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Free tax services 1. Free tax services   Canceled Debts Table of Contents General RulesForm 1099-C Discounts and loan modifications Sales or other dispositions (such as foreclosures and repossessions) Abandonments Stockholder debt This chapter discusses the tax treatment of canceled debts. Free tax services General Rules Generally, if a debt for which you are personally liable is forgiven or discharged for less than the full amount owed, the debt is considered canceled in whatever amount it remained unpaid. Free tax services There are exceptions to this rule, discussed under Exceptions , later. Free tax services Generally, you must include the canceled debt in your income. Free tax services However, you may be able to exclude the canceled debt. Free tax services See Exclusions , later. Free tax services Example. Free tax services John owed $1,000 to Mary. Free tax services Mary agreed to accept and John paid $400 in satisfaction of the entire debt. Free tax services John has canceled debt of $600. Free tax services Example. Free tax services Margaret owed $1,000 to Henry. Free tax services Henry and Margaret agreed that Margaret would provide Henry with services (instead of money) in full satisfaction of the debt. Free tax services Margaret does not have canceled debt. Free tax services Instead, she has income from services. Free tax services A debt includes any indebtedness: For which you are liable, or Subject to which you hold property. Free tax services Debt for which you are personally liable is recourse debt. Free tax services All other debt is nonrecourse debt. Free tax services If you are not personally liable for the debt, you do not have ordinary income from the cancellation of debt unless you retain the collateral and either: The lender offers a discount for the early payment of the debt, or The lender agrees to a loan modification that results in the reduction of the principal balance of the debt. Free tax services See Discounts and loan modifications , later. Free tax services However, upon the disposition of the property securing a nonrecourse debt, the amount realized includes the entire unpaid amount of the debt, not just the FMV of the property. Free tax services As a result, you may realize a gain or loss if the outstanding debt immediately before the disposition is more or less than your adjusted basis in the property. Free tax services For more details on figuring your gain or loss, see chapter 2 of this publication or see Publication 544. Free tax services There are several exceptions and exclusions that may result in part or all of a canceled debt being nontaxable. Free tax services See Exceptions and Exclusions, later. Free tax services You must report any taxable canceled debt as ordinary income on: Form 1040 or Form 1040NR, line 21, if the debt is a nonbusiness debt; Schedule C (Form 1040), line 6 (or Schedule C-EZ (Form 1040), line 1), if the debt is related to a nonfarm sole proprietorship; Schedule E (Form 1040), line 3, if the debt is related to nonfarm rental of real property; Form 4835, line 6, if the debt is related to a farm rental activity for which you use Form 4835 to report farm rental income based on crops or livestock produced by a tenant; or Schedule F (Form 1040), line 8, if the debt is farm debt and you are a farmer. Free tax services Form 1099-C If you receive a Form 1099-C, that means an applicable entity has reported an identifiable event to the IRS regarding a debt you owe. Free tax services The identifiable event may be an actual cancellation of the debt or it may be an event the applicable entity is required, solely for purposes of reporting to the IRS, to treat as a cancellation of debt. Free tax services For information on the reasons an applicable entity files Form 1099-C, see Identifiable event codes, later. Free tax services Unless you meet one of the exceptions or exclusions discussed later, this canceled debt is ordinary income and must be reported on the appropriate form discussed above. Free tax services An applicable entity includes: A federal government agency, A financial institution, A credit union, and Any organization a significant trade or business of which is lending money. Free tax services Identifiable event codes. Free tax services    Box 6 of Form 1099-C should indicate the reason the creditor filed this form. Free tax services The codes shown in box 6 are explained below. Free tax services Also see the chart after the explanation for a quick reference guide for the codes used in Box 6. Free tax services Note. Free tax services Codes A through G and I identify specific occurrences resulting from an actual discharge of indebtedness. Free tax services However, Code H, Expiration of nonpayment testing period, does not necessarily identify an actual discharge of indebtedness. Free tax services Code A — Bankruptcy. Free tax services Code A is used to identify cancellation of debt as a result of a title 11 bankruptcy case. Free tax services See Bankruptcy , later. Free tax services Code B — Other judicial debt relief. Free tax services Code B is used to identify cancellation of debt as a result of a receivership, foreclosure, or similar federal or state court proceeding other than bankruptcy. Free tax services Code C — Statute of limitations or expiration of deficiency period. Free tax services Code C is used to identify cancellation of debt either when the statute of limitations for collecting the debt expires or when the statutory period for filing a claim or beginning a deficiency judgment proceeding expires. Free tax services In the case of the expiration of a statute of limitations, an identifiable event occurs only if and when your affirmative defense of the statute of limitations is upheld in a final judgment or decision in a judicial proceeding, and the period for appealing the judgment or decision has expired. Free tax services Code D — Foreclosure election. Free tax services Code D is used to identify cancellation of debt when the creditor elects foreclosure remedies that statutorily end or bar the creditor's right to pursue collection of the debt. Free tax services This event applies to a mortgage lender or holder who is barred from pursuing debt collection after a power of sale in the mortgage or deed of trust is exercised. Free tax services Code E — Debt relief from probate or similar proceeding. Free tax services Code E is used to identify cancellation of debt as a result of a probate court or similar legal proceeding. Free tax services Code F — By agreement. Free tax services Code F is used to identify cancellation of debt as a result of an agreement between the creditor and the debtor to cancel the debt at less than full consideration. Free tax services Code G — Decision or policy to discontinue collection. Free tax services Code G is used to identify cancellation of debt as a result of a decision or a defined policy of the creditor to discontinue collection activity and cancel the debt. Free tax services For purposes of this identifiable event, a defined policy includes both a written policy and the creditor's established business practice. Free tax services Code H — Expiration of nonpayment testing period. Free tax services Code H is used to indicate that the creditor has not received a payment on the debt during a testing period ending on December 31, 2013. Free tax services The testing period is a 36-month period increased by the number of months