Filing federal excise taxes can be confusing for many businesses.
This guide will provide clear, step-by-step instructions on how to accurately fill out IRS Form 720 to report your federal excise tax liability every quarter.
You'll learn key factors in determining if you need to file, how to calculate the taxes you owe, tips for completing each section of the form properly, choosing tax software to file electronically, and more.
Introduction to Quarterly Federal Excise Tax Return
Form 720 is a quarterly federal excise tax return that certain businesses must file to report and pay applicable excise taxes. Key things businesses should know:
- Form 720 must be filed every quarter by the last day of the month following the end of the quarter. So for Q1 2023, it's due April 30th.
- You must file if you're liable for collecting or paying any of the federal excise taxes covered, like taxes on fuel, manufacturing, transportation, communications services, imported products, vaccines, etc.
- There are penalties for late filing or underpaying, so understanding your potential tax liability is important.
Understanding the Basics of Form 720
Form 720 is used to report a variety of federal excise taxes. It covers taxes on:
- Motor fuels like gasoline, diesel fuel, kerosene
- Tires
- Petroleum products
- Certain vaccines
- Certain medical devices
- Certain chemicals and imported products
You must file Form 720 and pay applicable excise taxes if you're a manufacturer, seller, or importer of these types of taxable products or services.
The form calculates your total excise tax liability for the quarter. You must report quantities, sales amounts, and calculate tax due using the applicable IRS tax rates for each category.
Identifying Businesses Subject to IRS Form 720 for 2023
Types of businesses required to file Form 720 excise tax returns include:
- Gas stations - For federal fuel excise taxes
- Tire manufacturers & importers - For tire taxes
- Chemical manufacturers - For certain chemical taxes
- Medical device makers - For medical device sales taxes
- Vaccine manufacturers - For vaccine taxes
You must have an Employer Identification Number (EIN) and be registered with the IRS to file Form 720 and pay excise taxes each quarter. Using tax software can simplify the process.
If you think your business may be liable for federal excise taxes, review IRS Publication 510 which covers Form 720 requirements in detail.
Do I need to file form 720 Quarterly Federal Excise Tax Return?
You need to file Form 720 if your business manufactures or sells certain goods or services that are subject to federal excise taxes.
Some examples of businesses that may need to file include:
- Telecommunications service providers
- Manufacturers and sellers of certain fuels like gasoline, diesel fuel, and kerosene
- Producers of certain chemicals like ozone-depleting chemicals and imported taxable products
You generally need to file Form 720 if:
- You were liable for more than $500 in excise taxes during a tax quarter
- You produced or imported any amount of ozone-depleting chemicals during the tax quarter
You do not need to file Form 720 if:
- Your net tax liability is $500 or less for the quarter
- You have no superfund tax liability and you imported 5,000 or fewer ozone-depleting chemicals during the quarter
The form is due by the last day of the month following the end of the tax quarter. So you'll file 4 times per year - by April 30th, July 31st, October 31st, and January 31st.
It's important to carefully review IRS Publication 510 to determine if you meet the requirements for filing Form 720 each quarter. Failing to file can lead to penalties from the IRS. Reach out to a tax professional if you need help determining your responsibility.
Do I need to file form 720 for my trucking company?
If your trucking company is involved in selling taxable goods or services such as diesel fuel, gasoline, tires, heavy trucks, etc., you likely need to file IRS Form 720. Here are some key points:
- Form 720 must be filed quarterly to report and pay federal excise taxes on taxable sales and activities. This includes taxes on fuels, tires, heavy vehicles, communications services, and more.
- It applies not just to manufacturers but also to retailers and wholesale distributors selling these excisable goods. This includes trucking companies selling or using taxable items.
- You must file Form 720 if you have a tax liability of $2,500 or more for a specific excise tax for the quarter. Smaller amounts can be rolled into the next quarter.
- Due dates are one month after the end of each quarter - April 30th, July 31st, October 31st, January 31st. Taxes must be paid via EFTPS.
- Failure to file Form 720 can lead to significant penalties and interest charges. It is crucial to understand if you have excise tax liability and file accurately.
