Filing quarterly federal excise taxes can be confusing and time-consuming for many businesses and individuals.
This comprehensive guide to IRS Form 720 will walk you through everything you need to know to file accurately and on time.
You'll learn exactly who needs to file, key deadlines, how to complete the form line-by-line, where to file, and more. We'll also cover special cases involving additional forms, amendments, and recent updates. Whether you are filing for the first time or are a seasoned Form 720 veteran, this guide has the insights and tips to make the process smooth and painless.
Introduction to IRS Form 720: Quarterly Federal Excise Tax Return
Understanding Form 720: The Quarterly Federal Excise Tax Return
IRS Form 720 is the Quarterly Federal Excise Tax Return that certain businesses must file to report and pay various federal excise taxes. These taxes apply to specific goods, services, and activities like fuel, tires, indoor tanning services, vaccines, and more. Form 720 is an important tax document that helps the government collect revenues that fund public programs.
Some key things to know about Form 720:
- It is filed quarterly to report a business's federal excise tax liabilities
- Covers a wide range of excise taxes like those on fuels, tires, indoor tanning services, vaccines, and more
- Helps fund public spending programs through excise tax revenue collection
- Requires detailed reporting of various excise tax liabilities each quarter
So in summary, Form 720 allows the IRS to efficiently collect federal excise taxes from businesses on a quarterly basis.
Who Needs to File Form 720: Eligibility and Requirements
Whether a business needs to file Form 720 depends on the goods it manufactures or sells, and the services it provides.
You generally have to file Form 720 if you:
- Manufacture or sell certain fuels like gasoline, diesel fuel, or gasohol
- Produce or import ozone-depleting chemicals
- Manufacture or sell tires
Additionally, Form 720 filers include:
- Indoor tanning services providers
- Vaccine manufacturers and importers
- Certain non-profit organizations providing insurance
Limited liability companies (LLCs) may also have to file if they operate in one of the above industries or provide applicable services.
So in summary, Form 720 applies to manufacturers, sellers, and service providers in industries subject to federal excise taxes. Most LLCs are not required to file unless they fall under one of the taxable categories.
Form 720 Deadlines: Key Dates to Remember
The deadlines for filing Form 720 align with the standard IRS quarterly tax periods:
- 1st Quarter: April 30
- 2nd Quarter: July 31
- 3rd Quarter: October 31
- 4th Quarter: January 31
It is critical for Form 720 filers to know these deadlines and file on time to avoid penalties. Helpful resources like IRS Publication 509, Tax Calendars provide quarterly tax due dates as well.
Many filers submit Form 720 electronically, which is due by the last day of the month following the tax quarter. This allows extra time versus filing by mail.
Keeping track of deadlines is vital for proper Form 720 compliance. Electronic filing can provide added leeway if needed.
IRS Form 720 Online Filing: A Step-by-Step Guide
IRS Form 720 can be filed electronically for convenience and faster processing. The main steps are:
- Gather necessary information like Business EIN, excise tax details, etc.
- Use IRS-approved tax software to complete Form 720 electronically
- File Form 720 through the IRS e-file system
- Make an electronic federal tax payment via EFTPS
Key benefits include error checking, faster processing, and easy federal tax payments. There are multiple IRS-approved software options for e-filing Form 720 conveniently.
In summary, online filing streamlines submitting Form 720, allows integrated tax payments, and provides added confidence in accuracy. This modern approach saves significant time versus paper filing.
Who needs to file form 720 Quarterly Federal Excise Tax Return?
The IRS Form 720 Quarterly Federal Excise Tax Return must be filed by businesses that:
- Manufacture or sell certain products subject to excise taxes, like fuel, tires, tobacco, firearms, and air transportation services
- Receive payments for certain services subject to excise taxes, like communications services and indoor tanning services
- Are liable for environmental taxes, like ozone-depleting chemicals or imported petroleum products
Specifically, the following businesses are generally required to file Form 720:
- Manufacturers and sellers of motor fuels, diesel fuels, kerosene, alternative fuels
- Producers and importers of coal and taxable vaccines
- Manufacturers and sellers of sport fishing equipment and bows and arrows
- Manufacturers, sellers and users of certain trucks, tractors and trailers
- Operators of heavy vehicles registered or required to be registered for highway use
- Producers and importers of ozone depleting chemicals and imported taxable products
- Providers of taxable communications and indoor tanning services
You must file Form 720 even if no tax is due, to avoid penalties. Most filers need to submit Form 720 quarterly, by the last day of the month following the end of the quarter. You can file Form 720 electronically through IRS e-file, by mail, or by private delivery service. Carefully review the instructions to determine your specific filing requirements.
What is quarterly federal excise tax?
