online tax preparation A model first taxpayer's report is shown in the Appendix as Model Certificate B. Free online tax preparation The report must contain all information needed to complete the model. Free online tax preparation   By the due date for filing the Form 720, you must also send a separate copy of the report to the following address. Free online tax preparation Department of the Treasury Internal Revenue Service  Cincinnati, OH 45999-0555 Write “EXCISE – FIRST TAXPAYER'S REPORT” across the top of that copy. Free online tax preparation Optional reporting. Free online tax preparation   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. Free online tax preparation 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. Free online tax preparation Providing information. Free online tax preparation   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. Free online tax preparation If an optional report is filed, a copy should (but is not required to) be given to the buyer or owner. Free online tax preparation   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. Free online tax preparation 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. Free online tax preparation A model statement of subsequent seller is shown in the Appendix as Model Certificate A. Free online tax preparation The statement must contain all information necessary to complete the model. Free online tax preparation   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. Free online tax preparation Each buyer must be given a copy of the report. Free online tax preparation Refund claim. Free online tax preparation   You must have filed Form 720 and paid the second tax before you file for a refund of that tax. Free online tax preparation You must make your claim for refund on Form 8849. Free online tax preparation Complete Schedule 5 (Form 8849) and attach it to your Form 8849. Free online tax preparation Do not include this claim with a claim under another tax provision. Free online tax preparation You must not have included the second tax in the price of the fuel and must not have collected it from the purchaser. Free online tax preparation You must submit the following information with your claim. Free online tax preparation A copy of the first taxpayer's report (discussed earlier). Free online tax preparation A copy of the statement of subsequent seller if the fuel was bought from someone other than the first taxpayer. Free online tax preparation Definitions of Nontaxable Uses This section provides definitions of the terms used in Table 2-1 for nontaxable uses. Free online tax preparation If applicable, the type of use number from Table 2-1 is indicated in each heading. Free online tax preparation Type of use table. Free online tax preparation   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. Free online tax preparation For type of use 2, the mobile machinery parenthetical applies only to Form 8849 and Form 720. Free online tax preparation Table 2-1. Free online tax preparation Type of Use Table No. Free online tax preparation 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. Free online tax preparation 1). Free online tax preparation   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. Free online tax preparation Farm. Free online tax preparation   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. Free online tax preparation It also includes structures such as greenhouses used primarily for the raising of agricultural or horticultural commodities. Free online tax preparation A fish farm is an area where fish are grown or raised — not merely caught or harvested. Free online tax preparation Farming purposes. Free online tax preparation   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. Free online tax preparation To cultivate the soil or to raise or harvest any agricultural or horticultural commodity. Free online tax preparation To raise, shear, feed, care for, train, or manage livestock, bees, poultry, fur-bearing animals, or wildlife. Free online tax preparation To operate, manage, conserve, improve, or maintain your farm and its tools and equipment. Free online tax preparation To handle, dry, pack, grade, or store any raw agricultural or horticultural commodity. Free online tax preparation For this use to qualify, you must have produced more than half the commodity so treated during the tax year. Free online tax preparation Commodity means a single raw product. Free online tax preparation For example, apples and peaches are two separate commodities. Free online tax preparation 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. Free online tax preparation , is incidental to your farming operations. Free online tax preparation Your tree operations will be incidental only if they are minor in nature when compared to the total farming operations. Free online tax preparation   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. Free online tax preparation However, see Custom application of fertilizer and pesticide, next. Free online tax preparation   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. Free online tax preparation 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. Free online tax preparation Custom application of fertilizer and pesticide. Free online tax preparation   Fuel used on a farm for farming purposes includes fuel used in the application of fertilizer, pesticides, or other substances, including aerial applications. Free online tax preparation Generally, the applicator is treated as having used the fuel on a farm for farming purposes. Free online tax preparation For aviation gasoline, the aerial applicator makes the claim as the ultimate purchaser. Free online tax preparation 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. Free online tax preparation Fuel used between airfield and farm. Free online tax preparation   Fuel used by an aerial applicator for the direct flight between the airfield and one or more farms is treated as a farming purpose. Free online tax preparation Fuel not used for farming. Free online tax preparation   Fuel is not used on a farm for farming purposes if it is used in any of the following ways. Free online tax preparation 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. Free online tax preparation For personal use, such as mowing the lawn. Free online tax preparation In processing, packaging, freezing, or