Actions Have Been Taken to Enhance Fuel Tax Credit Screening and Examination Processes; However, Improvements Are Still Needed

Ensure that the FTC examination workplan maintains flexibility to address higher dollar FTC claims without a business purpose. In addition, the W&I Division should perform ongoing analysis for high-dollar questionable FTC claims that are not being selected for examination to determine if the selection process should be adjusted.

Require all examinations that identify improper FTC claims to check prior year taxpayer returns for additional improper FTC claims. In addition, future examination selection criteria should include repeated filers with improper FTC claims who continue to submit returns with FTC claims.

The Commissioner, W&I Division, should develop and implement procedures to assess the frivolous filing penalty, where applicable, as a deterrent for filing improper FTC claims without a business purpose.

The Commissioner, W&I Division, should revise Form 4136 to require the taxpayer to certify that the FTC for off-highway business use is being claimed for equipment or a vehicle that was not registered, or required to be registered, for use on public highways.

The Commissioner, W&I Division, should develop procedures to validate the FTC claim amount before increasing it on a taxpayer submitted Form 1040.