Tempted to pump up your fuel tax credit? Don't

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For all the gas you buy in a given year, chances are good you won't be allowed to claim a credit on your tax return for the federal fuel taxes you paid.

Eligibility rules for the fuel tax credit are pretty limited: Do you run a commercial fishing boat? A farm? A school bus company? Or does your business run vehicles primarily on local roads, rather than federal highways?

If not, you probably don't qualify.

And yet, shady tax preparers push the idea.

"The IRS routinely finds unscrupulous preparers who have enticed sizable groups of taxpayers to erroneously claim the credit to inflate their refunds," the agency said.

Identity thieves, too, have been known to file a fraudulent return for a business or farm to claim the credit.

Related: Don't file a 'frivolous' return

Part of the problem may be that while you must have a log of the people from whom you bought the fuel and the purchase dates, you're not required to attach receipts to your tax return.

The only way that lack of evidence would be discovered is if the IRS decides to audit you, said Mark Luscombe, principal federal tax analyst for tax publisher Wolters Kluwer, CCH.

If the IRS sniffs out a fraudulent or inflated fuel tax credit claim, it can result in a penalty of $5,000. And if the claim is part of a larger scam, that can result in other penalties, interest and possible criminal prosecution.

The agency said that it has beefed up its detection system to root out fraudulent or excessive fuel tax credit claims through use of new identity theft screening filters and has taken additional steps to set aside more returns for review that claim the credit.

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