canning operations. Free online tax preparation In processing crude gum into gum spirits of turpentine or gum resin or in processing maple sap into maple syrup or maple sugar. Free online tax preparation Off-highway business use (No. Free online tax preparation 2). Free online tax preparation   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. Free online tax preparation The terms “highway vehicle,” “public highway,” and “registered” are defined below. Free online tax preparation Do not consider any use in a boat as an off-highway business use. Free online tax preparation   Off-highway business use includes fuels used in any of the following ways. Free online tax preparation In stationary machines such as generators, compressors, power saws, and similar equipment. Free online tax preparation For cleaning purposes. Free online tax preparation In forklift trucks, bulldozers, and earthmovers. Free online tax preparation   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. Free online tax preparation Example. Free online tax preparation Caroline owns a landscaping business. Free online tax preparation She uses power lawn mowers and chain saws in her business. Free online tax preparation The gasoline used in the power lawn mowers and chain saws qualifies as fuel used in an off-highway business use. Free online tax preparation The gasoline used in her personal lawn mower at home does not qualify. Free online tax preparation Highway vehicle. Free online tax preparation   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. Free online tax preparation Examples of vehicles designed to carry a load over public highways are passenger automobiles, motorcycles, buses, and highway-type trucks and truck tractors. Free online tax preparation 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. Free online tax preparation A particular type of load, such as passengers, furnishings, and personal effects (as in a house, office, or utility trailer). Free online tax preparation A special kind of cargo, goods, supplies, or materials. Free online tax preparation Some off-highway task unrelated to highway transportation, except as discussed next. Free online tax preparation Vehicles not considered highway vehicles. Free online tax preparation   Generally, the following kinds of vehicles are not considered highway vehicles for purposes of the credit or refund of fuel taxes. Free online tax preparation Specially designed mobile machinery for nontransportation functions. Free online tax preparation A self-propelled vehicle is not a highway vehicle if all the following apply. Free online tax preparation 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. Free online tax preparation 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. Free online tax preparation 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. Free online tax preparation The vehicle must have traveled less than 7,500 miles on public highways during the taxable year. Free online tax preparation Vehicles specially designed for off-highway transportation. Free online tax preparation 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. Free online tax preparation 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. Free online tax preparation It does not matter that the vehicle can carry heavier loads off highway than it is allowed to carry over the highway. Free online tax preparation Nontransportation trailers and semitrailers. Free online tax preparation 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. Free online tax preparation For example, a trailer that is capable only of functioning as an office for an off-highway construction operation is not a highway vehicle. Free online tax preparation Public highway. Free online tax preparation   A public highway includes any road in the United States that is not a private roadway. Free online tax preparation This includes federal, state, county, and city roads and streets. Free online tax preparation Registered. Free online tax preparation   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. Free online tax preparation Any highway vehicle operated under a dealer's tag, license, or permit is considered registered. Free online tax preparation 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. Free online tax preparation Dual use of propulsion motor. Free online tax preparation   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. Free online tax preparation It does not matter if the special equipment is mounted on the vehicle. Free online tax preparation Example. Free online tax preparation The motor of a registered concrete-mixer truck operates both the engine and the mixing unit by means of a power take-off. Free online tax preparation The fuel used in the motor to run the mixer is not off-highway business use. Free online tax preparation Use in separate motor. Free online tax preparation   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. Free online tax preparation 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. Free online tax preparation You may make a reasonable estimate based on your operating experience and supported by your records. Free online tax preparation   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. Free online tax preparation Add to this amount the fuel consumed while idling or warming up the motor before propelling the vehicle. Free online tax preparation The difference between your total fuel used and the fuel used to propel the vehicle is the fuel used in the separate motor. Free online tax preparation Example. Free online tax preparation Hazel owns a refrigerated truck. Free online tax preparation It has a separate motor for the refrigeration unit. Free online tax preparation The same tank supplies both motors. Free online tax preparation Using the truck's hubometer, Hazel figures that 90% of the fuel was used to propel the truck. Free online tax preparation Therefore, 10% of the fuel is used in an off-highway business use. Free online tax preparation Fuel lost or destroyed. Free online tax preparation   You cannot treat fuel lost or destroyed through spillage, fire, or other casualty as fuel used in an off-highway business use. Free online tax preparation Export (No. Free online tax preparation 3). Free online tax preparation   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. Free online tax