the creditor was prevented from engaging in collection activity by a stay in bankruptcy or similar bar under state or local law. Free tax services This identifiable event applies only for a creditor that is a financial institution or credit union (and certain of their subsidiaries), the Federal Deposit Insurance Corporation (FDIC), Resolution Trust Corporation (RTC), National Credit Union Administration (NCUA), and other Federal executive agencies. Free tax services Expiration of the nonpayment testing period does not necessarily result from an actual discharge of indebtedness. Free tax services Code I — Other actual discharge before identifiable event. Free tax services Code I is used to identify an actual cancellation of debt that occurs before any of the identifiable events described in codes A through H. Free tax services Form 1099-C Reference Guide for Box 6 Identifiable Event Codes A Bankruptcy B Other judicial debt relief C Statute of limitations or expiration of deficiency period D Foreclosure election E Debt relief from probate or similar proceeding F By agreement G Decision or policy to discontinue collection H Expiration of nonpayment testing period I Other actual discharge before identifiable event Even if you did not receive a Form 1099-C, you must report canceled debt as gross income on your tax return unless one of the exceptions or exclusions described later applies. Free tax services Amount of canceled debt. Free tax services    The amount in box 2 of Form 1099-C may represent some or all of the debt that has been canceled or treated as canceled. Free tax services The amount in box 2 will include principal and may include interest and other nonprincipal amounts (such as fees or penalties). Free tax services Unless you meet one of the exceptions or exclusions discussed later, the amount of the debt that has been canceled is ordinary income and must be reported on the appropriate form as discussed earlier. Free tax services Interest included in canceled debt. Free tax services    If any interest is included in the amount of canceled debt in box 2, it will be shown in box 3. Free tax services Whether the interest portion of the canceled debt must be included in your income depends on whether the interest would be deductible if you paid it. Free tax services See Deductible Debt under Exceptions, later. Free tax services Persons who each receive a Form 1099-C showing the full amount of debt. Free tax services    If you and another person were jointly and severally liable for a canceled debt, each of you may get a Form 1099-C showing the entire amount of the canceled debt. Free tax services However, you may not have to report that entire amount as income. Free tax services The amount, if any, you must report depends on all the facts and circumstances, including: State law, The amount of debt proceeds each person received, How much of any interest deduction from the debt was claimed by each person, How much of the basis of any co-owned property bought with the debt proceeds was allocated to each co-owner, and Whether the canceled debt qualifies for any of the exceptions or exclusions described in this publication. Free tax services See Example 3 under Insolvency, later. Free tax services Discounts and loan modifications If a lender discounts (reduces) the principal balance of a loan because you pay it off early, or agrees to a loan modification (a “workout”) that includes a reduction in the principal balance of a loan, the amount of the discount or the amount of principal reduction is canceled debt. Free tax services However, if the debt is nonrecourse and you did not retain the collateral, you do not have cancellation of the debt income. Free tax services The amount of the canceled debt must be included in income unless one of the exceptions or exclusions described later applies. Free tax services For more details, see Exceptions and Exclusions, later. Free tax services Sales or other dispositions (such as foreclosures and repossessions) Recourse debt. Free tax services   If you owned property that was subject to a recourse debt in excess of the FMV of the property, the lender's foreclosure or repossession of the property is treated as a sale or disposition of the property by you and may result in your realization of gain or loss. Free tax services The gain or loss on the disposition of the property is measured by the difference between the FMV of the property at the time of the disposition and your adjusted basis (usually your cost) in the property. Free tax services The character of the gain or loss (such as ordinary or capital) is determined by the character of the property. Free tax services If the lender forgives all or part of the amount of the debt in excess of the FMV of the property, the cancellation of the excess debt may result in ordinary income. Free tax services The ordinary income from the cancellation of debt (the excess of the canceled debt over the FMV of the property) must be included in your gross income reported on your tax return unless one of the exceptions or exclusions described later applies. Free tax services For more details, see Exceptions and Exclusions, later. Free tax services Nonrecourse debt. Free tax services   If you owned property that was subject to a nonrecourse debt in excess of the FMV of the property, the lender's foreclosure on the property does not result in ordinary income from the cancellation of debt. Free tax services The entire amount of the nonrecourse debt is treated as an amount realized on the disposition of the property. Free tax services The gain or loss on the disposition of the property is measured by the difference between the total amount realized (the entire amount of the nonrecourse debt plus the amount of cash and the FMV of any property received) and your adjusted basis in the property. Free tax services The character of the gain or loss is determined by the character of the property. Free tax services More information. Free tax services    See Publications 523, 544, and 551, and chapter 2 of this publication for more details. Free tax services Abandonments Recourse debt. Free tax services   If you abandon property that secures a debt for which you are personally liable (recourse debt) and the debt is canceled, you will realize ordinary income equal to the canceled debt. Free tax services You must report this income on your tax return unless one of the exceptions or exclusions described later applies. Free tax services For more details, see Exceptions and Exclusions, later. Free tax services This income is separate from any amount realized from the abandonment of the property. Free tax services For more details, see chapter 3. Free tax services Nonrecourse debt. Free tax services   If you abandon property that secures a debt for which you are not personally liable (nonrecourse debt), you may realize gain or loss but will not have cancellation of indebtedness income. Free tax services Stockholder debt If you are a stockholder in a corporation and the corporation cancels or forgives your debt to it, the canceled debt is a constructive distribution. Free tax services For more information, see Publication 542, Corporations. Free tax services Prev  Up  Next   Home   More Online Publications
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IRS Taxpayer Assistance Centers (TACs) are your source for personal tax help when you believe your tax issue can only be handled face-to-face. No appointment is necessary.

