What to know about federal tax credit on diesel fuel

Not an exciting topic, but sure enough, not all new entrants into the motorcoach industry are aware of this federal tax benefit until they have filed several tax returns. Reasons for this costly oversight may be that the operator had yet to hear of it from industry peers, has not explored all the information that is available at the association level, and their tax accountant is not aware of industry nuances when it comes to the federal tax code. It is not too late if you are one of these operators. And by the way, welcome to the industry!

Motorcoach operators are eligible for a federal diesel fuel tax credit if any part of your bus operations includes intercity or local transportation, or the transportation of students or school employees. These credits are based on the number of gallons of diesel fuel your company uses for these nontaxable uses. The rates are 17 cents or 24.3 cents per gallon of diesel, depending on what the fuel is used for. In other words, you are due at least 17 cents per gallon of diesel fuel pumped into your buses and motorcoaches. And if you have not filed for such credits, you are eligible to go back three years and file for the credits. These are credits, dollars back to you, not expense deductions. This credit is fully refundable should your business have no tax liability or can help the company pay any federal taxes due.

Eligibility rules

Note: You are not due a credit if the diesel fuel was purchased without the federal excise tax added.

A bus used for intercity or local use bus, designed for 20 passengers or more, qualify for a tax credit of 17 cents per gallon.

A school bus is defined as a bus used to transport students and employees of schools. Schools are defined as any educational institution with regular faculty, curriculum, and enrolled body of students. Schools are not limited to kindergarten through 12^th grades. Make sure you track the student purposed miles so you can use your average MPG to determine the gallons used for student runs which qualify for a higher tax credit of 24.3 cents per gallon. This is not limited to “yellow bus” mileage.

Your company can file for this credit either quarterly or annually. If filed quarterly, use IRS Form 8849 and Schedule 1 of Form 8849 to record your information. Line 3a for School Buses defined above, Line 3d for all other. The claim must be filed during the quarter following the last quarter included in the claim and be at least $750.

If you choose to file annually or you are late filing the quarterlies, use IRS Form 4136 and file it with your annual income tax return. Line 3a for School Buses, Line 3d for all other.

Seek assistance from BUSBooks or your CPA when filing for previous year credits you may have missed. For more resources, see Publication 510 and Internal Revenue Code Section 6427.

How about tires? Are you paying the federal excise tax on tires used for intercity, local or school buses? You do not need to! Apply for a federal excise tax exemption number from the IRS. Once received, providing that information to your tire retailer will allow you to purchase and lease those tires without paying the federal excise tax. There is no reason to pay that tax if you are exempt from it! Save over $50 on a typical bus tire, or $400 on a full set. Receive more information from your tire retailer who will be happy to assist.

Let us at BUSBooks guide you in obtaining tax benefits that are available to your company right now!

Written by Tracy Fickett, CPA and Peter Shelbo, Veteran Bus Operator

BUSBooks is a unique CPA accounting firm dedicated to the motorcoach industry.

The information contained in this communication is general in nature and is not intended, and should not be considered, as legal, accounting, or tax advice provided by BUSBooks, LLC to the reader. The reader is also notified that this material may not apply to or be suitable for the reader’s specific circumstances or needs and may require consideration of additional factors including other tax and non-tax facts and circumstances. BUSBooks, LLC recommends that the reader contact his/her tax professional before taking any action based on this information. BUSBooks, LLC assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

Reporting PPP Forgiveness for Income Taxes Copy

Reporting PPP forgiveness for income taxes

With all this talk about forgiveness, you would think we all did something wrong. That is certainly not the case! Thankfully, most of you who are reading this have survived this unprecedented upheaval and are now planning a bright future. Therefore, we are pleased to share this information.

The IRS has finally issued guidance on when and how to recognize the tax-exempt income related to PPP loan forgiveness. Revenue Procedures 2021-48, 2021-49, and 2021-50 were issued in the latter part of 2021. In this guidance, the IRS discusses three acceptable periods for recognizing the exempt forgiveness income.

Period One

The earliest period for recognizing and reporting the exempt income is when the PPP funds are used toward eligible expenses. This means as they are spent. For most PPP loan recipients, this would be the calendar year 2020 for the first draw and calendar year 2021 for the second draw. If your first draw was received later in 2020 or 2021, or the business is a fiscal or non-calendar year reporter, then this period may cover two different tax reporting periods.

