Section 4121 of the Internal Revenue Code imposes an excise tax on domestically produced coal. The taxes collected on the sales of coal are deposited to the Black Lung Disability Trust Fund to finance payments of black lung benefits to afflicted miners. ISSUE IDENTIFICATION
Examinations of coal producers have identified numerous recurring issues resulting in substantial underpayments of coal excise tax liabilities. Uncle Sam's Tax Audit Assistant includes the 12 largest potential audit issues related to the coal excide tax; each section includes a detail explanation, cites the appropriate Code sections and references, and identifies helpful audit techniques.
Take a look at the following questions....If you don't know the answers to these questions or understand how the answers to these questions can and will affect your tax liability - you could find yourself behind the eight ball when you meet with the Internal Revenue Service Audit Agent.
- Who is liable for the coal tax when the miner does not possess an ownership interest under state law?
- Should transportation costs be excludable in arriving at the taxable sales price of coal?
- Should the tax imposed by IRC Section 4121 be based on raw or clean tonnage sold?
- Is the cost of adding a freeze-dried additive to coal allowed as a reduction in computing the taxable sales price of coal?
- Is it permissible to reduce the taxable weight of coal by excess moisture and what method should be used by taxpayers in calculating this reduction in taxable weight?
- Is coal used by a producer in a thermal-dryer to dry the producer's own coal subject to the IRC Section 4121 tax?
- Is coal extracted from a riverbed by dredging operations subject to IRC Section 4121 tax on coal?
- Is a person who extracts coal from a coal refuse pile subject to IRC Section 4121?
- If coal sold is a mixture of underground and surface coal, how is the tax liability under IRC Section 4121 determined?
- How is the producer's tax liability for coal calculated when that producer also purchases coal from unrelated producers?
- How is coal transported?
- How do you determine the FET when it is included in the sale price?
- Can a producer of coal subject to IRC Section 4121 file a claim to recover an overpayment of FET?