Keep in mind, many questions can be resolved online without waiting in line. Through IRS.gov you can:
• Set up a payment plan.
• Get a transcript of your tax return.
• Make a payment.
• Check on your refund.
• Find answers to many of your tax questions.

We are now referring all requests for tax return preparation services to other available resources. You can take advantage of free tax preparation through Free File, Free File Fillable Forms or through a volunteer site in your community. To find the nearest volunteer site location or to get more information about Free File, go to the top of the page and enter “Free Tax Help” in the Search box.

If you have a tax account issues and feel that it requires talking with someone face-to-face, visit your local TAC.

Caution:  Many of our offices are located in Federal Office Buildings. These buildings may not allow visitors to bring in cell phones with camera capabilities.

Multilingual assistance is available in every office. Hours of operation are subject to change.

Before visiting your local office click on "Services Provided" in the chart below to see what services are available. Services are limited and not all services are available at every TAC office and may vary from site to site. You can get these services on a walk-in basis.

City  Street Address  Days/Hours of Service  Telephone* 
Bend 

250 NW Franklin Ave.
Bend, OR  97701

Monday-Friday 8:30 a.m.- 4:30 p.m.
(Closed for lunch 12:30 p.m. - 1:30 p.m.)

 

Services Provided

(541) 706-5732
Eugene 211 E 7th           
Eugene, OR 97401

Monday-Friday 8:30 a.m.- 4:30 p.m.

