Easiest Way to Calculate IFTA – A 4 Step Guide
If you are a fleet manager or a truck driver then you have to calculate your IFTA tax by yourself. This can be very difficult and time-consuming work for you. It doesn’t matter how many times you had filed taxes earlier, there are some easy steps you can follow to do this IFTA tax calculations easily.Read More
Step 1: Record your IFTA mileage
This is the most difficult and time consuming step of the IFTA calculations. There are three steps to calculate your mileage.
- Manual: This method requires you to have pen, paper and calculator ready in your hand.
You have to note down a lot of numbers and do a lot of calculations. Every time you enter a state, you have to note down the odometer reading and also when you exit the state, you have to record the reading again. This will give you the number of miles you drove in a state.
Miles driven in a state = odometer reading after exiting the state – odometer reading at the entry point.
Once you have the total number of miles driven in each state for the quarter, then you can add all them together to get the total number of miles driven in a quarter.
- By trip calculator: If you don’t want to note down your odometer reading every time you enter a state, then you can use a trip calculator tool to estimate your miles or use ifta state mileage calculator. In this method, you have to enter your starting point and end point of the journey. Then the trip calculator estimates your miles for you. Now you have the data for one state, similarly you can collect the miles travelled in all the states. Therefore by adding all the miles driven in the quarter will give you the total miles for the quarter.
- By IFTA automation software: With the help of IFTA automation software, you can record your miles driven in a particular state automatically. Therefore it is the easiest method of them all. It can give you the total number of miles driven in each state and the total miles for the quarter with a click of a button.
The manual and the trip calculator methods are very time consuming and there is a great risk of human error involved with them. Compared to them, IFTA program can do all the calculations in a few minutes with great accuracy. If you operate a large fleet, you simply cannot use the first two methods as they are not a viable option. For a large fleet, you can calculate all the data in a couple of minutes with the help of an automation tool.
Step 2: Fuel purchase receipt
To calculate the fuel tax, you just need to add the number of gallons of fuel you purchased a particular state. Therefore, it is very necessary to maintain each and every fuel receipt. It is also very important to include all the state traveled even though you didn’t buy any fuel from any particular state because the fuel tax still is calculated for that state.
First you have to calculate the fuel mileage by simply dividing the total number of miles driven by the total gallons of fuel purchased.
Fuel mileage = total miles / total gallons of fuel
Once you have the fuel mileage, now you can find the amount of fuel used in any particular state.
Fuel used in the state = total miles driven the state/fuel mileage
Now, you can calculate the total IFTA tax for each state. To calculate the IFTA tax for any state, first, you need to know the tax rate for that state. Then you can multiply the tax rate by the number of miles driven in that state.
Fuel tax for the state = tax rate of the state multiply by fuel used in that state
“There is more credit and satisfaction in being a first-rate truck driver than a tenth-rate executive.”-B.C. Forbes
Step 3: Total fuel tax owed to the states
In the second step, you can find out the fuel tax for each state, hence you are able to find out the amount of tax you owe to each state.
The amount of fuel tax owed to each state is equal to the fuel tax required for the state minus the fuel tax you already paid to the state.
This number can be negative, which simply means that you have paid more tax to the state than you actually burn the fuel in the state.
Now you can find the total tax owed to all the states by adding the individual tax owed to each state including the negative values.
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Step 4: File your tax return
This is the final step of the process. Each state has some type of online portal to file your taxes. Since you have all the information you need to file your IFTA tax, you can simply use the online portal or you can file it by paper.
You have to file your IFTA tax quarterly. If you follow all these steps to record your IFTA tax, you will find it easy to calculate and file your IFTA tax.