preparation Fuel is not exported if it is in the fuel supply tank of a vehicle or aircraft. Free online tax preparation In a boat engaged in commercial fishing (No. Free online tax preparation 4). Free online tax preparation   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. Free online tax preparation They include boats used in both fresh and salt water fishing. Free online tax preparation They do not include boats used for both sport fishing and commercial fishing on the same trip. Free online tax preparation In certain intercity and local buses (No. Free online tax preparation 5). Free online tax preparation   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. Free online tax preparation The bus must be engaged in one of the following activities. Free online tax preparation Scheduled transportation along regular routes. Free online tax preparation Nonscheduled operations if the seating capacity of the bus is at least 20 adults, not including the driver. Free online tax preparation Vans and similar vehicles used for van-pooling or taxi service do not qualify. Free online tax preparation Available to the general public. Free online tax preparation   This means you offer service to more than a limited number of persons or organizations. Free online tax preparation 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. Free online tax preparation A bus does not qualify when its operator uses it to provide exclusive services to only one person, group, or organization. Free online tax preparation Also, intercity bus transportation does not include transporting students and employees of schools or intercity transportation in a qualified local bus. Free online tax preparation In a qualified local bus (No. Free online tax preparation 6). Free online tax preparation   In a qualified local bus means fuel used in a bus meeting all the following requirements. Free online tax preparation It is engaged in furnishing (for compensation) intracity passenger land transportation available to the general public. Free online tax preparation It operates along scheduled, regular routes. Free online tax preparation It has a seating capacity of at least 20 adults (excluding the driver). Free online tax preparation It is under contract with (or is receiving more than a nominal subsidy from) any state or local government to furnish the transportation. Free online tax preparation Intracity passenger land transportation. Free online tax preparation   This is the land transportation of passengers between points located within the same metropolitan area. Free online tax preparation It includes transportation along routes that cross state, city, or county boundaries if the routes remain within the metropolitan area. Free online tax preparation Under contract. Free online tax preparation   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. Free online tax preparation More than a nominal subsidy. Free online tax preparation   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. Free online tax preparation 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. Free online tax preparation In a school bus (No. Free online tax preparation 7). Free online tax preparation   In a school bus means fuel used in a bus engaged in the transportation of students or employees of schools. Free online tax preparation 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. Free online tax preparation For diesel fuel and kerosene (other than kerosene used in aviation) used other than as a fuel (No. Free online tax preparation 8). Free online tax preparation   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. Free online tax preparation In foreign trade (No. Free online tax preparation 9). Free online tax preparation   In foreign trade means fuel used in civil aircraft employed in foreign trade or trade between the United States and any of its possessions. Free online tax preparation The term trade includes the transportation of persons or property for hire and the making of the necessary preparations for such transportation. Free online tax preparation In the case of aircraft registered in a foreign country, the country must allow reciprocal benefits for aircraft registered in the United States. Free online tax preparation Certain helicopter and fixed-wing aircraft uses (No. Free online tax preparation 10). Free online tax preparation   Includes: Certain helicopter uses. Free online tax preparation   Certain helicopter uses means fuel used by a helicopter for any of the following purposes. Free online tax preparation Transporting individuals, equipment, or supplies in the exploration for, or the development or removal of, hard minerals, oil, or gas. Free online tax preparation Planting, cultivating, cutting, transporting, or caring for trees (including logging operations). Free online tax preparation Providing emergency medical transportation. Free online tax preparation   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. Free online tax preparation For item (1), treat each flight segment as a separate flight. Free online tax preparation Fixed-wing aircraft uses. Free online tax preparation   Fixed-wing aircraft uses means fuel used by a fixed-wing aircraft for any of the following purposes. Free online tax preparation Planting, cultivating, cutting, transporting, or caring for trees (including logging operations). Free online tax preparation Providing emergency medical transportation. Free online tax preparation The aircraft must be equipped for and exclusively dedicated on that flight to acute care emergency medical services. Free online tax preparation 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. Free online tax preparation Exclusive use by a qualified blood collector organization (No. Free online tax preparation 11). Free online tax preparation   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. Free online tax preparation Qualified blood collector organization. Free online tax preparation   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. Free online tax preparation In a highway vehicle owned by the United States that is not used on a highway (No. Free online tax preparation 12). Free online tax preparation   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. Free online tax preparation This use applies whether or not the vehicle is registered or required to be registered