IRS Warns of Significant Claim Processing Delays in 2022; Marketers Urged to File Motor Fuel Excise Tax and Biodiesel Blender Claims Electronically to Minimize Refund Delays

The Internal Revenue Service is warning taxpayers to expect significant delays in the processing of tax returns during 2022 according to a new report to Congress by the IRS’s Taxpayer Advocate. The warning applies to all filings including those related to federal motor fuel excise tax (FET) and biodiesel blender claims. Energy marketers have been plagued by processing delays over the past 2 years. The excessive delays have forced marketers to float hundreds of thousands of dollars in refunds owed to them for biodiesel blending and the tax-free sale of clear diesel fuel to state and local governments and non-profit educational organizations. Ordinarily, these claims are paid within 45 days. Many marketers rely on these refunds to pay for daily operational expenses. IRS claim processing delays have extended payment of refunds out 9 months and longer for many marketers. The IRS cites a number of reasons for the processing delays including; funding reductions, promulgating an array of new COVID related tax credits and stimulus payments, employee resignations and absences, and last but not least, the filing of paper claim forms. Many marketers are still submitting their FET and biodiesel blender credit claims on paper forms. Paper claim forms are like “kryptonite” to the IRS according to the report because they must be processed manually, a laborious task made worse due to lack of adequate resources.

Accordingly, the IRS is urging taxpayers to file all claims electronically. Electronic filing is often seamless and results in far fewer processing delays. See the following Q&A on electronic filing.

Frequently Asked Questions – Form 8849, Claim for Refund of Excise Taxes

Q. Why is IRS offering electronic filing of Form 8849, Claim for Refund of Excise Taxes?
A. Offering electronic filing of Form 8849 satisfies the Congressional mandate to provide filers an electronic option for filing Form 8849 with Schedules 2, 3, or 8. Schedules 1, 5, and 6 are also available.

Q. Who may file motor fuel excise claims electronically?
A. Any taxpayer who pays the provider’s required service fee for online submission will be able to electronically transmit Form 8849.

Q. How do I choose a transmitter to e-file 8849 returns?
A. IRS has posted the contact information of all approved e-file transmitters. You will need to select one to your liking. IRS does not endorse any one provider and cannot make recommendations. All listed providers are approved to submit returns to the IRS electronically.

Q. When can I e-file Form 8849?
A. IRS is currently accepting electronically-filed Form 8849, Schedules 1, 2, 3, 5, 6 and 8. Check with approved e-file transmitters for which schedules they offer.

Q. Where and how do I access the electronic 8849 tax forms?
A. Taxpayers will be required to submit their electronic Excise Tax forms through an approved transmitter/software developer.

Q. Will it cost anything to file Excise Tax forms?
A. Yes. To electronically file Excise forms, taxpayers will incur the cost of the provider’s required service fee for online submission.

Q. Can all Excise Tax forms be filed electronically?
A. No. At this point, the only Excise forms available for electronic filing are Form 2290, Heavy Highway Vehicle Use Tax; Form 720, Quarterly Federal Excise Tax; and Form 8849, Claim for Refund of Excise Taxes (Schedules 1, 2, 3, 5, 6 and 8).

Q. Will IRS continue to accept paper forms once electronic forms are available?
A. Yes, IRS will continue to accept paper Forms 8849. Electronic filing of the Form 8849 is optional.

Q. How will Form 8849 e-file improve results?
A. Refunds for an electronically filed Form 8849, with Schedule 2, 3 or 8, will be processed within 20 days of acceptance by the IRS. All other Form 8849 schedules are processed within 45 days of acceptance.