New Law Changes Highway Use Tax Rules: Installment Payment
Option Eliminated
The IRS is reminding truckers and other owners of heavy highway
vehicles that the installment option for paying the federal
highway use tax will no longer be available. This change was
included in the American Jobs Creation Act of 2004 and applies
to filers of Form 2290, Heavy Highway Vehicle Use Tax Return.
Beginning with the Form 2290 for the tax year that begins on
July 1, 2005 and ends on June 30, 2006, the balance due shown on
the form must be paid in full by the due date of the return. In
most cases, the deadline for filing the return and paying any
tax due is August 31, 2005. Payment can be made by check, money
order or electronically through electric payment (EFTPS).
In previous years, taxpayers who timely filed Form 2290 could
choose to pay the tax in four equal installments. Ordinarily,
these installment payments were due on the last day of August,
December, March and June. About 148,000 taxpayers chose this
option last year in 2004.
In general, the highway use tax applies to trucks, truck
tractors and buses with a gross taxable weight of 55,000 pounds
or more. Ordinarily, vans, pick-ups and panel trucks are not
taxable because they fall below the 55,000-pound threshold.
For trucks and other taxable vehicles in use during July,
payments are due on August 31. The tax is based on weight and
normally ranges from $100 to $550 per vehicle. A variety of
special rules, discussed in the instructions for Form 2290,
apply to vehicles with minimal road use, logging or agricultural
vehicles, vehicles transferred during the year and those first
used on the road after July.
State governments are required to receive proof of payment of
the federal highway use tax as a condition of vehicle
registration. Schedule 1 of the Form 2290 is stamped and
returned to filers for this purpose. This process remains
unchanged.
The Jobs Act also eliminated reduced tax rates for vehicles
registered in Canada and Mexico. For vehicles with a base
registration in either country, the tax rate was 25% below the
regular rate.
In addition, the Jobs Act made electronic filing mandatory for
taxpayers who file highway use tax returns for 25 or more
vehicles. The availability of electronic filing for Forms 2290
is pending. Taxpayers should continue to file paper returns. The
IRS will notify taxpayers when the electronic filing program is
available.