In summary, trucking companies commonly need to file Form 720 to report federal excise taxes if they sell taxable goods like diesel or tires. Carefully review the form instructions to determine your specific filing requirements. Consider using tax software or an accountant to simplify the process.
What is the penalty for filing form 720?
The penalty for a late filing of Form 720, Quarterly Federal Excise Tax Return, can be substantial. Here are the key details:
- 5% penalty per month - The basic penalty is 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax.
- Interest charges - In addition to penalties, interest charges apply to any unpaid taxes from the due date of the return until the taxes are paid in full. The interest rate is determined quarterly by the IRS.
- No extensions - Unlike income tax returns, there are no extensions for filing Form 720. It must be filed by the due date each quarter to avoid penalties.
- Calculation - The penalty and interest are calculated based on the net amount of tax due on the late-filed return. You can use IRS Form 720 instructions to correctly calculate the penalty and interest.
Filing Form 720 on time is crucial to avoid accruing substantial penalties and interest charges. Mark your calendar for the due dates each quarter and make sure to file by those dates. If you do file late, be prepared to pay the applicable penalty and interest to the IRS. Reaching out to a tax professional can also help ensure timely, accurate filing of this form.
How to fill out form 720 for Pcori fee?
The Patient-Centered Outcomes Research Institute (PCORI) fee must be paid by certain health insurance issuers and employers who sponsor self-insured health plans. Here are the key steps to fill out IRS Form 720 correctly for the PCORI fee:
Gather Information Needed
- Determine if you need to pay the PCORI fee based on IRS guidance.
- Have your Employer Identification Number (EIN) ready.
- Calculate the average number of lives covered under your applicable self-insured health plans during the plan year.
Complete Part I of Form 720
- Enter your company information including name, address, and EIN.
- Check the second quarter box under "Quarter beginning" and "ending" for the PCORI fee.
Complete Part II, Line 133
- Enter your calculated average number of covered lives on line 133(c) or 133(d).
- Multiply this by the fee amount set by the IRS for that year (e.g. $2.79 per covered life in 2023).
- Enter the total PCORI fee amount on line 133.
Complete Part III
- Enter the total from line 133 on line 3.
- Enter the amount from line 3 again on line 10.
- An authorized person must sign and date at the bottom.
Be sure to use IRS instructions for specifics on completing other parts of Form 720 accurately. Pay electronically or attach payment voucher when filing.
sbb-itb-beb59a9
Form 720 Preparation Checklist
Filing Form 720 can be complex, but following this checklist can help businesses prepare:
Calculating Your Excise Tax Liability
To calculate your total excise tax liability for the quarter:
- Review business activities to identify taxable transactions subject to federal excise taxes
- Apply appropriate excise tax rates to quantities of taxable items sold or used
- Calculate total excise tax owed for each tax category
- Sum all excise taxes to determine total Form 720 tax liability
For example, if you sold 200,000 gallons of diesel fuel, you would calculate the excise tax as:
200,000 gallons x $0.244 per gallon excise tax rate = $48,800 total diesel excise tax
Repeat tax calculations for each excise tax type.
Enrollment in the Electronic Federal Tax Payment System (EFTPS)
All Form 720 filers must pay their balance due through the Electronic Federal Tax Payment System (EFTPS). This allows online payment of federal taxes.
To enroll:
- Obtain an Employer Identification Number (EIN) if you do not already have one
- Complete EFTPS enrollment online or submit Form 9779 by mail
This should be done before your first Form 720 filing.
Reviewing Instructions for Form 720
Carefully review the Instructions for Form 720 published in IRS Publication 509. This covers:
- Tax rates and payment deadlines for each excise tax category
- Form 720 schedules and line items
- Deposit requirements
- Recordkeeping procedures
- Contact information for the Taxpayer Advocate Service
Thoroughly reviewing instructions can prevent mistakes or penalties for non-compliance. Reach out to the IRS with any questions.
Following this Form 720 preparation checklist can ensure your business accurately calculates and reports federal excise tax obligations. Let me know if you need any clarification or have additional questions!