for highway use. Free online tax preparation Exclusive use by a nonprofit educational organization (No. Free online tax preparation 13). Free online tax preparation   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. Free online tax preparation It has a regular faculty and curriculum. Free online tax preparation It has a regularly enrolled body of students who attend the place where the instruction normally occurs. Free online tax preparation   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. Free online tax preparation Exclusive use by a state, political subdivision of a state, or the District of Columbia (No. Free online tax preparation 14). Free online tax preparation   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. Free online tax preparation A state or local government is any state, any political subdivision thereof, or the District of Columbia. Free online tax preparation 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. Free online tax preparation Gasoline, diesel fuel, and kerosene used by the American Red Cross is considered to be the use of these fuels by a state. Free online tax preparation In an aircraft or vehicle owned by an aircraft museum (No. Free online tax preparation 15). Free online tax preparation   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. Free online tax preparation It is exempt from income tax as an organization described in section 501(c)(3). Free online tax preparation It is operated as a museum under a state (or District of Columbia) charter. Free online tax preparation It is operated exclusively for acquiring, exhibiting, and caring for aircraft of the type used for combat or transport in  World War II. Free online tax preparation   The aircraft or vehicle (such as a ground servicing vehicle for aircraft) must be used exclusively for the purposes described in item (3). Free online tax preparation In military aircraft (No. Free online tax preparation 16). Free online tax preparation   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. Free online tax preparation In commercial aviation (other than foreign trade). Free online tax preparation   See Commercial aviation, earlier, for the definition. Free online tax preparation Use in a train. Free online tax preparation   Use in a train means fuel used in the propulsion engine of equipment or machinery that rides on rails. Free online tax preparation This includes use in a locomotive, work train, switching engine, and track maintenance machine. Free online tax preparation 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. Free online tax preparation 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. Free online tax preparation Biodiesel or renewable diesel mixture credit claimant. Free online tax preparation   Claimant produced a biodiesel mixture by mixing biodiesel with diesel fuel. Free online tax preparation Claimant produced a renewable diesel mixture by mixing renewable diesel with liquid fuel (other than renewable diesel). Free online tax preparation   The person that produced and sold or used the mixture in their trade or business is the only person eligible to make this claim. Free online tax preparation The credit is based on the gallons of biodiesel or renewable diesel in the mixture. Free online tax preparation 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. Free online tax preparation Claim requirements. Free online tax preparation   See the Instructions for Form 720 for the biodiesel or renewable diesel mixture claim requirements. Free online tax preparation Alternative fuel credit claimant. Free online tax preparation   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. Free online tax preparation Carbon capture requirement. Free online tax preparation   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. Free online tax preparation Alternative fuel credit. Free online tax preparation   The registered alternative fueler is the person eligible to make the claim. Free online tax preparation 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. Free online tax preparation An alternative fueler includes a person who sells for use or uses an alternative fuel in aviation. Free online tax preparation Alternative fuel mixture credit claimant. Free online tax preparation   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. Free online tax preparation The credit is based on the gallons of alternative fuel in the mixture. Free online tax preparation An alternative fuel mixture is a mixture of alternative fuel and section 4081 taxable fuel (gasoline, diesel fuel, or kerosene). Free online tax preparation Registration. Free online tax preparation   You must be registered by the IRS to be eligible to claim the section 6426 fuel credit. Free online tax preparation See Registration Requirements in chapter 1. Free online tax preparation Credits for fuel provide incentive for United States production. Free online tax preparation   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. Free online tax preparation The United States includes any possession of the United States. Free online tax preparation Credit for fuels derived from paper or pulp production. Free online tax preparation   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. Free online tax preparation 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. Free online tax preparation 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. Free online tax preparation See Notice 2005-4 and the Instructions for Form 720 for more information. Free online tax preparation Also see Notice 2013-26 on page 984 of I. Free online tax preparation R. Free online tax preparation B. Free online tax preparation 2013-18 at www. Free online tax preparation irs. Free online tax preparation gov/pub/irs-irbs/irb13-18. Free online tax preparation pdf; and see chapter 2, later. Free online tax preparation Coordination with income tax credit. Free online tax preparation   Only one credit may be taken for any amount of biodiesel or renewable diesel. Free online tax preparation 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. Free online tax preparation   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. Free online tax preparation Any excess credit may claimed on Schedule C (Form 720), Schedule 3 (Form 8849), or Form 4136. Free online tax preparation   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. Free