IRS Waives Dyed Diesel Penalties Through Year-End

Farmers and ranchers hauling grain and livestock this fall can use dyed diesel on highways without facing federal dyed fuel penalties through the end of the year. The Internal Revenue Service (IRS) announced Oct. 14 that the nationwide relief covers dyed diesel sold for highway use or used on highways from Oct. 1 through Dec. 31, 2026.

The announcement follows President Donald Trump’s Oct. 5 executiv order on diesel fuel. During the relief period, the IRS will suspend federal inspections of on-road dyed diesel use and waive related excise-tax penalties, including those for missed tax deposits and inadequate records.

The announcement does not eliminate the federal diesel tax. The IRS said it expects to issue additional guidance on postponing payment and will explore ways to eliminate any deferred tax obligation. Its Oct. 14 announcement did not establish a new payment deadline.

Nebraska’s relief has a different deadline. Gov. Jim Pillen’s Executive Order 26-21 provides state relief for qualifying transportation of Nebraska agricultural products on Nebraska roads through Dec. 23. The federal announcement does not change state fuel taxes or penalties.

Producers should continue keeping fuel receipts and tracking gallons, miles, and qualifying trips. Although the IRS is not requiring records to establish eligibility for the federal relief, supporting documentation is required for Nebraska fuel-tax refund claims. Keeping those records also can help producers prepare for additional federal guidance.

Nebraska Farm Bureau’s quick guide to the executive orders and fuel recordkeeping form are available. Producers with questions about their individual operation should consult their local tax preparation specialist or accountant.

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