Firstly, you have to understand what exactly is the International Fuel Tax Agreement. IFTA or International Fuel Tax Agreement is a contract among the U.S.A. and the canadian provinces to simplify the payment of fuel tax by the commercial vehicle drivers who operate in more than one state.
Before IFTA, the drivers have to stop at the point of entry of each and every state to buy the permit. As you can see, this can cost the driver a significant amount of time. The rules and regulations of every state are different, therefore it was very tedious work for a driver to get a permit every time he entered a different state. International Fuel Tax Agreement solves this problem and offers a unified permit that allows drivers to drive without stopping at each point of entry.
The vehicles carrying the IFTA decals allows the commercial driver to go to any IFTA jurisdiction without the requirement of a single trip permit. IFTA let them pay their taxes quarterly and save from any kind of audits.
You do not need an expert to file your IFTA taxes. You just have to understand the key components of the IFTA.
What type of vehicle needs to get an IFTA permit?
There are three types of vehicle required for an IFTA permit. The first one is the double axle vehicle with a gross weight greater than 26000 lbs. Second, are those vehicles with three or more axles. Third, are the vehicles with trailers that have a gross weight of more than 26000 lbs.
How to get an IFTA permit and IFTA decals?
To get an IFTA license or permit, the first step is to apply online at your home state and then get a print out of the application form and send it to the designated office. Once your application is processed by the authority, you will receive the decals for the current year.
How to calculate your IFTA tax?
You can calculate your IFTA tax in five simple steps without any expert’s help.
- Track your miles per state in a given quarter: The drivers need to record their miles driven in each state very carefully. Nowadays, there is various software available to track your vehicle’s mileage and give a consolidated report of mileage used in every state separately.
- Add your fuel receipts: The next thing required for the IFTA tax calculation is the amount of fuel purchased in each jurisdiction. Therefore, it is paramount to collect and record all your fuel receipts accurately. You should separate them statewide to calculate the tax accurately. These fuel receipts must contain some basic but very important information like date of purchase, types of fuel purchased, location, fuel amount in gallons, pricing per gallon etc.
- Calculate the fuel used per state: in the first two steps, you already have the total number of miles driven in a quarter and the total gallon of fuel purchased in a quarter. Now you calculate the fuel mileage by following the formula.
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Fuel mileage = Total mile divide by the total gallon
Once you have the fuel mileage, then you easily find out the fuel used in a state.
Fuel used in a particular state = Total miles driven in a state divide by the fuel mileage
- Find out how much you owe to each state: in step 3, you find out the amount of fuel used in every state. Now, you just have to multiply the fuel amount with the given rate of tax in a particular state. This will give you the amount of tax you owed to that state for a given quarter.
- Consolidate all the figures: Now, you have already paid the tax for some state where you have purchased the fuel. Therefore, in some jurisdictions your tax may come in a negative number. But when you file your IFTA tax, all the amounts from each state must be added together to give you a consolidated figure to pay to the tax department.
There are some additional softwares that can make your IFTA calculations very easy. Traditionally, the drivers used to note down every single mile in their miles worksheet, but that was a very tedious and error-prone method that consumed a lot of time. Nowadays, there is so many cloud-based fleet management software that provides the required information with a click of a button.
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This software gives you the mileage report for the quarter with the exact number of miles driven in each and every state. You can enter the amount of fuel purchased in the system and you don’t have to do anything else. The software does the rest for you. You follow all these simple steps with the help of technology you will never need to hire an expert to do your IFTA taxes.