The federal excise tax is a tax imposed on the manufacture and sale of certain products and services in the United States. Some common items that are subject to federal excise tax include:
- Alcoholic beverages like beer, wine, and liquor
- Tobacco products like cigarettes and cigars
- Motor fuels like gasoline and diesel
- Air transportation services
- Environmental taxes on ozone-depleting chemicals, petroleum products, and imported products that use certain chemicals
Businesses that manufacture, sell, or import these types of taxable goods and services may need to file Form 720 and pay federal excise taxes on a quarterly basis. The quarters are as follows:
- January, February, March
- April, May, June
- July, August, September
- October, November, December
So if your business deals with any of the goods or services subject to excise tax, you must file Form 720 for each quarter by the last day of the month following the quarter end to report and pay the applicable taxes. For example, taxes for the first quarter (Jan-Mar) would be due by April 30. Failure to file can result in penalties and interest charges.
The types of businesses that may need to file Form 720 and pay federal excise taxes include:
- Alcohol and tobacco manufacturers and importers
- Gas stations
- Air transportation providers
- Chemical and petroleum producers
So in summary, the quarterly federal excise tax is a tax that must be paid on a quarterly basis by businesses dealing in certain excise-taxable goods and services. Form 720 is used to report and pay this tax to the IRS.
Can I deduct excise tax on my federal return?
The federal government charges excise taxes on the sale or use of a wide variety of products, including alcohol, tobacco, tires, gasoline, vaccines, indoor tanning services, and more. These taxes are imposed on either the manufacturer or retailer, who then passes the cost onto the consumer through higher prices.
An excise tax is generally not deductible if it is incurred for personal consumption or use. However, in certain cases, an excise tax related to your trade or business may be deductible as a business expense.
For example, if you operate a distillery, tobacco manufacturing plant, or transportation company, the excise taxes you pay on the products you sell may qualify as ordinary and necessary business expenses that can be deducted on your federal tax return. The key factors are that the excise taxes:
- Must be business expenses rather than personal expenses
- Must be common and accepted expenses in your line of trade or business
- Cannot be capital expenses or inventory costs
So if you incur excise taxes as an individual consumer making personal purchases, you cannot deduct them on your federal tax return. But excise taxes paid in the ordinary course of operating certain types of businesses may qualify as deductible business expenses. Be sure to consult a tax professional to determine whether any excise taxes you have paid are eligible tax deductions for your business.
What is the form 720 update for 2023?
The IRS has released an updated version of Form 720 for 2023. Some key updates include:
- The Patient-Centered Outcomes Research (PCOR) fee rates have been updated for plan years ending on or after October 1, 2022 and before October 1, 2023. The applicable rate is now $3.00 per covered life. This fee helps fund research on patient outcomes and is part of the Affordable Care Act (ACA).
- The filing due date for the PCOR fee remains July 31st of each year. Employers will need to file Form 720 and pay applicable PCOR fees by July 31, 2023.
- The instructions for Line 52 on Form 720 regarding the PCOR fee have been updated to reflect the new fee rate. Employers will need to calculate the PCOR fee based on the $3.00 per covered life rate.
- No other significant changes have been made to Form 720 instructions for 2023. The form can be filed electronically or by paper.
In summary, the key update to Form 720 for 2023 is the change to the PCOR fee rate. Employers with self-insured health plans should review the new instructions and ensure they file on time by July 31st, 2023 using the updated $3.00 per covered life rate to calculate PCOR fees owed. As always, be sure to keep detailed records to support your PCOR fee calculations.
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Preparing to File Form 720
Gathering Required Information and Documents
Gathering Required Information and Documents
To accurately file Form 720, you will need to gather the necessary records and documents ahead of time. This includes:
- Receipts and invoices for any taxable transactions, such as sales of diesel fuel, gasoline, tobacco products, etc. These provide details needed to calculate excise tax owed.
- Inventory records tracking taxable items manufactured or purchased during the quarter.
- Supporting schedules and worksheets detailing calculations.
- Bank deposit information on tax payments made, if applicable.
- Your Employer Identification Number (EIN) or Social Security number.
Having these documents organized will streamline filing Form 720 properly and on time.
Understanding Form 720 Instructions for 2023
Be sure to review the latest instructions for Form 720 for the 2023 tax year. Key updates include:
- The PCORI fee rate is now $2.79 per covered life for plan years ending on or after October 1, 2022 before October 1, 2023.
- The Patient-Centered Outcomes Research Trust Fund fee has been extended through fiscal year 2029.
- The IRS now requires electronic filing for filers reporting over $10,000 in quarterly excise taxes.