Period Two

The next possible time for reporting the tax-exempt forgiveness income would be the period in which the forgiveness application was submitted. For example, if you requested forgiveness in November 2020, using this approach, the business would report the tax-exempt income on the tax return including November 2020. This would be tax year 2020 for calendar year reporters.

Period Three

The last possible time for reporting the tax-exempt forgiveness income is the period in which the forgiveness was granted.

What if full forgiveness was reported, but actual forgiveness was limited to a lesser amount?

If you originally reported the full amount of the PPP loan as exempt income and it was only partially forgiven, the IRS requires an amended return to correct the reporting. If the entity amending the return is a flow-through entity such as a partnership or S corporation, the business should issue amended forms K-1 and the recipients should amend their returns as well.

For 2021 business returns, there are also additional reporting requirements for how to report and disclose the exempt income from PPP loan forgiveness.

Check with your tax preparer to see how this might affect your business and personal income tax returns.

Let BUSBooks put your accounting in order! Together we can make YOUR accounting MORE meaningful.

Written by Tracy Fickett, CPA and Peter Shelbo, Veteran Bus Operator, and published in Bus and Motorcoach News on March 11, 2022.

BUSBooks is a unique CPA accounting firm dedicated to the motorcoach transportation industry.

This information is general in nature and is not intended as legal, accounting, or tax advice provided by BUSBooks LLC to the reader. This material may not apply to the reader’s specific circumstances and may require consideration of additional factors. BUSBooks LLC recommends that the reader contact a tax professional before taking any action based on this information. BUSBooks assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect this information.

Annual Information Reporting for Quarter 1

The New Year brings your business fresh opportunities. It also demands annual compliance and information reporting. January requires your accounting department to prepare a handful of reports that affect your employees, vendors, and your friends at the IRS.

Here is a recap of the 2021 calendar year information reporting that you may be responsible for issuing soon.

Forms W-2 to Employees

Employers need to issue Forms W-2 to all employees receiving wages during the tax year. In addition, the fourth quarter and annual payroll tax returns are due. These are prepared by the person or company who processes your payroll during the year. The recipients must receive their W-2’s by January 31. The IRS requires filing by Jan 31 as well.

Forms 1099 to Vendors and Independent Contractors

Forms 1099-MISC or forms 1099-NEC are required for certain payments made to other individuals or companies in connection with a trade or business.

Payments made directly by credit card, through payment service providers such as Venmo, or a credit card processor such as Square, are not to be included.

Forms 1099-MISC are issued for certain payments and/or bartering transactions of at least $600.

Paid to individuals or entities not taxed as corporations, including:

Rents
Prizes and awards
Other income

Paid to individuals or any entities including those taxed as corporations, including:

Medical and healthcare payments (NOT health insurance premiums)
Payments to an attorney

Direct sales of at least $5,000 of consumer products for resale

Due dates:

The recipients must receive the Form 1099-MISC by February 15.
The IRS requires filing by March 1 if filed by mail, March 31 if filed electronically.

Forms 1099-NEC are issued for certain payments and/or bartering transactions of at least $600, paid to individuals or entities not taxed as corporations, for services performed by non-employees with no exclusion for parts and materials.

Due dates:

The recipients must receive the Form 1099-NEC February 1.
The IRS requires filing by February 1 regardless of how delivered.

Forms 1099K are issued by credit card processors and payment service providers, such as Square and Venmo. These credit card processors and service providers are responsible for the reporting compliance. Do not report these payments on forms 1099-MISC or 1099-NEC.

Planning Opportunity: Consider paying vendors and Independent contractor by credit card or through payment service providers to reduce your business’s Form 1099 filing requirements.

Note: The IRS General Instructions for Forms 1099 compliance is thirty-one pages. What we have presented here is the most common uses that effect the Motorcoach Operator. We recommend that you clear the final preparation with your CPA before submitting your Forms 1099.

BUSBooks wishes you the best in 2022.

Let BUSBooks put your accounting in order! Together we can make YOUR accounting MORE meaningful.

Written by Tracy Fickett, CPA and Peter Shelbo, Veteran Bus Operator

BUSBooks is a unique CPA accounting firm dedicated to the ground transportation industry.

The information contained in this communication is general in nature and is not intended, and should not be considered, as legal, accounting, or tax advice provided by BUSBooks, LLC to the reader. The reader is also notified that this material may not apply to or be suitable for the reader’s specific circumstances or needs, and may require consideration of additional factors including other tax and non-tax facts and circumstances. BUSBooks, LLC recommends that the reader should contact his/her tax professional before taking any action based on this information. BUSBooks, LLC assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.