Filling Out IRS Form 720 Fillable
Filling out Form 720 can seem daunting, but breaking it down step-by-step makes the process more manageable. Here are some tips for accurately completing and submitting this quarterly federal excise tax return:
Completing Each Section of Form 720
Carefully go through each section of Form 720, providing the required information on your business, excise tax liability, and payment details.
- Employer Identification Number (EIN) - Enter your 9-digit EIN assigned by the IRS. This identifies your business to the IRS.
- Tax liability - Calculate total excise tax due for the quarter based on your sales and IRS tax rates. Common excise taxes include fuel, air transportation, communications services, and more.
- Tax rates - Tax rates vary based on the type of excise tax. Refer to IRS Publication 510 for details. Double check your liability calculations.
- Payment details - Report how much you are paying with this return via check, money order, or electronic payment.
Adhering to the Form 720 Due Date
Form 720 is due quarterly:
- By April 30th
- By July 31st
- By October 31st
- By January 31st
Mark your calendar with reminders to avoid late fees. Postmark or submit by the due date to stay compliant.
Documenting and Retaining Records
- Keep detailed records on excise tax transactions and liability calculations. This includes sales invoices, receipts, and other proof documents.
- Retain records for at least 4 years to support your tax return data. Store securely in physical or digital formats.
- Well-organized records make future Form 720 filing easier and help justify details if audited.
Accurately completing all sections of Form 720 and retaining thorough supporting records helps avoid IRS issues down the road. Let us know if you need help with your quarterly filing.
Electronic Submission: IRS Form 720 Online Filing
Filing Form 720 electronically offers several advantages over paper filing. Online filing is faster, more accurate, and provides quicker processing times. Using tax software also makes Form 720 filing easier by guiding you through the process step-by-step.
Choosing the Right Tax Software for Form 720
When selecting tax software for filing Form 720 electronically, look for the following key features:
- IRS e-file Certification: Make sure the software is authorized by the IRS for electronic filing of business and excise tax returns like Form 720. This ensures proper transmission protocols.
- Form 720 Support: The software should provide a user-friendly and compliant Form 720 module with all schedules and ability to make payments.
- Accuracy Checks: Opt for software that performs basic math checks and flags common errors to avoid mistakes.
- Help Resources: Choose tax software that offers context-sensitive help guides, FAQs, chat support in case you need assistance.
Electronic Filing Steps and Tips
Follow these steps to file Form 720 through certified tax software:
- Enter your employer identification number (EIN): This is required for e-filing and IRS verification.
- Select Form 720: The software should walk you through each section.
- Input tax liability information: Carefully enter amounts from your records. The software will compute totals.
- Perform final review: Double check your information before submitting to avoid amendments.
- File Form 720 electronically: Get instant confirmation from the IRS and keep e-records.
Pro tip: Schedule payments through EFTPS for easy automated tax deposits.
Troubleshooting Common E-Filing Issues
If you run into problems e-filing Form 720, try these troubleshooting tips:
- Verify EIN: Double check your employer identification number was entered correctly. This is the most common cause of rejected e-files.
- Check error messages: Read any error notifications from your tax software carefully and fix accordingly.
- Call support: If your tax software provides assistance, explain the issue and try their recommendations.
- Consult the IRS: Reach out to the IRS at 800-829-4933 if your software cannot resolve the e-filing problem.
Being proactive and addressing any filing issues promptly will help ensure smooth electronic submission of Form 720.
Post-Submission Actions and Compliance
After submitting Form 720 each quarter, it's important to take a few key next steps to stay compliant with federal excise tax requirements:
Ensuring Timely Quarterly Federal Excise Tax Payments
Any excise taxes owed must be paid on time through the Electronic Federal Tax Payment System (EFTPS). Failure to make timely payments may result in penalties and interest charges from the IRS. Businesses should log into their EFTPS account to schedule tax payments on the due date for Form 720.
Correcting Mistakes with Form 720-X, Amended Quarterly Federal Excise Tax Return
If any errors are found on a previously filed Form 720, businesses can file Form 720-X to correct the mistakes. This amended return should be submitted as soon as possible after discovering the errors to minimize potential penalties. Form 720-X can be filed electronically or mailed to the IRS.