 

Services Provided

(541) 342-8766
Medford 960 Ellendale Dr.
Medford, OR 97504

Monday-Friday 8:30 a.m.- 4:30 p.m.
(Closed for lunch 12:00 noon - 1:30 p.m.)

 

Services Provided

(541) 282-1350
Portland 1220 SW Third Ave.
Portland, OR  97204
 

Monday-Friday 8:30 a.m.- 4:30 p.m.

 

Services Provided

(503) 265-3501
Salem

1660 Oak St. S.E.
Salem, OR  97301

Monday-Friday 8:30 a.m.- 4:30 p.m.

 

Services Provided

(503) 587-3101

* Note: The phone numbers in the chart above are not toll-free for all locations. When you call, you will reach a recorded business message with information about office hours, locations and services provided in that office. If face-to-face assistance is not a priority for you, you may also get help with IRS letters or resolve tax account issues by phone, toll free at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses). 

For information on where to file your tax return please see Where to File Addresses

The Taxpayer Advocate Service: Call (503) 265-3591 in the Portland area or 1-877-777-4778 elsewhere, or see  Publication 1546, The Taxpayer Advocate Service of the IRS. For further information, see  Tax Topic 104.

Partnerships

IRS and organizations all over the country are partnering to assist taxpayers. Through these partnerships, organizations are also achieving their own goals. These mutually beneficial partnerships are strengthening outreach efforts and bringing education and assistance to millions.

For more information about these programs for individuals and families, contact the Stakeholder Partnerships, Education and Communication Office at:

Internal Revenue Service
100 SW Main Street, MS 0180
Portland, OR 97204

For more information about these programs for businesses, your local Stakeholder Liaison office establishes relationships with organizations representing small business and self-employed taxpayers. They provide information about the policies, practices and procedures the IRS uses to ensure compliance with the tax laws. To establish a relationship with us, use this list to find a contact in your state:

Stakeholder Liaison (SL) Phone Numbers for Organizations Representing Small Businesses and Self-employed Taxpayers.

