IRS Form 720, the Quarterly Federal Excise Tax Return, is a tax form for businesses that sell goods or services subject to excise tax to report and pay those taxes. The penalty for failing to file Form 720 is 5% of the unpaid tax for each month or part of a month the return is late, up to 25%. Additionally, there’s a separate penalty for failing to pay the tax on time (0.5% per month), and specific penalties for late deposits.
You will automatically be enrolled in EFTPS when you apply for an EIN. You will receive a separate mailing containing instructions for activating your EFTPS enrollment after you receive your EIN. Enter the amount from Form 6627, Part IV, line 4, column (d), on the line for IRS No. 20.
Communications Services (IRS No.
Fill in the number of gallons and the appropriate rate in the Rate column on the line for IRS No. 79. If you are liable for the reduced rate (see below) of tax on a diesel-water emulsion removal at the terminal rack or other taxable event, report these gallons on the line for IRS No. 104. If you are liable for the diesel fuel tax on removal at the terminal rack, report these gallons on line 60(a).
For late filing, the 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%. If your return is more than 60 days late, the minimum penalty is the smaller of $450 (adjusted for inflation) or 100% of the tax due. The IRS takes excise tax compliance seriously, and the penalties for noncompliance can add up quickly.
Stay Penalty-Free: Ensure Compliance with Form 720
However, you can’t use the EIN of the tax preparation firm in place of your PTIN. You can apply for a PTIN online or by filing Form W-12, IRS Paid Preparer Tax Identification Number (PTIN) Application and Renewal. For more information about applying for a PTIN online, go to IRS.gov/PTIN. If you are only filing to report zero tax and you won’t owe excise tax in future quarters, check the Final return box above Part I of Form 720. This article breaks down what IRS Form 720 is, why it exists, who must file it, and how to file correctly.
Information regarding the use of FCNs was made public by an announcement in the Federal Register on April 12, 2010. The Infrastructure Investment and Jobs Act (Public Law , 135 Stat. 429) reinstated the excise taxes on certain chemicals and chemical substances, with certain modifications, effective July 1, 2022. To electronically file Form 720 taxpayers will incur the cost of the provider’s required service fee for online submission.
Understanding the Different Types of Excise Taxes
Any device or system of devices that provides the tractor with services, such as heat, air conditioning, and electricity, without the use of the main drive engine while the tractor is temporarily parked or stationary. The device must be affixed to the tractor and determined by the Administrator of the EPA, in consultation with the Secretary of Energy and Secretary of Transportation, to reduce idling while parked or stationary. The tax is 3% of amounts paid for local telephone service and teletypewriter exchange service. A responsible person can be an officer or employee of a corporation, a partner or employee of a partnership, an employee of a sole proprietorship, an accountant, or a volunteer director/trustee. A responsible person may also include one who signs checks for the business or otherwise has authority to cause the spending of business funds. If you receive a notice about a penalty after you file this return, reply to the notice with an explanation and we will determine if you meet reasonable-cause criteria.
Effective December 23, 2017, certain payments related to the management of private aircraft are exempt from the excise taxes imposed on taxable transportation by air. If communications, air transportation, and indoor tanning services taxes are collected but not paid to the U.S. Treasury or are willfully not collected, the trust fund recovery penalty may apply. The IRS considers a semimonthly period as the first 15 days of the month (first semimonthly period) or the 16th through the last day of the month (second semimonthly period).
Now that you’ve got the basics, let’s dive deeper into the specific parts of the form and how to fill them out. We believe everyone should be able to make financial decisions with confidence. When you use Taxfyle, you’re guaranteed an affordable, licensed Professional.
If you don’t have an EIN, you may apply for one online by going to IRS.gov/EIN. You may also apply for an EIN by faxing or mailing Form SS-4, Application for Employer Identification Number, to the IRS. If you have adjustments to liabilities reported for prior quarters, see Form 720-X, Amended Quarterly Federal Excise Tax Return. Report the floor stocks tax on ozone-depleting chemicals (ODCs), IRS No. 20, on the return due by July 31 of each year.
- Surtax on any liquid used in a fractional ownership program aircraft as fuel (IRS No. 13).
- If the due date for filing Form 720 falls on a weekend or legal holiday, you can file by the next business day.
