The IRS has granted temporary reporting and recordkeeping relief for certain taxes on dyed diesel used between 1 October and 31 December 2026, waiving specified filing requirements and penalties while it considers simpler administrative procedures.
The US Internal Revenue Service (IRS) announced on 21 October 2026 that it has granted temporary administrative relief from certain reporting and recordkeeping rules tied to the tax imposed under section 4041(a) of the Internal Revenue Code. The relief applies while the Department of the Treasury and the IRS study simpler ways to administer these requirements.
What the relief covers
The IRS will not challenge temporary failures to meet return filing, reporting, or recordkeeping requirements under sections 6001 and 6011, as long as the failure stems solely from liability under section 4041(a). That liability must arise from taxable uses of dyed diesel on or after 1 October 2026 and before 1 January 2027.
The relief covers filing Form 720 only to report that liability, reporting it on a Form 720 that taxpayers must file anyway, and creating or keeping records only to support that liability. The IRS will not assert civil penalties or additions to tax for failures covered by the announcement.
Deadlines and future filings
The relief applies even if the filing or reporting deadline falls after 31 December 2026. Taxpayers will not need to file, report, or rebuild records for the covered liability after that date. Anyone who must file Form 720 for other liabilities must still file, report, and keep records for those liabilities.
Concerns about red dye
The IRS recognises concerns about residual red dye in fuel tanks once the relief period ends. The agency is considering a suitable grace period or other mitigation measures and will issue further guidance.
What the announcement does not change
The announcement does not affect recordkeeping or reporting requirements that apply independently to another tax. It also leaves unchanged any requirement tied to a claim for an exemption, credit, or refund.
