A Guide to IFTA Requirements
Driving a truck is an invaluable career. As a professional motor carrier, your job is to ensure that essentials get to consumers across the country. In the past, this important task was complicated by fuel taxes and other bothersome issues.
However, in 1983, several states worked together to develop the International Fuel Tax Agreement, or IFTA, which was largely based on the International Registration Plan of 1973. More states quickly hopped aboard, and carriers were better able to run their businesses without having to worry about complicated fuel tax reporting and payments.
What is IFTA? IFTA filing allows licensed carriers to file a single quarterly fuel consumption tax return to their base jurisdiction. This eliminates the need for separate returns for each state visited. IFTA compliance ensures commercial carriers sustainability and longevity.
Now, any truck company or motor carrier who meets certain criteria must register their vehicle with IFTA and apply for an IFTA license. This guide will walk you through everything you need to know about IFTA requirements, benefits, and tax filing.
What Are IFTA Requirements?
Before we delve into some of the more detailed components, let’s discuss the basics of the International Fuel Tax Agreement. This agreement covers all of the states, except Alaska and Hawaii. It also includes ten Canadian provinces. Essentially, the purpose of IFTA is to simplify the fuel usage reporting for those who operate in multiple jurisdictions—in particular, truckers.
The requirements for those who must register with IFTA include:
- Operate a qualified motor vehicle – The first requirement is to operate a qualifying vehicle. Vehicles must have two axles and a registered gross vehicle weight of more than 26,000 pounds or have three axles. The vehicle must be used to transport passengers or goods. It’s important to note that recreational vehicles aren’t eligible, even if they meet the size requirements. To qualify as a recreational vehicle, the vehicle cannot be used in connection with any business endeavor.
- Register your vehicle – If you operate a qualified motor vehicle, you must then select your base state and register your qualified vehicle in that state. To complete this process, you’ll have to provide proof of residency in that state, such as a bank statement or a utility bill. An ID card or driver license is not an acceptable proof of residency. Then, your state will issue you a set of IFTA decals that you must display on your vehicle. If you have multiple vehicles, each will need its own IFTA license and IFTA decals.
- Keep accurate records – Keeping records requires a little extra work, but it’s a critical component of IFTA. You must keep accurate records of your mileage and fuel usage, and each vehicle’s records should be kept separately, as you’ll need to submit a report for every unit. Don’t forget to hang on to your receipts, as well, as you must include those with your report. If you’re wondering how to calculate miles for IFTA, there are a couple methods you can use.
- Report at the right time – Lastly, you must file your reports every quarter. The IFTA report should list total miles driven within member jurisdictions covered by IFTA and how many gallons of fuel you bought there. You’ll also need to include documentation for both your mileage and fuel purchases.
What Are the Quarterly Reporting Dates?
IFTA dictates that you must file quarterly reports and pay any taxes owed at that time. The quarterly dates are as follows:
- For fuel purchased between January 1st–March 31st, payments are due by April 15th
- For fuel purchased between April 1st–May 31st, payments are due by June 15th
- For fuel purchased between June 1st–August 31st, payments are due by September 15th
- For fuel purchased between September 1st–December 31st, payments are due by January 15th of the following year
What Happens if You Don’t Follow IFTA Requirements?
IFTA is meant to make your life easier and ensure that all truckers who use the highways in the United States and Canada are contributing tax payments to maintain the roads. Since 1996, IFTA registration has been required in all U.S. states except for Alaska and Hawaii.
Failure to comply can come with some pretty harsh repercussions. For instance:
- Missing a due date will result in a late fee.
- Further failure to file can lead to a suspended license.
- If your license is suspended, you won’t be allowed to drive until your license is reinstated and payments are made.
- The IRS may immediately demand payment on taxes owed.
Therefore, to keep your license in good standing and to avoid getting into trouble with the IRS, you must follow IFTA requirements.
How Do You Follow IFTA Reporting Requirements as an Owner-Operator?
Owner-operators own their own trucking company and vehicle or vehicles. This ultimately makes them the person responsible for collecting and submitting all of the required documentation for quarterly taxes.
The key then to avoiding problems with the IRS as an owner-operator is to ensure that all of your drivers provide you with this necessary documentation so that you meet all of the IFTA reporting requirements.
As an owner-operator, you need to include the following tax information in your quarterly reports:
- Self-employment taxes – First, you must plan to pay self-employment taxes. When you work for a company, the amount you pay for Medicare and Social Security tax is deducted from your check. As a self-employed individual, you must pay this tax amount directly to the IRS. Plan for approximately 15.3% of your total quarterly earnings.
