How I Survived My IFTA Audit

Introduction

In a prior blog entry, I provided an in-depth overview of the International Fuel Tax Agreement (IFTA) and introduced the IFTA filing spreadsheet I rely on for compliance. Now, I will provide a look into my IFTA audit experience. This post unveils the challenges encountered, shedding light on the shortcomings of my data collection methods. I was a bit surprised that I was audited so soon, as it occurred within the first three years of launching my company operations. But looking on the bright side, it was an unexpected but invaluable opportunity to pinpoint early missteps and course correct for smoother operations ahead.

What is IFTA (International Fuel Tax Agreement)

Here’s a short description of IFTA but if you want more you can check out my previous blog post that explains all about IFTA and includes my IFTA tracking spreadsheet.

IFTA is a fuel tax cooperative arrangement among the U.S. states and Canada. Before IFTA, truck drivers were required to track and pay fuel taxes in each state they traveled. IFTA enables you to report and pay fuel taxes based on the total distance traveled in all participating states. This eliminates the need for carriers to obtain multiple fuel tax permits, reducing administrative burdens and ensuring tax equity.

Motor carriers are required to file IFTA every quarter if they operate across state lines. Filing is not hard and takes only about a half hour if all of your information for the quarter is up to date. Still, many drivers opt to pay an IFTA filing service for added convenience. 

My general rule of thumb is not to pay for anything I can do myself. However, this strategy meant I was on my own when it came to handling my IFTA audit when the DMV auditor came knocking. In this blog post, I’ll walk you through my audit experience, covering everything from receiving the audit packet and information requests to my response and the challenges I encountered along the way.

What Is an IFTA Audit

An IFTA audit is a process conducted by government authorities to ensure that long-haul trucking companies are accurately reporting and paying the correct amount of fuel taxes for the miles they travel across different states or provinces.

During the audit, officials review the company’s records, including fuel purchases and mileage reports, to verify that they match up with the fuel taxes paid to each jurisdiction. The goal is to prevent underpayment or overpayment of taxes, promoting fair and consistent taxation for commercial vehicles operating across multiple jurisdictions.

Contact from the Virginia DMV Auditor

I was contacted by a Virginia DMV field auditor who informed me that I was going to undergo an IFTA audit. He sent a packet to my residence but he also emailed it to me because he knew that I was a long-haul trucker and probably on the road.

Here is the actual packet he sent and what was requested. It included:

  • Notification Letter
  • Questionnaire
  • Sample 1 lists types of acceptable documents
  • Sample 2 lists the information required in the documents
  • Waiver to sign to agree with timeframes

It was a little confusing but the two pages titled Sample 1 and Sample 2 are useful as they list the items needed to support the audit. I didn’t have all that was needed so had to figure out a workaround as I will describe in detail in a bit.

I Sent the Auditor My State and Fuel Data, but My Records Were Insufficient

I reviewed the packet while on the road and I was able to send him some of the requested information right away, like the state mileage and fuel purchase information I had collected using my IFTA tracking spreadsheet. However other items like the questionnaire and waiver required that I print, fill out, and sign so I needed to wait to send them. At least I had about a month to get everything over to him so I figured I would be able to do that before the deadline. 

Utilizing the same information logged in my IFTA spreadsheet, I was able to send him some information right away. After review, he said that my fuel information was perfect, but my state travel information was insufficient. His main concern was that I didn’t have detailed enough information to support each trip. For the audit, he was required to recreate my trips so he could verify the miles I had traveled precisely matched the miles I had claimed. To achieve this he needed more documentation showing my specific pickup and dropoff locations and the routes I had driven. Thus, he said he would also need some type of geolocation information such as ELD or GPS information.

