The Use of Dyed Diesel Leads to $9,000 IRS Penalty
In my home state of Washington, we now have a case of the IRS fining a farmer $9,000 for using dyed off-road diesel in his bale wagon to transport the hay from his field to his haystack. During this transport, the farmer was briefly on a public road and an IRS agent staked him out and then pulled him over to issue a penalty for the use of the off-road diesel on the public road.
The IRS does allow the use of this diesel in tractors, etc. that go from field to field using public roads. Their interpretation in this case is that the bale wagon is not a qualified farm vehicle, however, New Holland, the manufacturer, and the state of Washington both classify it as a farm use vehicle. Plus, I think most reasonable people would understand that you are not going to take the bale wagon into town to shop.
The Washington Farm Bureau has generated a letter to the IRS on behalf of the farmer.
I would be interested to hear from any of our readers if they have come across any other action by the IRS similar to this. I know in today’s environment of falling tax revenues that one very easy way for the IRS to raise money is to assess penalties. Even if they are wrong, many taxpayers or farmers will pay the penalty rather than fight it. I am very grateful to see the Washington Farm Bureau help out in this situation, since if unchecked, this could lead to substantial fines for almost all farmers.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
Let’s review the fourth amendment and probale cause. What gave the IRS agent PC to stop the farmer and conduct a search of his fuel tank? If the farmer gave the agent consent shame on the farmer, if he didn’t then the agent conducted an illegal search and shame on him. If the agent only had reasonable suspecion then he should have requested a search warrant if he wanted to conduct a legal search. Are we afraid to say no to Federal agents?