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IRS ‘Dirty Dozen’ list of tax scams for 2018 contains warning to avoid improper claims for business credits

Two common credits targeted for abuse by shady return preparers include the research credit and the fuel tax credit. Both credits have legitimate uses, but there are specific criteria that taxpayers need to qualify for these.

Congress enacted the research credit in 1981 to provide an incentive for American private industry to invest in research and experimentation. Such a claim must be substantiated and satisfy the requirements.

Fraud involving the fuel tax credit is considered a frivolous tax claim and can result in a penalty of $5,000.  The fuel tax credit is generally limited to off-highway business use or use in farming.  Consequently, the credit is not available to most taxpayers.

Learn more about the research and fuel tax credits — and abuses — here.