online tax preparation   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. Free online tax preparation Filing Claims This section tells you how to make a claim for a credit or refund of excise taxes on fuels. Free online tax preparation This section also covers recordkeeping requirements and when to include the credit or refund in your income. Free online tax preparation 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. Free online tax preparation In some cases, you will have to attach additional information. Free online tax preparation You need to keep records that support your claim for a credit or refund. Free online tax preparation 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. Free online tax preparation Ultimate purchaser. Free online tax preparation   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. Free online tax preparation If you are an ultimate purchaser, you must keep the following records. Free online tax preparation The number of gallons purchased and used during the period covered by your claim. Free online tax preparation The dates of the purchases. Free online tax preparation The names and addresses of suppliers and amounts purchased from each in the period covered by your claim. Free online tax preparation The nontaxable use for which you used the fuel. Free online tax preparation The number of gallons used for each nontaxable use. Free online tax preparation It is important that your records show separately the number of gallons used for each nontaxable use that qualifies as a claim. Free online tax preparation If the fuel is exported, you must have proof of exportation. Free online tax preparation   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. Free online tax preparation Exceptions. Free online tax preparation    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. Free online tax preparation However, see Claims by credit card issuers, later, for an exception. Free online tax preparation The ultimate purchaser may not claim a credit or refund as follows. Free online tax preparation 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. Free online tax preparation A new certificate is required each year or when any information in the current certificate expires. Free online tax preparation 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. Free online tax preparation A new waiver is required each year or when any information in the current waiver expires. Free online tax preparation 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. Free online tax preparation A new waiver is required each year or when any information in the current waiver expires. Free online tax preparation 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. Free online tax preparation A new certificate is required each year or when any information in the current certificate expires. Free online tax preparation Registered ultimate vendor. Free online tax preparation   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. Free online tax preparation If you are a registered ultimate vendor, you must keep certain information pertaining to the sale of the fuel. Free online tax preparation   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. Free online tax preparation You are required to have a valid certificate or waiver in your possession in order to make the claim. Free online tax preparation   In addition, you must have a registration number that has not been revoked or suspended. Free online tax preparation See Form 637. Free online tax preparation State use. Free online tax preparation   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. Free online tax preparation 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. Free online tax preparation The name and taxpayer identification number of each person (government unit) that bought the fuel. Free online tax preparation The number of gallons sold to each person. Free online tax preparation An unexpired certificate from the buyer. Free online tax preparation See Model Certificate P in the Appendix. Free online tax preparation 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. Free online tax preparation Nonprofit educational organization and state use. Free online tax preparation   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. Free online tax preparation 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. Free online tax preparation The name and taxpayer identification number of each person (nonprofit educational organization or government unit) that bought the fuel. Free online tax preparation The number of gallons sold to each person. Free online tax preparation An unexpired certificate from the buyer. Free online tax preparation See Model Certificate M in the Appendix. Free online tax preparation  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. Free online tax preparation Blocked pump. Free online tax preparation   To make a claim as an ultimate vendor (blocked pump), you must have a UP registration number. Free online tax preparation 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. Free online tax preparation The date of each sale. Free online tax preparation The name and address of the buyer. Free online tax preparation The number of gallons sold to that buyer. Free online tax preparation Certain intercity and local bus use. Free online tax preparation   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. Free online tax preparation You must keep the following information. Free online tax preparation The date of each sale. Free online tax preparation The name and address of the buyer. Free online tax preparation The number of gallons sold to the buyer. Free online tax preparation A copy of the waiver signed by the buyer at the time the credit or payment is claimed. Free online tax preparation See Model Waiver N in the Appendix. Free online tax preparation Kerosene for use in commercial aviation or noncommercial aviation. Free online tax preparation   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. Free online tax preparation See Kerosene for use in aviation, earlier, for a list of nontaxable uses. Free online tax preparation You must keep the following information. Free online tax preparation The date of each sale. Free online tax preparation The name and address of the buyer. Free online tax preparation The number