Refer to the instructions for specifics on tax rates, payment options, where to file, deadlines, and more critical filing details. Understanding the instructions upfront prevents mistakes.
Using IRS Form 720 Fillable Forms for Preparation
The IRS provides fillable printable PDF versions of Form 720. These auto-calculate excise tax owed based on amounts entered. Using the fillable form to prepare your figures ensures accuracy before filing.
The IRS also offers fillable Form 720-CS and Form 720-TO for summarizing taxes by category. Preparing these forms ahead of time verifies your tax details are complete.
Determining If You Need to File Form 720 for Your LLC
Limited liability companies (LLCs) must pay certain federal excise taxes if they:
- Manufacture or sell motor fuels, diesel fuels, coal, taxable tires, gasoline, firearms, tobacco products, etc.
- Fail to withhold required taxes on wages paid.
So if your LLC engages in any taxable activities subject to excise taxes, you must file Form 720 to report and remit those taxes instead of reporting them on Form 1120-S or Form 1065. Check if you exceeded any registration thresholds for manufacturing or selling excisable goods.
Form 720 Filing Process
Completing IRS Form 720: Line-by-Line Instructions
When completing Form 720, start by filling out your identifying information such as name, address, EIN, etc. in Part I. Then proceed to reporting your net tax liability for the applicable excise taxes in Part II. Refer to the Form 720 Instructions for the current tax year for specifics on each line item.
Some key pointers:
- Report liabilities by IRS quarters - by the due date for each quarterly period.
- If you have no tax to report, enter zero on the liability lines. Do not leave any lines blank.
- There are various schedules to file (e.g. Form 720-CS, Form 6627) for certain taxes. Attach these to your Form 720.
- Keep detailed records to support the information on Form 720 as required by law.
Remember, Form 720 is due by the last day of the month following the end of each quarter.
IRS Form 720 PCORI Fees: Reporting and Payment
The Patient-Centered Outcomes Research Institute (PCORI) fees apply to certain health insurance policies and self-insured plans. To report and pay PCORI fees, enter the average number of lives covered on Line 133 on Form 720. Then enter the applicable rate for that tax year and calculate the total fee owed.
For specifics on which types of plans are subject to PCORI fees, determining the average covered lives, and the fee amount per life, refer to Form 720 PCORI Fee FAQs.
Utilizing the Electronic Federal Tax Payment System (EFTPS)
To make federal tax payments electronically for Form 720 and other returns, enroll in the EFTPS online system. You can schedule one-time or recurring payments via EFTPS up to 365 days in advance. When making payments for Form 720, enter the form number (720), the tax period for which you are making the payment, and your net excise tax liability amount.
EFTPS provides a quick and secure way to pay federal excise taxes online or by phone. It also lets you view your payment history.
IRS Form 720 Mailing Address: Where to Send Paper Returns
To file Form 720 by mail, send your completed paper return to the IRS at the applicable address below:
Without payment:
Department of the Treasury
Internal Revenue Service
Ogden, UT 84201-0009
With payment:
Internal Revenue Service
P.O. Box 37930
Hartford, CT 06176-7930
Be sure to include Form 720-V payment voucher if sending a payment by check or money order. Do not send cash payments.
For private delivery services, see the Form 720 instructions for the appropriate mailing address.
Special Cases and Additional Forms
Filing Form 720 can involve some special cases and additional reporting requirements. Here is an overview of some key items to be aware of:
Form 720-CS, Carrier Summary Report: When and How to File
The Carrier Summary Report, IRS Form 720-CS, must be filed by rail carriers, inland water transportation carriers, and pipeline operators along with Form 720. It provides details on amounts subject to tax on transportation of property by rail, inland waterways, and pipeline.
To file Form 720-CS, total the taxable amounts for each quarter and enter them on the form. Indicate the quarter being reported at the top. File the completed 720-CS with your Form 720 by the due date.
Form 720-TO, Terminal Operator Report: Filing Requirements
Terminal operators who receive liquid products transferred by pipeline or vessel must file Form 720-TO to report gallons received and stored. This ties to excise taxes reportable on Form 720.
The Terminal Operator Report must be filed by the last day of the month following the quarter covered by the report. Provide terminal operator registration number, IRS-assigned location code, product information, and gallon totals.
Amending Returns with Form 720-X
If you need to correct a previously filed Form 720, file Form 720-X, Amended Quarterly Federal Excise Tax Return. Use it to report additional tax due or claim a credit or refund.
File Form 720-X by the due date of the Form 720 for the quarter in which you determined the need for an amendment. Provide an explanation and your calculations.
Reporting Environmental and Gas Guzzler Taxes
Environmental taxes on ozone-depleting chemicals, fuel oils, and chemicals used in imported products are reported annually on Form 6627, Environmental Taxes.
