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The Farm CPA

RSS By: Paul Neiffer, Top Producer

Paul is now part of the fourth generation in America that is involved in farming and hopes the next generation will be involved also. Through his blog he provides analysis and insight to farmer tax questions.

Use of Bale Wagon Leads to $9.000 Penalty

Oct 07, 2010

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.

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