IRS Suspends Federal Penalties for Highway Use of Dyed Diesel Through Year-End, Retroactive to October 1
WASHINGTON — The Internal Revenue Service announced on October 14 that, from October 1 through December 31, 2026, it will not impose federal penalties when dyed diesel fuel is sold for use on the highway or used in diesel-powered vehicles on the highway anywhere in the United States. The relief is retroactive to October 1 and is available to any person who sells or uses such fuel for highway use, according to the IRS media release, which tax publications reported on October 15.
Dyed diesel, colored red for identification, is normally intended for off-highway uses such as farming and construction equipment and is exempt from the federal excise tax. When it is sold for highway use or used to power a highway vehicle, the tax generally falls on the retail seller or, when the fuel is not bought at retail — for example, fuel drawn from a farm storage tank — on the vehicle operator. The IRS said the announcement implements Executive Order 14435, 'Emergency Tax Relief on Diesel Fuel,' signed by President Donald Trump on October 5 and published in the Federal Register on October 9.
During the relief period, the IRS said, ordinary federal collection and enforcement procedures are suspended, IRS Fuel Compliance Officers are being reassigned to other duties, and no federal inspections of on-road dyed fuel use will take place. The penalty relief also covers failures to make required semimonthly tax deposits and failures to maintain adequate records. Sellers and distributors do not need to investigate or document the end use of dyed fuel sold during the period, and taxpayers do not need to keep records to substantiate their eligibility for the relief.
The IRS said it expects to issue further guidance on the anticipated tax payment postponement, including how the relief applies to Form 720, the Quarterly Federal Excise Tax Return, and that it will consider options to eliminate the obligation to pay deferred amounts. Taxpayers who receive a penalty notice but believe they qualify for relief should follow the instructions in the notice or contact the IRS. The agency noted that the relief applies only for federal tax purposes and does not affect state fuel taxes or penalties, which vary by state.
Related:
Published by GSM · USA (original Chinese edition)
Photo: 佛罗里达州皮尔斯堡服务区的柴油加油棚与半挂卡车（资料图，本站裁切）· DanTD 摄，CC BY 4.0，维基共享资源 / A diesel canopy and a semi truck at the Fort Pierce Service Plaza in Florida (file photo, cropped by GSM) · DanTD, CC BY 4.0, via Wikimedia Commons
- 2026-10-05Trump Signs Order Easing Diesel Restrictions to Cut Fuel Costs
- 2026-10-09Idaho Governor Signs Order Pausing Dyed-Diesel Enforcement Checks for 30 Days During Fall Harvest
- 2026-10-09Missouri Executive Order 26-20 Allows Dyed Diesel on State Highways Through End of 2026
- 2026-10-10Nebraska Governor Thanks President for Diesel Order to Help Harvest
- 2026-10-11South Dakota Red Diesel Dispute Escalates: Farmers Union Calls Special Session to Put Tax Relief Into Law
- 2026-10-16IRS Suspends Federal Penalties for Highway Use of Dyed Diesel Through Year-End, Retroactive to October 1This story
- 2026-10-21West Virginia Declares 60-Day Emergency: Trucks Allowed to Use Tax-Free Red Diesel on Highways
- 2026-10-21Follow-Up: West Virginia Tax Division Suspends Dyed Diesel Highway Enforcement for 60 Days