Page Last Reviewed or Updated: 28-Mar-2014

The Free Tax Services

Free tax services 14. Free tax services   Excise Taxes Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Fuels Used in FarmingBuyer of fuel, including undyed diesel fuel or undyed kerosene. Free tax services Undyed diesel fuel, undyed kerosene, and Other Fuels (including alternative fuel). Free tax services Custom application of fertilizer and pesticide. Free tax services Fuel not used for farming. Free tax services Dyed Diesel Fuel and Dyed Kerosene Fuels Used in Off-Highway Business Use Fuels Used for Household Purposes or Other Than as a Fuel for Propulsion Engines How To Claim a Credit or RefundCredit only. Free tax services Claiming a Credit Claiming a Refund Including the Credit or Refund in Income Introduction You may be eligible to claim a credit on your income tax return for the federal excise tax on certain fuels. Free tax services You may also be eligible to claim a quarterly refund of the fuel taxes during the year, instead of waiting to claim a credit on your income tax return. Free tax services Whether you can claim a credit or refund depends on whether the fuel was taxed and the purpose (nontaxable use) for which you used the fuel. Free tax services The nontaxable uses of fuel for which a farmer may claim a credit or refund are generally the following. Free tax services Use on a farm for farming purposes. Free tax services Off-highway business use. Free tax services Uses other than as a fuel in a propulsion engine, such as home use. Free tax services Table 14-1 presents an overview of credits and refunds that may be claimed for fuels used for the nontaxable uses listed above. Free tax services See Publication 510, Excise Taxes, for more information. Free tax services Topics - This chapter discusses: Fuels used in farming Dyed diesel fuel and dyed kerosene Fuels used in off-highway business use Fuels used for household purposes How to claim a credit or refund Including the credit or refund in income Useful Items - You may want to see: Publication 510 Excise Taxes Form (and Instructions) 720 Quarterly Federal Excise Tax Return 4136 Credit for Federal Tax Paid on Fuels 8849 Claim for Refund of Excise Taxes See chapter 16 for information about getting publications and forms. Free tax services Fuels Used in Farming Owners, operators, and tenants of farms and certain other persons may be eligible to claim a credit or refund of excise taxes on fuel used in the trade or business of farming, when used on a farm in the United States for farming purposes. Free tax services See Table 14-1 for a list of available fuel tax credits and refunds. Free tax services Fuel is used on a farm for farming purposes only if used in carrying on a trade or business of farming, on a farm in the United States, and for farming purposes. Free tax services Farm. Free tax services   A farm includes livestock, dairy, fish, poultry, fruit, fur-bearing animals, and truck farms, orchards, plantations, ranches, nurseries, ranges, and feed yards for finishing cattle. Free tax services It also includes structures such as greenhouses used primarily for raising agricultural or horticultural commodities. Free tax services A fish farm is an area where fish are grown or raised and not merely caught or harvested. Free tax services Table 14-1. Free tax services Fuel Tax Credits and Refunds at a Glance Use this table to see if you can take a credit or refund for a nontaxable use of the fuel listed. Free tax services Fuel Used On a Farm for Farming Purposes Off-Highway Business Use Household Use or Use Other Than as a Fuel1 Gasoline Credit only Credit or refund None Aviation gasoline Credit only None None Undyed diesel fuel and undyed kerosene Credit or refund Credit or refund2 Credit or refund2 Kerosene for use in aviation Credit or refund None None Dyed diesel fuel and dyed kerosene None None None Other Fuels (including alternative fuels)3 Credit or refund Credit or refund None 1For a use other than as fuel in a propulsion engine. Free tax services 2Applies to undyed kerosene not sold from a blocked pump or, under certain circumstances, for blending with undyed diesel fuel to be used for heating purposes. Free tax services See Reg. Free tax services 48. Free tax services 6427-10 (b)(1) for the definition of a blocked pump. Free tax services 3Other Fuels means any liquid except gas oil, fuel oil, or any product taxable under Internal Revenue Code section 4081. Free tax services It includes the alternative fuels: liquefied petroleum gas (LPG),“P” Series fuels, compressed natural gas (CNG), liquefied hydrogen, any liquid fuel derived from coal (including peat) through the Fischer-Tropsch process, liquid fuel derived from biomass, liquid natural gas (LNG), liquefied gas derived from biomass, and compressed gas derived from biomass. Free tax services Farming purposes. Free tax services   As the owner, tenant, or operator and the ultimate purchaser of fuel that you purchased, you use the fuel on a farm for farming purposes if you use it in any of the following ways. Free tax services To cultivate the soil or to raise or harvest any agricultural or horticultural commodity. Free tax services To raise, shear, feed, care for, train, or manage livestock, bees, poultry, fur-bearing animals, or wildlife. Free tax services To operate, manage, conserve, improve, or maintain your farm and its tools and equipment. Free tax services To handle, dry, pack, grade, or store any raw agricultural or horticultural commodity. Free tax services For this use to qualify, you must have produced more than half the commodity so treated during the tax year. Free tax services The more-than-one-half test applies separately to each commodity. Free tax services Commodity means a single raw product. Free tax services For example, apples and peaches are two separate commodities. Free tax services 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 these