Easiest Way To Calculate Your IFTA
Calculation of IFTA is a complicated process. It is a time-consuming task that requires a lot of money and effort. It is next to impossible to undertake the IFTA calculation accurately if the traditional pen and paper method is used to calculate the same. All organizations need to know how to calculate IFTA with ease. This guarantees accuracy and makes sure that you get the correct benefits.Read More
Here are a few steps of calculating IFTA easily:
IFTA Mileage Calculation:
This is the first step and the most important one in calculating the IFTA. It is also the most lengthy and tiring step in the entire process. Below are the three basic methods with the help of which mileages can be easily calculated:
Trip mileage calculator
Automated IFTA fuel tax reporting solution
“Make sure you pay your taxes; otherwise you can get in a lot of trouble.”–Richard M. Nixon
Method 1: Manual Tracking
It is an old pen and paper method of tracking the fleet. It requires manual documentation of the miles traveled across states or provinces. You need to collect and record the fuel tax reporting receipts of every state separately. You must also check the recent tax rates for each quarter. It is essential to record the odometer reading as and when you cross a state or refuel. You need to have a mileage number each and every time your truck enters a new state. This can be calculated using the formula given below:
Miles in State = Exit Reading in State – Entry Reading in State
After this, you need to access the mileage of all the states together. This has to be done by adding up all the mileages. Then you should calculate the total mileage for the entire quarter.
Manual reading has its own set of merits and demerits. It leads to accuracy in the readings of the odometer. However, it leads to certain human errors as you may forget to record the odometer. It is also a very time-consuming method.
Method 2: Trip Mileage Calculator
Odometer readings have chances of manual errors. Here, the trip mileage calculator comes to the rescue. This calculator helps in estimating the miles traveled. Various calculators can be used for performing the IFTA mileage calculations. The mileage calculator helps in presenting the routes and the miles traveled in each state.
The benefits of using the IFTA trip mileage calculator include comfort as you need not track the odometer readings whenever you enter or exit a state. You can easily find free mileage calculators online which saves your money. There are certain disadvantages as well. They include a lack of accuracy in the estimation of miles. It requires a lot of time and there are chances of manual errors.
Method 3: The Easiest Solution
The above two methods are time-consuming. It is tough for businesses to calculate IFTA for every quarter. They may forget to do the same which results in penalties and audits. To solve these problems, the easiest solution is using the IFTA program. Such softwires calculates the miles and generates reports without any manual efforts. This whole process takes a few minutes and has numerous benefits associated with it. It is highly accurate and there are no chances of manual errors or frauds. It makes sure that you can focus on other areas without worrying about the IFTA tax requirements.
Your fuel receipts
After calculating IFTA the next step involves calculating the gallons of fuel used and calculating the mileage of the fuel. You need to add up the total number of gallons purchased and the total miles traveled. The fuel mileage is calculated using the formula given below
Fuel Mileage = Total Number Of Gallons Of Fuel/ Total Mileage
After calculating the fuel mileage, the fuel burnt in each state must be determined.
Fuel usage = Fuel mileage X Miles Driven
Now, you need to calculate the tax to be paid for each state.
Fuel Tax Required = Fuel Usage X Tax Rate
Fuel Tax Owed
The amount of fuel tax you owe per state needs to be calculated. This is done using the following formula:
Fuel Tax Owned = Fuel Tax Required – Fuel Tax Paid
Fuel Tax Owed = Sum of Tax Owned In Every State
Filing Your Return
The final step in the IFTA calculation is filing the return. This can be done online or offline as per the state norms. It is important to file IFTA at the end of every quarter i.e., four times a year.
Video Credit – AllTruckJobs.com
You need to file IFTA fuel tax reporting accurately, and on time to save your business from audits. You should still always be prepared for the audits beforehand to save your business from huge penalties and the risk of shutting down due to losses. You must have a transparent IFTA reporting process and should be able to explain the way you measured and filed IFTA to the auditors. This keeps your business safe and increases its goodwill and profitability.