Solution: A Combination of Quickbooks Invoices and My Google Timeline

So now I began to brainstorm how I would get him the information he needed. Unfortunately, I did not have the trip sheets anymore. My Google Drive had gotten full so I had started deleting old BOLs if I had already been paid for them. Also, I know I should, but I rarely put the trip information in my ELD for each load. So I had to come up with a workaround solution. The only thing I had that could support the actual load was my invoices because they included the trip number, date, pickup, and dropoff location. I asked the auditor if the invoices would work and he said the invoices would help, but in order to recreate my trips, he would still need some type of geolocation or GPS information.

That left my Google timeline as the only information I had that would show exactly what routes I had traveled and the places I had been. I have occasionally used my Google timeline to support detention requests with brokers so I figured it couldn’t hurt to ask. Luckily, he said they would work.

Spend the Time or Pay the $1500 Fine 

Even though I was happy that I found a solution that would work, using my Google timeline came with its own set of challenges. The first challenge was the sheer amount of information needed. With the time period of the audit being 1 quarter or 3 months, that meant I would need to send him a ton of invoices and Google timeline information. If you’ve ever gone through your Google timeline, then you realize how much data is included in just one day. Now multiply that times 10 for a trucker who is always on the move and stopping at multiple places each day. To record one day’s timeline meant scrolling down multiple times on my phone taking and compiling numerous screenshots into one long image. And that was just one day! So having to do that for 3 months was going to be a lot of work and take a lot of time. Now add to that having to retrieve all of the invoices for three months and putting the invoices and timelines together so that they told the narrative of my loads and routes. 

Once I learned what it would take to comply, I questioned whether the time it would take to compile all this information was worth it. So, I asked the auditor how much it would be just to pay the fine if I didn’t have the Google timelines to send. He said it’ll probably be around $1,500 so I figured it was worth the trouble to just suck it up and collect what he needed. However, because it would take so long, I asked if he could just spot-check it somehow. I am so glad I asked this because he agreed to shorten the time frame from 3 months to 1. So with my marching orders, I proceeded to compile a bunch of screenshots for my Google timeline and PDF each invoice from Quickbooks.

Additional Challenge with Google Timeline–Privacy Concerns

The second challenge with using my Google timeline is that it shows everything. For those who may not be familiar, your Google timeline doesn’t just track the places you went but it will show how long you stayed there and includes any photos you took at each location. So, depending on how accurate you are with recording your IFTA information or depending on whether you have some places you went to that you would want to keep private, sharing the Google timeline with a State DMV auditor may not be ideal. I am pretty accurate in my recording of information and filing so I wasn’t too worried about that. 

However, the privacy concerns were another matter altogether. I’m pretty sure the inspector had a blast scrolling through my timeline photos, especially those from my trips to Vegas. Maybe that’s the reason he initially told me I would owe about $50 after the audit but it ended up being only $12. Guess with the entertainment value of my photos he figured he had already gotten his money’s worth! Who knew my travel pics would double as entertainment for auditors!

Lastly, in addition to the lessons I learned by having to use my Google timeline, I also learned a lesson regarding my QuickBooks invoices. Turns out, I didn’t have any of the trip sheets attached to my QuickBooks invoices. I just submitted them to the broker to get paid and that was it. To make matters worse, I had deleted some of them because I needed space on my Google Drive. To be perfectly honest, as of writing this, I still haven’t changed my behavior but I just located the place in Quickbooks where you can attach documentation to the invoice and I will start doing that going forward.

Final Verdict

The auditor reviewed it and he said it looked good. He said I delivered a load to North Carolina but did not have any North Carolina miles for that month so he dinged me for that and said I would owe about $50. As I mentioned previously, my final charge was $12.

After the audit, I revised my IFTA spreadsheet to include more specific load information and sent it to the auditor to see if that would work for next time. However, he said it really wouldn’t help and that he still wanted the GPS/ELD coordinates information.

While the audit experience may have been challenging, it served as a valuable lesson in the importance of thorough documentation and compliance. Moving forward, I’m committed to implementing the necessary changes to ensure smoother audits and minimize any potential discrepancies. Hopefully, the lessons I have shared in this blog post save you a whole lot of hassle down the road if you are ever involved in an IFTA audit.