Accessing Support from the Taxpayer Advocate Service
The Taxpayer Advocate Service is an independent organization within the IRS that helps taxpayers resolve issues. If businesses have difficulties with federal excise tax compliance, they can contact the Taxpayer Advocate Service for assistance. Support options include submitting Form 911, Request for Taxpayer Advocate Assistance, calling 1-877-777-4778, or searching for the nearest Taxpayer Advocate office on IRS.gov.
Staying on top of post-filing actions like making payments on time, correcting any mistakes, and obtaining help when needed can ensure ongoing federal excise tax compliance for businesses. Paying attention to these key steps after submitting Form 720 quarterly helps avoid penalties and other unnecessary hassles.
Special Circumstances in Filing Form 720
Filing Form 720 can involve some special circumstances that require additional forms and considerations.
Reporting the Patient-Centered Outcomes Research Institute (PCORI) Fees on Form 720
The Patient-Centered Outcomes Research Institute (PCORI) fee applies to certain health insurance policies and self-insured plans. This fee must be reported on Form 720 if your organization is an applicable self-insured health plan or insurance carrier.
To report the PCORI fee on Form 720:
- Calculate the average number of lives covered under the policy and the fee amount due using Form 720 instructions.
- Enter the fee amount on Part II, line 133 of Form 720.
- Attach Form 720 and your payment to Form 720-V.
The PCORI fee payment deadlines are July 31st of each year. Carefully calculate this fee to avoid penalties.
Handling the Gas Guzzler Tax with Form 6197
If your organization manufactures or imports luxury automobiles with low fuel economy, you may owe a gas guzzler tax. This excise tax must be calculated on Form 6197 and then transferred to Form 720.
To report this tax:
- Determine the fuel economy rating for each automobile model.
- Calculate gas guzzler tax on Form 6197 for models below the fuel economy standard.
- Enter the total gas guzzler tax from Form 6197 onto Form 720, Part I, line 2b.
- Attach Form 6197 to your Form 720.
The gas guzzler tax payment is due by the end of the month following the quarter in which the automobiles were sold. File Form 720 timely to avoid failure-to-pay penalties.
Addressing Environmental Taxes on Form 6627
Certain environmental taxes, like the ozone-depleting chemicals tax, must be reported on Form 6627. The totals from Form 6627 then transfer to Form 720.
To report these taxes:
- Calculate the environmental taxes owed on Form 6627.
- Enter the amount from Form 6627, line 26 on Form 720, Part I, line 3.
- Attach Form 6627 to Form 720.
Environmental taxes are due by the end of the month following the end of the quarter. Pay these taxes on time to prevent interest and penalties.
Carefully review all sections of Form 720 to determine if additional forms and specialized taxes apply to your business. Seek assistance from a tax professional if you need help navigating these complex situations.
Conclusion: Key Takeaways on Filing Form 720
Filing Form 720 accurately and on time each quarter is critical for meeting your federal excise tax obligations. Here are some key takeaways:
- Form 720 is due by the last day of the month following the end of each quarter. Mark your calendar with the due dates to avoid any penalties.
- You must file Form 720 electronically if you are reporting over $50,000 in quarterly excise taxes. Use IRS e-file or file through EFTPS.
- Carefully calculate your excise tax liability for each applicable tax category, such as air transportation taxes, fuel taxes, and more. Refer to the form instructions.
- Keep detailed records to support the tax amounts reported. The IRS may request documentation during an audit.
- You can file an amended return on Form 720X if you need to correct a previously filed Form 720. Do not include the amended amounts on the next quarter's regular Form 720 filing.
- Pay your balance due on time to avoid failure-to-pay penalties and interest charges. You may pay electronically through EFTPS.
- Seek assistance from a tax professional if you have questions or difficulties regarding Form 720 reporting requirements or calculations. Getting compliant is critical.
Meeting your quarterly federal excise tax obligations can feel complicated, but taking the right steps will help your business stay compliant. Reach out for help if needed.