activities are incidental to your farming operations. Free tax services Your tree operations are incidental only if they are minor in nature when compared to the total farming operations. Free tax services   If any other person, such as a neighbor or custom operator (independent contractor), performs a service for you on your farm for any of the purposes included in list items (1) or (2), above, you are considered to be the ultimate purchaser who used the fuel on a farm for farming purposes. Free tax services Therefore, you can still claim the credit or refund for the fuel so used. Free tax services However, see Custom application of fertilizer and pesticide, later. Free tax services If the other person performs any other services for you on your farm for purposes not included in list items (1) or (2) above, no one can claim the credit or refund for fuel used on your farm for those other services. Free tax services Buyer of fuel, including undyed diesel fuel or undyed kerosene. Free tax services   If doubt exists whether the owner, tenant, or operator of the farm bought the fuel, determine who actually bore the cost of the fuel. Free tax services For example, if the owner of a farm and his or her tenant equally share the cost of gasoline used on the farm, each can claim a credit for the tax on half the fuel used. Free tax services Undyed diesel fuel, undyed kerosene, and Other Fuels (including alternative fuel). Free tax services   Usually, the farmer is the only person who can make a claim for credit or refund for the tax on undyed diesel fuel, undyed kerosene, or other fuels (including alternative fuel) used for farming purposes. Free tax services However, see Custom application of fertilizer and pesticide, next. Free tax services Also see Dyed Diesel Fuel and Dyed Kerosene, later. Free tax services Example. Free tax services Farm owner Haleigh Blue hired custom operator Tyler Steele to cultivate the soil on her farm. Free tax services Tyler used 200 gallons of undyed diesel fuel that he purchased to perform the work on Haleigh's farm. Free tax services In addition, Haleigh hired contractor Lee Brown to pack and store her apple crop. Free tax services Lee bought 25 gallons of undyed diesel fuel to use in packing the apples. Free tax services Haleigh can claim the credit for the 200 gallons of undyed diesel fuel used by Tyler on her farm because it qualifies as fuel used on the farm for farming purposes. Free tax services No one can claim a credit for the 25 gallons used by Lee because that fuel was not used for a farming purpose included in list items (1) or (2), above. Free tax services In the above example, both Tyler Steele and Lee Brown could have purchased dyed (untaxed) diesel fuel for their tasks. Free tax services Custom application of fertilizer and pesticide. Free tax services   Fuel used on a farm for farming purposes includes fuel used in the application (including aerial application) of fertilizer, pesticides, or other substances. Free tax services Generally, the applicator is treated as having used the fuel on a farm for farming purposes. Free tax services For applicators using highway vehicles, only the fuel used on the farm is exempt. Free tax services Fuel used traveling on the highway to and from the farm is taxable. Free tax services Fuel used by an aerial applicator for the direct flight between the airfield and one or more farms is treated as used for a farming purpose. Free tax services For aviation gasoline, the aerial applicator makes the claim as the ultimate purchaser. Free tax services For kerosene used in aviation, the ultimate purchaser may make the claim or waive the right to make the claim to the registered ultimate vendor. Free tax services A sample waiver is included as Model Waiver L in the appendix of Publication 510. Free tax services A registered ultimate vendor is the person who sells undyed diesel fuel, undyed kerosene, or kerosene for use in aviation to the user (ultimate purchaser) of the fuel for use on a farm for farming purposes. Free tax services To claim a credit or refund of tax, the ultimate vendor must be registered with the Internal Revenue Service at the time the claim is made. Free tax services However, registered ultimate vendors cannot make claims for undyed diesel fuel and undyed kerosene sold for use on a farm for farming purposes. Free tax services Fuel not used for farming. Free tax services   You do not use fuel on a farm for farming purposes when you use it in any of the following ways. Free tax services Off the farm, such as on the highway or in noncommercial aviation, even if the fuel is used in transporting livestock, feed, crops, or equipment. Free tax services For personal use, such as lawn mowing. Free tax services In processing, packaging, freezing, or canning operations. Free tax services In processing crude gum into gum spirits of turpentine or gum resin or in processing maple sap into maple syrup or maple sugar. Free tax services All-terrain vehicles (ATVs). Free tax services   Fuel used in ATVs on a farm for farming purposes, discussed earlier, is eligible for a credit or refund of excise taxes on the fuel. Free tax services Fuel used in ATVs for nonfarming purposes is not eligible for a credit or refund of the taxes. Free tax services If ATVs are used both for farming and nonfarming purposes, only that portion of the fuel used for farming purposes is eligible for the credit or refund. Free tax services Dyed Diesel Fuel and Dyed Kerosene If you purchase dyed diesel fuel or dyed kerosene for a nontaxable use, you must use it only on a farm for farming purposes or for other nontaxable purposes. Free tax services For example, you should not use dyed diesel fuel in a truck that is used both on the farm for farming purposes and on the highway, even though the highway use is in connection with farm business. Free tax services Excise tax applies to the fuel used by the truck on the highways. Free