Different businesses or trades, for instance, in the transportation and aviation sectors, as well as manufacturing, pay federal excise taxes. For this purpose, the tax authority of the U.S., the IRS, has a specific form specifically created to collect this tax under its own name, Form 720. While preparing to make payment for your federal excise tax, it is advisable that you get familiar with using the form so that you are in the right side of the law. The following is the procedure to pay your federal excise tax using Form 720:.
Understanding Federal Excise Tax
Federal excise tax is levied on a wide range of goods and services carried out by the government as to raise funds for various governmental concepts. It is paid for an extensive list of products such as fuel, tires, heavy trucks, and some of the services such as air transport. The money collected or generated from these taxes is mainly used in infrastructure projects, environmental programs, and any other provided services by the government.
Who Must File Form 720?
Form 720 must be filed by businesses that manufacture, sell, and utilize taxable products or services. These include manufacturers and sellers of goods subject to excise taxation, including alcohol and tobacco; transportation services of air carriers and railroads; and other chemicals and substances for environmental taxes.
Before you file, ensure that your business falls in one of these classes. If unsure, you could discuss things over with a tax professional and he may be able to sort out the confusion.
Instructions for Form 720
Filling up Form 720
- Gather Needed Information
Before you fill up Form 720, gather all the information you’d need to complete the form including:
Employer Identification Number (EIN)
That is an exclusive number issued to your business.
Tax Period
Identify which quarter you are reporting for.
- Tax Rates: Make sure you know the rates applicable to your product or service as of the current day.
2. Complete the Form
Form 720 is divided into many parts that must be filled in correctly:
- Part I: You will report the excise taxes on particular goods and services involved in this section. Since each line item represents a different type of excise tax, ensure that you book those in the appropriate amounts based on your business activities.
- Part II: This part deals with environmental taxes imposed on specific chemicals and substances.
- Part III: Reflect any credits or adjustments you’re eligible for. This can include carrying forward adjustments from the preceding periods, or carrying forward credits available for specific activities.
3. Calculate Your Total Tax Liability
When you have completed all the parts of the form, calculate your total tax liability. Add up all the amounts from the relevant parts of the form. You need to look at your computations again so that you will not make a mistake that will get you into trouble with the tax authorities, resulting in extra fees.
4. Sign and Date the Form
Form 720 must be signed and dated prior to filing. The IRS will not accept an unsigned form, which would expose you to delayed payment or worse yet, additional penalties.
How to Pay Your Federal Excise Tax
1. Option of Payment Method
You can pay your federal excise tax through various ways, including:
- EFT: This is the most commonly and preferred. EFT can be started by you through the IRS’s Electronic Federal Tax Payment System.
- Check or Money Order: If you want to send a paper payment, you could either send a check or money order payable to “United States Treasury.” On the memo line include your EIN and “Form 720.”.
- Credit/Debit Card: Payment, via an approved payment gateway, is also accepted by credit or debit card. A fee may be incurred for this service.
Pay Your Payment by Due Date
And to be sure, time is of the essence in filing tax payments. Be ahead of schedule by submitting payment before the due date so as not to incur interest and penalties. In general, most federal excise taxes fall due at the end of each quarter of the year, namely: April 30, July 31, October 31, and January 31.
Tips for Quick and Stress-Free Filing and Payment
- Record Keeping: Organized records related to excise tax liability are maintained. These include receipts, invoices, and other type of communication be it direct or indirect with the IRS.
- Engage a Tax Advisor: If uncertain about filing obligations and tax liabilities, it will prove beneficial to engage a tax advisor specializing in excise taxes.
Use IRS Resources Insite To the site of the IRS, you will find several important resources, such as detailed instructions for Form 720 and updates on tax rates. Routinely track the possible changes that may concern your business.
You don’t have to be afraid of federal excise taxes with Form 720. Knowing what is required of you, completing the forms in the proper way, and paying on time ensures you are in compliance and avoid unnecessary penalties. Remember, being better informed and organized proves the best way to manage your tax needs. It doesn’t matter whether you’re old or new; taking the time to be sure of the procedure will pay for itself in time and headaches saved in the future.