IFTA Audit Survival Guide: What Auditors Look For and How to Prepare

Most trucking companies will face an IFTA audit at some point. The International Fuel Tax Agreement requires member jurisdictions to audit at least 3% of IFTA licensees annually. When your number comes up, preparation makes the difference between a routine review and a costly nightmare. This guide covers everything you need to know to survive—and pass—an IFTA audit.

What Triggers an IFTA Audit?

IFTA audits aren't always random. While every carrier has some chance of being selected, certain factors increase your audit probability:

Random Selection

Each IFTA member jurisdiction must audit at least 3% of their licensees annually. Some carriers are selected purely through random sampling to ensure broad compliance coverage.

Red Flags That Trigger Audits

• MPG anomalies: Reported fuel efficiency significantly higher or lower than fleet averages raises questions
• Dramatic changes: Sudden shifts in reported mileage or fuel consumption between quarters
• Pattern discrepancies: Consistently claiming credits without proportional fuel purchases
• Missing quarters: Filing zero-mile returns when the carrier is known to be operating
• Complaints: Tips from competitors, former employees, or other sources
• Previous violations: Carriers with past audit issues face more scrutiny

What Auditors Examine

IFTA auditors follow a systematic process to verify the accuracy of your returns. They examine three main areas:

1. Mileage Records

Auditors verify that your reported state-by-state mileage is accurate and supported by documentation. They look for:

• Trip records: Individual trip sheets, GPS logs, or ELD data showing origin, destination, and route
• Odometer readings: Beginning and ending readings for each trip
• State-by-state breakdown: Documentation of miles driven in each jurisdiction
• Total miles: Reconciliation of total reported miles with operational records

2. Fuel Records

Every fuel purchase must be documented with specific information:

• Date of purchase
• Seller name and address
• Number of gallons purchased
• Fuel type (diesel, gasoline, etc.)
• Price per gallon or total amount
• Unit number (which vehicle received the fuel)
• Purchaser's name (driver or company)

3. Vehicle Information

Auditors verify that your fleet information matches your records:

• VIN numbers of all qualified motor vehicles
• Vehicle additions and deletions during the audit period
• Fuel type used by each vehicle
• Calculated fleet MPG consistency

The 4-Year Record Retention Requirement

IFTA regulations require carriers to maintain records for the current year plus the previous three years. This means at any given time, you must have four years of documentation ready for potential audit.

Electronic records are acceptable as long as they can be produced in a readable format upon request. Many carriers find digital storage more reliable than paper files, which can be lost, damaged, or destroyed.

Common IFTA Audit Findings and Penalties

Understanding what auditors commonly find helps you avoid the same mistakes. Here are the most frequent audit findings and their consequences:

1. Insufficient Documentation

The Problem: Missing fuel receipts, incomplete trip records, or gaps in mileage documentation.

The Consequence: Without documentation, auditors may disallow fuel credits and assess additional tax plus interest. In severe cases, they may estimate your liability based on industry averages—usually not in your favor.

2. MPG Discrepancies

The Problem: Your reported fuel consumption doesn't match your reported mileage, resulting in an unrealistic MPG.

The Consequence: Auditors may recalculate your liability using industry-standard MPG figures, potentially adding significant tax due.

3. Unreported Jurisdictions

The Problem: You drove through a state but didn't report any miles there.

The Consequence: Tax assessments for the unreported jurisdiction plus penalties and interest.

4. Non-Compliant Fuel Records

The Problem: Fuel receipts missing required information (seller address, gallons, unit number, etc.).

The Consequence: Those fuel purchases may be disallowed as tax-paid credits.

How to Prepare Before an Audit Arrives

The best time to prepare for an IFTA audit is before you receive the audit notice. Implement these practices now:

1. Establish a Record-Keeping System

Create a consistent process for capturing and storing all required documentation. Whether paper-based or digital, your system should:

• Capture every fuel receipt with all required information
• Record every trip with state-by-state mileage breakdown
• Organize records by quarter for easy retrieval
• Back up electronic records in multiple locations

2. Reconcile Quarterly

Before filing each quarterly return, reconcile your records:

• Verify total miles match sum of state-by-state miles
• Check that fleet MPG is reasonable (5-7 MPG for heavy trucks)
• Ensure fuel purchases have complete documentation
• Identify and resolve any discrepancies

3. Use Technology

GPS-based tracking systems like FleetCollect automatically capture state-by-state mileage with timestamps and coordinates. This creates audit-proof documentation that's far more reliable than manual logs or estimates.

4. Conduct Self-Audits

Review your own records annually using the same criteria auditors use. Look for:

• Missing documentation
• MPG anomalies
• Unexplained gaps in trip records
• Jurisdictions where you operated but reported no miles

What to Do During an IFTA Audit

When you receive an audit notice, follow these steps:

Step 1: Don't Panic

An audit notice doesn't mean you did something wrong. Many audits are routine random selections. Respond professionally and within the specified timeframe.

Step 2: Review the Notice

The audit notice will specify:

• The audit period (typically 8-12 quarters)
• Documents requested
• Response deadline
• Contact information for the auditor

Step 3: Gather Your Records

Collect all requested documentation. Organize it by quarter and category. If you're missing any records, note the gaps now rather than hoping the auditor won't notice.

Step 4: Consider Professional Help

For complex audits or significant potential liability, consider hiring:

• An IFTA consultant familiar with audit procedures
• A CPA with trucking industry experience
• A transportation attorney if penalties are substantial

Step 5: Cooperate with the Auditor

Be responsive, honest, and organized. Answer questions directly. If you don't have documentation for something, say so—don't fabricate records.

Step 6: Review the Findings

After the audit, you'll receive preliminary findings. Review them carefully. If you disagree with any assessments, gather documentation to support your position.

Your Rights and the Appeals Process

You have rights during and after an IFTA audit:

• Right to representation: You can have a consultant, CPA, or attorney present
• Right to review findings: You can examine the auditor's workpapers and calculations
• Right to appeal: If you disagree with the assessment, you can appeal to your base jurisdiction
• Right to a hearing: Most jurisdictions offer formal hearing processes for disputed audits

The appeals process varies by jurisdiction but typically includes:

1. Informal review with the audit supervisor
2. Formal written appeal within 30-60 days of assessment
3. Administrative hearing if the appeal is denied
4. Court review as a final option

Frequently Asked Questions

How long does an IFTA audit take?

Most IFTA audits are completed within 30-90 days from the initial records request. Complex audits or those requiring additional documentation may take longer.

Can I appeal an IFTA audit assessment?

Yes. You have the right to appeal audit findings to your base jurisdiction. Start with an informal review, then proceed to formal appeal if necessary.

What if I lost records for the audit period?

Inform the auditor immediately. They may allow alternative documentation (bank statements, fuel card reports, etc.) or apply estimation methods. Lost records typically result in some penalty, but cooperation is better than providing incomplete information.

Do I need a lawyer for an IFTA audit?

For routine audits with good records, probably not. For audits with significant potential liability, missing records, or suspected fraud allegations, professional representation is advisable.

What happens if I fail an IFTA audit?

"Failing" an audit means you owe additional tax, penalties, and interest. You must pay the assessment to maintain your IFTA license. Repeated audit failures may result in increased scrutiny or license revocation.