what happens when you file your motor fuel excise tax returns late?

What Happens When You File Your Motor Fuel Excise Taxes Late

Did you find yourself filing late this month? We understand that even the most seasoned professionals can file late. Whether due to oversight, complex data management, or understaffing. Late excise tax filings in motor fuel can happen and may have significant repercussions.

Below, we explore the potential ramifications for late filers in the motor fuel industry and offer tips for filing timely and avoiding hits to the bottom line.

Consequences of Filing Late in Excise Tax

Late excise tax filings can potentially lead to a series of undesirable consequences. Below is what can happen if a tax professional files after the due date.

Penalties and Fines

Every state has its own unique regulations regarding late filings and payment penalties. The penalties states impose are typically based on the report's nature and the delay's duration. However, it varies by state whether the penalty is a fixed amount or a percentage of the filing and whether any interest is added.
These are anything but straightforward, and each state can be drastically different. Consult Section 22 of the FTA Tax Information by State Handbook for more information on what happens when you file late in your state(s).


Risk of Business Operation Suspension

Consistent non-compliance with excise tax deadlines may lead to the suspension or cancellation of fuel-related licenses, hurting profits and business operations.

Moreover, reinstating a suspended or canceled license can be lengthy and complex, involving extensive paperwork, compliance checks, and possibly even legal proceedings. During this period, businesses may face significant operational disruptions. For companies operating in competitive markets, such delays can be particularly damaging, potentially leading to a loss of market share as customers turn to competitors who can reliably supply their needs.

Increased Workload and Stress

Late filings often mean a frantic scramble to resolve the resulting issues, raising stress levels and increasing your team's workload. As businesses expand into more jurisdictions, the workload and filings a team must work on increases. This can cause burnout. As we know, expertise is king in a niche industry like excise tax, so avoiding turnover is key. Keep a pulse on your team by tracking individual workloads and performance in a performance dashboard.

6 Tips for Filing Timely and Accurately in Fuel Excise Tax

It’s no secret. When it comes to motor fuel excise tax, precision and punctuality are paramount. Adhering to these principles not only ensures compliance but also mitigates the risk of penalties and interest that result from errors or late filings. Below are some tips to file timely and accurately.

Establish a Filing Calendar

Never miss a deadline by implementing a comprehensive filing calendar that tracks all filing due dates, including quarterly, monthly, annual, and special filing obligations. Bonus points if your tax calendar comes equipped with escalating deadline alerts! These alerts can be customized to become more frequent and urgent as the due date approaches, ensuring that important deadlines never slip through the cracks. Working this into your daily workflow can significantly streamline your processes, making tax preparation and filing a less daunting task.

Stay Current with Tax Law Changes

Fuel excise tax regulations are continually changing due to legislative or regulatory updates. Review news from your state jurisdiction sites and other relevant tax authorities to avoid any alterations affecting excise tax filing like:

  • State Jurisdiction Sites: State governments may have different rates and rules for excise taxes on fuel. Businesses operating in multiple states must be aware of the variations in tax regulations across jurisdictions. Check out important state sites here.
  • Internal Revenue Service (IRS): The IRS provides information on federal excise tax rates and regulations, including any changes to tax laws that impact fuel taxation. Their website is a valuable resource for official announcements and guidance documents.
  • Department of Energy (DOE)For information on alternative fuel excise tax credits and incentives, the DOE's Alternative Fuels Data Center offers comprehensive details on federal and state programs.
  • Legal and Tax Advisory Services: Subscribing to updates from professional advisory services, like PWC, can provide businesses with expert analysis and interpretation of recent tax laws and regulations changes.
  • Industry Associations: Trade associations, like FTA and API, often provide their members with updates on legislative and regulatory changes affecting their industry, including those related to excise taxes.

Maintain Accurate Records

Conscientious record-keeping forms the bedrock of precise and timely tax filings. Organize and validate transaction records, ensuring all invoices, receipts, and documentation for fuel purchases and sales are accurate and readily available for data preparation.

Utilize Tax Automation Software

The perspective on tax automation is evolving rapidly; 55% of tax leaders plan to invest in digital transformation in the next 12 months. Instead of viewing automation as a threat to job security, it's seen as a tax assistant that takes on tedious and repetitive tasks involved in tax management. This shift in focus allows tax professionals to file more accurately, timely, and consistently while dedicating their expertise to more strategic, impactful work.

In fact, automation can increase fuel excise tax filing efficiencies by up to 50%!

Double-Check Data Entries

By now, you’ve probably heard the infamous stat: “88% of spreadsheets contain errors.” Errors often stem from simple data entry mistakes. Even the most advanced tax software relies on the accuracy of the initial data fed into it; hence, it is imperative to ensure this data is correct at the source. Before filing, re-examine and cross-check your figures and calculations with your general ledger and other financial documents.

Implement Checks and Balances

Implementing a system of checks and balances can further mitigate the risk of errors. This might involve having a second set of eyes review the data or employing software tools that flag common mistakes. Some organizations adopt a tiered review process, where different team members are responsible for verifying specific sections of the tax filing. This collaborative approach helps distribute the responsibility for accuracy and leverages the team's collective expertise.

Educate Your Team

Ensure all team members involved in the tax filing process are well-informed about procedures, deadlines, and best practices. Regular training could vastly reduce the risk of costly errors. Also, if possible, keep a fund your tax professionals can use to attend industry events, like the FTA and API meetings.

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    Bob Donnellan

    Bob Donnellan

    Motor Fuel Tax Subject Matter Expert

    This analysis is intended for informational purposes only and is not tax advice.  For tax advice, consult your tax adviser. See the full disclaimer here.