Understanding IFTA Audits and How to Prepare for One

Think your trucking company is safe from an International Fuel Tax Agreement (IFTA) audit? Think again.

Each IFTA jurisdiction is required to audit at least three percent of its accounts annually, according to the IFTA audit manual. And once selected, businesses that don’t have airtight fuel tax compliance can expect fines, penalties, and headaches.

It’s common for owner-operators to face an IFTA audit at some point. Unfortunately, many truckers wind up losing hard-earned money due to fines caused by avoidable errors.

Let’s break down why IFTA audits happen, how to prepare, and how to stay ahead of fuel tax compliance, so you can avoid these issues.

What is an IFTA Audit?

An IFTA audit is an in-depth review of your fuel tax filings, mileage records, and tax payments to ensure you’re reporting correctly across state and provincial lines. If auditors find issues, you can expect fines, interest charges, or even the loss of your IFTA license.

When and Why IFTA Audits Happen

Audits can happen randomly, but they’re often triggered by red flags in your filings. As mentioned, every year, IFTA jurisdictions must audit at least three percent of their accounts, meaning even compliant businesses may be selected.

The most common reasons for an audit include:

• Miscalculated fuel tax payments.
• Missing or inaccurate trip reports.
• Fuel purchases that don’t match the mileage driven.

If your records don’t add up, an audit could cost your company thousands in fines and interest.

What Authorities Look for During an Audit

IFTA auditors don’t just take your numbers at face value. They dig deep, checking for:

• Mileage tracking inconsistencies: If your reported miles per gallon look off, expect questions.
• Fuel receipt verification: Missing receipts? That’s a big problem.
• Gaps in trip reports: Auditors compare reported miles to actual routes driven.

Common Triggers for an IFTA Audit

Most IFTA audits are set in motion by specific warning signs that raise eyebrows at your local jurisdiction. For instance, an IFTA audit is almost guaranteed if your mileage and fuel numbers paint a suspicious picture. Think of it this way: tax agencies analyze your quarterly reports to look for inconsistencies, and if your numbers seem too good or slightly inconsistent, that’s all it takes for them to knock. Even small mistakes – whether it’s low MPG totals that defy physics or tax filings that don’t line up with receipts – can open the door to a full investigation. Understanding what alerts auditors in the first place is the first step to avoiding an IFTA audit altogether.

Reporting Errors That Raise Red Flags

Certain mistakes practically invite an audit. Common IFTA violations that make you a prime target include:

• Failing to file quarterly reports: This one guarantees trouble.
• Fuel purchases not matching miles traveled: Driving too many miles but reporting low fuel usage? That’s a flag.
• Suspiciously high or low MPG: If your truck is reporting an unrealistic MPG average (4 MPG vs. 10 MPG), auditors will take notice.

Inconsistencies in Mileage and Fuel Receipts

Big discrepancies between what you report and what you actually drive are a surefire way to get audited.

Common mistakes that get truckers in trouble:

• Not tracking non-IFTA miles (off-road use, exempt miles).
• Forgetting to record all fuel purchases.
• Manually guessing fuel tax amounts instead of keeping receipts.

How to Properly Maintain IFTA Records

IFTA records are your only defense in the event of an IFTA audit. If your documentation is sloppy or missing altogether, you’re out of luck no matter how honest your operations are. States and provinces expect accurate, consistent reporting of every mile driven and every gallon of fuel purchased. That’s why organized, verifiable recordkeeping is both best practice and a survival tool. To pass an IFTA audit with minimal trouble, make sure your purchase logs and trip sheets are clean, timely, and verifiable every single quarter.

Best Practices for Logging Fuel Purchases

A solid fuel tax compliance system starts with fuel receipts. Missing or messy receipts make an IFTA audit ten times harder.

• Keep records for four or more years: Most audits check back at least three years.
• Include all required info: This includes date, location, seller’s name, number of gallons, and total dollar amount.
• Avoid cash transactions when possible: credit card receipts are easier to verify.

Organizing Trip Reports Efficiently

Your trip reports must match your fuel purchases and tax reports. Here’s what to include in every trip report:

• Start and end odometer readings for each trip.
• Routes taken and states crossed.
• Total miles driven in each jurisdiction.

Use electronic tracking tools instead of handwritten logs to eliminate errors and make reports easier to verify.

What Happens During an IFTA Audit?

IFTA audits are more precise and time-consuming than most carriers realize. These audits aren’t just about what you filed last quarter; auditors can go back three to four years, asking for every receipt, every trip report, every hook and bolt tied to your reported IFTA numbers. You’ll deal with a structured process that moves from initial requests to a formal review and finally to a report that can come with stiff penalties if anything’s off. 

Steps in the Audit Process

If you're selected, the IFTA audit process will play out as follows:

1. Audit Notice: Your jurisdiction will notify you and request records from the past three to four years.
2. Preliminary Review: Auditors check for obvious discrepancies before requesting full documentation.
3. Official Examination: Your mileage reports, fuel logs, and tax payments get reviewed against IFTA requirements.
4. Audit Report Issued: You’ll receive a report listing any IFTA violations, additional taxes owed, and penalties.
5. Response Period: If you disagree with the findings, you can contest charges before payment is due.

How to Respond to Audit Findings

If errors are found, you’ll need to pay back taxes and possible fines. Interest charges grow fast, so pay ASAP.

• If you disagree with the ruling, work with a trucking tax compliance professional to challenge errors.
• If your records are well-kept and accurate, you’ll likely pass with no penalties.

How to Reduce the Risk of an IFTA Audit

Carriers that invest time in their compliance systems, use reliable software, and regularly review their own records are far less likely to land on that dreaded three percent audit list. Jurisdictions tend to skip over accounts that pass basic accuracy checks and flag those with unpredictable records. Staying consistent and audit-ready not only reduces your chances of being selected but also all but guarantees a smooth result if an IFTA audit ever does arrive.

Using IFTA Software for Accurate Reporting

Manual record-keeping? Risky. IFTA software tracks everything automatically, reducing errors.

The benefits of using IFTA-approved tracking solutions include:

• Automated fuel tax calculations.
• GPS-tracked mileage for maximum accuracy. 
• Automatically generated tax reports.

Avoid IFTA audits by letting technology handle the toughest parts of compliance.

Conducting Internal Compliance Reviews

Would you pass an audit right now? If not, start conducting internal compliance reviews. Self-audits help prevent problems before the FMCSA finds them:

• Go through old fuel receipts and mileage logs quarterly.
• Check if your MPG calculations make sense – if not, fix them.
• Ensure your fuel tax payments match reported miles in each state.

Looking for help with compliance for your business? Explore Authority Express’s Complete Trucking Authority Packages and contact us to learn more.