tax services In this situation, undyed (taxed) fuel should be purchased for the truck. Free tax services You should keep fuel records of the use of the truck on the farm for farming purposes, and for other uses. Free tax services You may be eligible for a credit or refund for the excise tax on fuel used on the farm for farming purposes. Free tax services Penalty. Free tax services   A penalty is imposed on any person who knowingly uses, sells, or alters dyed diesel fuel or dyed kerosene for any purpose other than a nontaxable use. Free tax services The penalty is the greater of $1,000 or $10 per gallon of the dyed diesel fuel or dyed kerosene involved. Free tax services After the first violation, the $1,000 portion of the penalty increases depending on the number of violations. Free tax services For more information on this penalty, see Publication 510. Free tax services Fuels Used in Off-Highway Business Use You may be eligible to claim a credit or refund for the excise tax on fuel used in an off-highway business use. Free tax services Off-highway business use. Free tax services   This is any use of fuel in a trade or business or in an income-producing activity. Free tax services The use must not be in a highway vehicle registered or required to be registered for use on public highways. Free tax services Off-highway business use generally does not include any use in a recreational motorboat. Free tax services Examples. Free tax services   Off-highway business use includes the use of fuels in a trade or business in any of the following ways. Free tax services In stationary machines such as generators, compressors, power saws, and similar equipment; For cleaning ; and In forklift trucks, bulldozers, and earthmovers. Free tax services   Off-highway nonbusiness (taxable) use of fuel includes: use in minibikes, snowmobiles, power lawn mowers, chain saws, and other yard equipment. Free tax services For more information, see Publication 510. Free tax services Fuels Used for Household Purposes or Other Than as a Fuel for Propulsion Engines You may be eligible to claim a credit or refund for the excise tax on undyed diesel fuel or kerosene used for home heating, lighting, and cooking. Free tax services This also applies to diesel fuel and kerosene used in a home generator to produce electricity for home use. Free tax services Home use of a fuel does not include use in a propulsion engine and it is not considered an off-highway business use. Free tax services How To Claim a Credit or Refund You may be able to claim a credit or refund of the excise tax on fuels you use for nontaxable uses. Free tax services The basic rules for claiming credits and refunds are listed in Table 14-2 . Free tax services Table 14-2. Free tax services Claiming a Credit or Refund of Excise Taxes This table gives the basic rules for claiming a credit or refund of excise taxes on fuels used for a nontaxable use. Free tax services   Credit Refund Which form to use Form 4136, Credit for Federal Tax Paid on Fuels Form 8849, Claim for Refund of Excise Taxes, and Schedule 1 (Form 8849), Nontaxable Use of Fuels Type of form Annual Quarterly When to file With your income tax return By the last day of the quarter following the last quarter included in the claim Amount of tax Any amount $750 or more1 1You may carry over an amount less than $750 to the next quarter. Free tax services 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 tax services You do not have to use any special form, but the records should establish the following information. Free tax services The total number of gallons bought and used during the period covered by your claim. Free tax services The dates of the purchases. Free tax services The names and addresses of suppliers and amounts bought from each during the period covered by your claim. Free tax services The nontaxable use for which you used the fuel. Free tax services The number of gallons used for each nontaxable use. Free tax services It is important that your records separately show the number of gallons used for each nontaxable use that qualifies as a claim. Free tax services For more information about recordkeeping, see Publication 583, Starting a Business and Keeping Records. Free tax services Credit or refund. Free tax services   A credit is an amount that reduces the tax on your income tax return when you file it at the end of the year. Free tax services If you meet certain requirements, you may claim a refund during the year instead of waiting until you file your income tax return. Free tax services Credit only. Free tax services   You can claim the following taxes only as a credit on your income tax return. Free tax services Tax on gasoline and aviation gasoline you used on a farm for farming purposes. Free tax services Tax on fuels (including undyed diesel fuel or undyed kerosene) you used for nontaxable uses if the total for the tax year is less than $750. Free tax services Tax on fuel you did not include in any claim for refund previously filed for any quarter of the tax year. Free tax services Claiming a Credit You make a claim for a fuel tax credit on Form 4136 and attach it to your income tax return. Free tax services Do not claim a credit for any excise tax for which you have filed a refund claim. Free tax services How to claim a credit. Free tax services   How you claim a credit depends on whether you are an individual, partnership, corporation, S corporation, trust, or farmers' cooperative association. Free tax services Individuals. Free tax services   You claim the credit on the “Credit for federal tax on fuels” line of your Form 1040. Free tax services If you would not otherwise have to file an income tax return, you must do so to get a fuel tax credit. Free tax services Partnership. Free tax services   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 tax services , showing each partner's share of the number of gallons of each fuel sold or