The Gas Guzzler Tax on automobiles with low fuel economy is reported on Form 6197, Gas Guzzler Tax. Refer to the form instructions for rates and how to calculate the tax.
These forms tie to excise taxes that may need to be included in your Form 720 filing as well.
FAQs and Additional Resources
FAQs: Aviation Excise Tax Holiday under the CARES Act
The CARES Act provides an excise tax holiday on the 7.5% tax imposed on amounts paid for commercial aviation. This applies to amounts paid for transportation beginning after March 27, 2020 and before January 1, 2021.
What does the aviation excise tax holiday cover?
The tax holiday covers the 7.5% excise tax imposed under Internal Revenue Code (IRC) 4261 on amounts paid for the transportation of persons by air, including domestic segments of international flights.
How long does the aviation excise tax holiday last?
The holiday lasts from March 28, 2020 to December 31, 2020. Any amounts paid during this period for commercial aviation are exempt from the 7.5% excise tax under IRC 4261.
What should airlines and taxpayers do regarding the aviation excise tax holiday?
Airlines and related commercial aviation businesses do not need to collect excise tax on taxable transportation during the holiday period. Taxpayers should not pay or have excise tax collected on such amounts.
Where can I find more information on the aviation excise tax holiday?
Further details can be found in IRS Notice 2020-23. Reach out to a tax professional for assistance as needed.
Alcohol and Tobacco Tax and Trade Bureau (TTB) Resources
The Alcohol and Tobacco Tax and Trade Bureau (TTB) administers and enforces excise tax laws related to alcohol and tobacco. They provide a number of resources relevant to Form 720 filers:
- TTB website - Information on alcohol and tobacco excise taxes.
- TTB online seminars - Webinars covering various excise tax topics.
- TTB news and guidance - Latest updates impacting alcohol and tobacco taxes.
- Ask TTB online database - Searchable database of FAQs.
- TTB contact information - Ways to get in touch with the TTB.
Check the TTB website and resources for assistance with alcohol and tobacco excise tax questions when filing Form 720.
Troubleshooting Common Issues with Form 720
Filing Form 720 can be complicated, leading to common errors or issues:
Math errors - Carefully double check all calculations on the form to avoid math errors. The IRS will reject returns with calculation mistakes.
Missing information - Ensure all relevant identification information is included. The IRS will ask for missing details which can delay processing.
Late filing - File Form 720 by the due date each quarter to avoid failure-to-file penalties. See IRS Tax Calendars.
Payment issues - Pay excise taxes on time using EFTPS to avoid penalties. Confirm payments have processed properly.
Recordkeeping problems - Maintain thorough supporting records as documentation for at least 4 years in case of an IRS audit.
Seeking help from a tax professional can assist with avoiding common pitfalls when filing Form 720 each quarter.
Seeking Professional Help for Form 720 Filing
Consider getting help from a tax professional for filing Form 720 if:
- It is your business's first time filing Form 720
- You have questions about which excise taxes apply
- You need help tracking taxable transactions
- You have issues or errors on past Form 720 returns
- You require tax planning and advice tailored to your situation
Enlisting an accountant, enrolled agent, or other qualified tax expert can save time and hassle dealing with this complex quarterly tax return. They can ensure compliance, maximize deductions, recommend strategies to reduce tax liability, and provide personalized guidance.
Be sure to work only with professionals who specialize in excise taxes and have expertise specifically with IRS Form 720 filing. Ask about their experience and qualifications.
Getting professional tax help is an investment but often pays for itself through tax savings, error reduction, and avoiding penalties for non-compliance. Consider the benefits when deciding if hiring help for filing Form 720 is right for your business.
Conclusion: Final Thoughts on Form 720 Filing
Recap of Form 720 Filing Essentials
Filing Form 720 accurately and on time is critical for businesses liable for federal excise taxes. Key points to remember:
- Form 720 must be filed every calendar quarter by the last day of the month following the quarter end (ex: Q1 taxes are due April 30)
- Taxes are due for various goods and services like fuel, tires, indoor tanning services, vaccines, etc. Review IRS Pub 510 to confirm if you need to file
- Both paper and electronic filing options are available
- Late filing or underpayment can result in penalties
Benefits of Compliance and Timely Filing
By understanding Form 720 requirements and filing on time, you can avoid penalties and audits. Additional benefits include:
- Accurate financial reporting and tax preparations
- Prompt receipt of any refunds
- Avoidance of interest charges from underpayment
- Reduced risk of tax notices or audits
In summary, Form 720 is a key aspect of excise tax compliance. Businesses should consult IRS guidance to ensure proper filing and payment.