- Income taxes – Next, you have to pay your income taxes. These are calculated by the tax bracket your earnings (after deductions) place you in. You’ll use IRS Form 1040 to file.
- Documentation of expenses – To minimize the amount of quarterly tax you owe, you (and your drivers) must keep records of all of your eligible expenses, including fuel costs. This should come in the form of clear receipts that state what was purchased and the amount spent on each purchase. Without receipts, you aren’t eligible for deductions.
- Information for deductions – The IRS allows for many deductions for owner-operators, provided you have the required documentation. Invest in good record-keeping software or an administrative professional who can help you keep tabs on everything you may need to claim a deduction. Keeping accurate records is also critical if you’re audited by the IRS.
- Per diem amounts – Lastly, part of a trucker’s job is to travel. So, a portion of the money you or your drivers spend when away from your home base is deductible. To claim these deductions, you must file a Schedule C form that tracks any nights spent away from home, along with meals, lodging, and other costs.
In the past, it was much tougher to keep tabs on all of this information. Luckily, technological advances now make it much simpler to record and file all of the necessary documents you need to save money on your taxes.
Next, let’s look at some potential deductions specific to owner-operators.
Can You Write Off IFTA Expenses?
If you’re an owner-operator, then you may be able to write off some of the fuel and mileage taxes that you have to pay under IFTA.
Some other expenses you might be able to deduct as an owner-operator include:
- Parking fees
- Maintenance costs
- Registration and licensing fees
- Truck cleaning
- Travel costs
You should keep detailed records of all expenses you incur for your business as many might be tax-deductible. This can lead to big savings for you at the end of the year.
Are Gasoline Expenses Tax Deductible?
Yes, since the fuel taxes you pay are considered a part of the cost of fuel, gasoline taxes are deductible if you’re an owner-operator. However, you must keep detailed receipts of your fuel purchases and submit them when you file your taxes.
Can Owner-Operators Write Off Truck Payments?
If you’re leasing a truck, you can write off the entirety of your monthly payment. If you purchase a truck, you can also write off the monthly payment. However, the truck will depreciate over time, limiting the amount you’re able to write off.
What Are the Benefits of IFTA?
Now that we’ve discussed IFTA requirements, let’s discuss IFTA benefits. There are many benefits of IFTA for fleets, including:
- Single license and decal set – IFTA makes keeping track of your trucks much easier. Each vehicle receives a single license and decal set. These connect that vehicle to its own account, which makes it easier for you to keep track of the required filling information for that specific vehicle.
- One quarterly tax report – IFTA also makes it possible for you to file a single quarterly tax report, regardless of the number of jurisdictions your vehicle visited during that period.
- Savings – Nesting your records and tax reports into a single account saves you both time and money. You don’t have to create separate reports for each state your vehicles crossed or purchased fuel in, so record-keeping becomes much easier to manage. This results in fewer mistakes, fines, and losses of income.
In short, IFTA was created to simplify the tax reporting process for those who drive into multiple jurisdictions every quarter. If you have any questions, your best answer would be directly from your state’s Motor Carrier Services.
Keep Tabs on Your Company’s Fuel Costs with AtoB
As a business owner, you already have a lot on your plate, so anything you can do to streamline your operations is a must. IFTA was created to make fuel tax reporting easier and more efficient for carriers.
However, sometimes it can be tricky to keep track of and manage receipts for all of your fuel purchases.
This is where AtoB can help. At AtoB, we offer zero-fee fuel cards that make tracking and managing your fuel purchases easier than ever before. We even make it possible to send all of your transactions directly to your Quickbooks account. Plus, the AtoB fuel card is accepted everywhere, creating convenience for both you and your drivers.
Check out our site today to learn more.
eTruck. The History of IFTA. https://www.etrucks.com/the-history-of-ifta
Wisconsin.gov. International Fuel Tax Agreement (IFTA). https://wisconsindot.gov/Pages/dmv/com-drv-vehs/mtr-car-trkr/ifta.aspx
Pennsylvania DOT. The Benefits for Carriers Under IFTA. https://revenue-pa.custhelp.com/app/answers/detail/a_id/140/~/the-benefits-for-carriers-under-ifta-%28international-fuel-tax-agreement%29
IRS.gov. Self-Employed Individuals Tax Center. https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center
Intuit Turbo Tax. What You Need to Know About Truck Driver Tax Deductions. https://turbotax.intuit.com/tax-tips/self-employment-taxes/what-you-need-to-know-about-truck-driver-tax-deductions/L68YC61fS
IRS.gov. When to Pay Estimated Taxes. https://www.irs.gov/faqs/estimated-tax/individuals/individuals-2