used for a nontaxable use, the type of use, and the applicable credit per gallon. Free tax services Each partner claims the credit on his or her income tax return for the partner's share of the fuel used by the partnership. Free tax services An electing large partnership can claim the credit on the “Other payments” line of Form 1065-B, U. Free tax services S. Free tax services Return of Income for Electing Large Partnerships. Free tax services Other entities. Free tax services   Corporations, S corporations, farmers' cooperative associations, and trusts make the claim on the appropriate line of their income tax return. Free tax services When to claim a credit. Free tax services   You can claim a fuel tax credit on your income tax return for the year you used the fuel. Free tax services You may be able to make a fuel tax claim on an amended income tax return for the year you used the fuel. Free tax services A claim for credit or refund of an overpayment must generally be filed within the later of: Three years from the date the original return was filed, or Two years from the date the tax was paid. Free tax services Claiming a Refund Generally, you may claim a refund of excise taxes on Form 8849. Free tax services Complete and attach to Form 8849 the appropriate Form 8849 schedule(s). Free tax services The instructions for Form 8849 and the separate instructions for each schedule explain the requirements for making a claim for refund. Free tax services If you file Form 720, you can use its Schedule C for your refund claims for the quarter. Free tax services See the Instructions for Form 720. Free tax services Do not claim a refund on Form 8849 for any amount for which you have filed or will file a claim on Form 720 or Form 4136. Free tax services You may file a claim for refund for any quarter of your tax year for which you can claim $750 or more. Free tax services This amount is the excise tax on all fuels used for a nontaxable use during that quarter or any prior quarter (for which no other claim has been filed) during the tax year. Free tax services If you cannot claim at least $750 at the end of a quarter, you carry the amount over to the next quarter of your tax year to determine if you can claim at least $750 for that quarter. Free tax services If you cannot claim at least $750 at the end of the fourth quarter of your tax year, you must claim a credit on your income tax return using Form 4136. Free tax services Only one claim can be filed for a quarter. Free tax services You cannot claim a refund for excise tax on gasoline and aviation gasoline used on a farm for farming purposes. Free tax services You must claim a credit on your income tax return for the tax. Free tax services How to file a quarterly claim. Free tax services   File the claim for refund by filling out Schedule 1 (Form 8849) and attaching it to Form 8849. Free tax services Send it to the address shown in the instructions. Free tax services If you file Form 720, you can use its Schedule C for your refund claims. Free tax services See the Instructions for Form 720. Free tax services When to file a quarterly claim. Free tax services   You must file a quarterly claim by the last day of the first quarter following the last quarter included in the claim. Free tax services If you do not file a timely refund claim for the fourth quarter of your tax year, you will have to claim a credit for that amount on your income tax return, as discussed earlier. Free tax services    In most situations, the amount claimed as a credit or refund will be less than the amount deducted as fuel tax expense because the Leaking Underground Storage Tank (LUST) tax of $0. Free tax services 001 per gallon is generally not subject to credit or refund. Free tax services Including the Credit or Refund in Income Include any credit or refund of excise taxes on fuels in your gross income if you claimed the total cost of the fuel (including the excise taxes) as an expense deduction that reduced your income tax liability. Free tax services Which year you include a credit or refund in gross income depends on whether you use the cash or an accrual method of accounting. Free tax services Cash method. Free tax services   If you use the cash method and file a claim for refund, include the refund amount in gross income for the tax year in which you receive the refund. Free tax services If you claim a credit on your income tax return, include the credit amount in gross income for the tax year in which you file Form 4136. Free tax services If you file an amended return and claim a credit, include the credit amount in gross income for the tax year in which you receive the credit. Free tax services Example. Free tax services Sharon Brown, a farmer who uses the cash method, filed her 2012 Form 1040 on March 3, 2013. Free tax services On her Schedule F, she deducted the total cost of gasoline (including $110 of excise taxes) used on the farm for farming purposes. Free tax services Then, on Form 4136, she claimed the $110 as a credit. Free tax services Sharon reports the $110 as other income on line 8b of her 2013 Schedule F. Free tax services Accrual method. Free tax services   If you use an accrual method, include the amount of credit or refund in gross income for the tax year in which you used the fuels. Free tax services It does not matter whether you filed for a quarterly refund or claimed the entire amount as a credit. Free tax services Example. Free tax services Patty Green, a farmer who uses the accrual method, files her 2012 Form 1040 on April 15, 2013. Free tax services On Schedule F, she deducts the total cost of gasoline (including $155 of excise taxes) she used on the farm for farming purposes during 2012. Free tax services On Form 4136, Patty claims the $155 as a credit. Free tax services She reports the $155 as other income on line 8b of her 2012 Schedule F. Free tax services Prev  Up  Next   Home   More Online Publications