- In that role, Ryan co-authored the Student Loan Ranger blog in partnership with U.S.
- This comprehensive guide endeavors to demystify the 720 form, offering you a step-by-step understanding of its purpose, who needs it, and how to navigate it effectively.
- The separate account for any month can’t include an adjustment resulting from a refusal to pay or inability to collect unless the refusal has been reported to the IRS.
- Generally, references to taxes on Form 720 include this fee.
510 for information on allowable claims relating to these taxes. You must include the following information for each claim. The kerosene sold for use in commercial aviation must have been sold during the period of claim for use in commercial aviation (other than foreign trade). For claims on line 8a, attach a separate sheet with the name and TIN of each governmental unit to whom the kerosene was sold and the number of gallons sold to each.
What is the deadline for filing Form 720?
The tax doesn’t apply if the surtax on fuel used in a fractional ownership program aircraft is imposed. See Surtax on any liquid used in a fractional ownership program aircraft as fuel (IRS No. 13), later. Your accounting software can generate reports to help you calculate your excise taxes for Form 720. Depending on your specific business, your excise taxes are either a percentage of total sales or a percentage of units sold. IRS Form 720 consists of three parts, as well as Schedule A, Schedule T and Schedule C sections and a payment voucher (called Form 720-V).
For lines 5a and 5b, the ultimate purchaser of kerosene used in commercial aviation (other than foreign trade) is eligible to make this claim. Claimant certifies that the right to make the claim hasn’t been waived. For line 2d, the aviation gasoline must have been used during the period of claim for type of use 9.
Environmental Taxes
Fill in the number of gallons and the appropriate rate in the Rate column on the line for IRS No. 51. The tax on arrow shafts is increased to $0.63 per arrow shaft. Generally, plan sponsors of applicable self-insured health plans must use one of the following three alternative methods to determine the average number of lives covered under a plan for the plan year. The percentage tax is 7.5% of 720 quarterly federal excise tax return amounts paid for taxable transportation of persons by air. The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to be responsible for collecting, accounting for, and paying over these taxes, and who acted willfully in not doing so.
Form 720 must be filed quarterly, with due dates typically falling on the last day of the month following the quarter’s end. We provide a detailed outline of these crucial dates to help businesses maintain timely compliance in their tax preparation and submission processes. However, there’s an important exception to this quarterly filing requirement. If your expected excise tax liability is $2,500 or less for the calendar quarter, you can request permission from the IRS to file annually rather than quarterly. This option can significantly reduce your paperwork burden if you have minimal excise tax obligations. Highway use tax is imposed on the use of any highway motor vehicle that, together with the semitrailer or trailer customarily used with such a vehicle, has a taxable gross weight of 55,000 pounds or more.
- TAS works to resolve large-scale problems that affect many taxpayers.
- For the safe harbor rule to apply, you must pay any underpayment for the current quarter by the due date of the return and check the box on line 5 of Form 720.
- After submission, understanding the subsequent steps, including IRS acknowledgments and the possibility of audits, is crucial.
What Happens If You Don’t File Form 720?
Taxfyle connects you to a licensed CPA or EA who can take time-consuming bookkeeping work off your hands. Tickmark, Inc. and its affiliates do not provide legal, tax or accounting advice. The information provided on this website does not, and is not intended to, constitute legal, tax or accounting advice or recommendations. All information prepared on this site is for informational purposes only, and should not be relied on for legal, tax or accounting advice. You should consult your own legal, tax or accounting advisors before engaging in any transaction.
This claim is made in addition to the claim made on line 2b for type ofuse 9. In a two-party exchange, the receiving person, not the delivering person, is liable for the tax imposed on the removal of taxable fuel from the terminal at the terminal rack. A two-party exchange means a transaction (other than a sale) where the delivering person and receiving person are both taxable fuel registrants and all of the following occur. Complete Schedule A to record net tax liabilities for Form 720, Part I, taxes for each semimonthly period in a quarter even if your net liability is under $2,500. The net tax liability for a semimonthly period isn’t reduced by any amounts from Form 720-X. If you are depositing more than one tax under a method, combine all the taxes under the method and make one deposit for the semimonthly period.