of gallons sold to the buyer. Free online tax preparation A copy of the waiver signed by the buyer at the time the credit or payment is claimed. Free online tax preparation See Model Waiver L in the Appendix. Free online tax preparation Kerosene for use in nonexempt, noncommercial aviation. Free online tax preparation   To make a claim as an ultimate vendor of kerosene for use in nonexempt, noncommercial aviation, you must have a UA registration number. Free online tax preparation You must keep the following information. Free online tax preparation The date of each sale. Free online tax preparation The name and address of the buyer. Free online tax preparation The number of gallons sold to the buyer. Free online tax preparation A copy of the certificate signed by the buyer at the time the credit or payment is claimed. Free online tax preparation See Model Certificate Q in the Appendix. Free online tax preparation Claims by credit card issuers. Free online tax preparation   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. Free online tax preparation 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). Free online tax preparation   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. Free online tax preparation 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. Free online tax preparation   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. Free online tax preparation A state is not allowed to make a claim for these fuels. Free online tax preparation 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. Free online tax preparation   The claim from the credit card issuer must contain the following information as it applies to the fuel covered in the claim. Free online tax preparation The total number of gallons. Free online tax preparation Its registration number. Free online tax preparation 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. Free online tax preparation 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. Free online tax preparation 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. Free online tax preparation Taxpayer identification number. Free online tax preparation   To file a claim, you must have a taxpayer identification number. Free online tax preparation 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. Free online tax preparation   If you normally file only a U. Free online tax preparation S. Free online tax preparation individual income tax return (such as Form 1040 or 1040NR), use your SSN or ITIN. Free online tax preparation You get an SSN by filing Form SS-5, Application for a Social Security Card, with the Social Security Administration. Free online tax preparation To get an ITIN, file Form W-7, Application for IRS Individual Taxpayer Identification Number, with the IRS. Free online tax preparation   If you operate a business, use your EIN. Free online tax preparation If you do not have an EIN, you may apply for one online. Free online tax preparation Go to the IRS website at irs. Free online tax preparation gov/businesses/small and click on the “Employer ID Numbers (EINs)” link. Free online tax preparation 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. Free online tax preparation Claiming A Refund Generally, you may claim a refund of excise taxes on Form 8849. Free online tax preparation Complete and attach to Form 8849 the appropriate Form 8849 schedules. Free online tax preparation The instructions for Form 8849 and the separate instructions for each schedule explain the requirements for making a claim for refund. Free online tax preparation If you file Form 720, you can use the Schedule C (Form 720) for your refund claims for the quarter. Free online tax preparation See the Instructions for Form 720. Free online tax preparation 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. Free online tax preparation 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. Free online tax preparation 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. Free online tax preparation 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. Free online tax preparation Only one claim may be made for any particular amount of alternative fuel. Free online tax preparation 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. Free online tax preparation See Biodiesel or Renewable Diesel Mixture Credit, Alternative Fuel Credit and Alternative Fuel Mixture Credit in chapter 2, earlier. Free online tax preparation 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. Free online tax preparation If you meet certain requirements (discussed earlier), you may be able to make a claim during the year. Free online tax preparation Credit only. Free online tax preparation   You can claim the following taxes only as a credit on Form 4136. Free online tax preparation Tax on fuels used for nontaxable uses if the total for your tax year is less than $750. Free online tax preparation Tax on fuel you did not include in any claim for refund previously filed for any quarter of your tax year. Free online tax preparation Tax on fuel you used in mobile machinery (off-highway business use) that traveled less than 7,500 miles on public highways. Free online tax preparation 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). Free online tax preparation When to file. Free online tax preparation   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). Free online tax preparation You may be able to make a fuel tax claim on an amended income tax return for the year you used the fuel. Free online tax preparation 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. Free online tax preparation How to claim a credit. Free online tax preparation   How you claim a credit depends on whether you are an individual, partnership, corporation, S corporation, or farmers' cooperative association. Free online tax preparation Individuals. Free online tax preparation   You claim the credit on the “Credits from” line of Form 1040. Free online tax preparation Also check box b on that line. Free online tax preparation If you would not otherwise have to file an income tax return, you must do so to get a fuel tax credit. Free online tax preparation Partnerships. Free online tax preparation   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. Free online tax preparation , showing each partner's share of the number of gallons of each fuel sold or used for a non