The procedure to update Form 720 will correct all your taxes on excises because accurate reporting of the same is of utmost importance in maintaining IRS compliance. Form 720 is the standard document used to report other federal excise taxes, and the most common errors are simply arithmetic mistakes, classification mistakes, and omitted details. Thankfully, updating Form 720 is also possible through a procedure that the IRS has put forward. It is in this guide that we will detail the procedures for amending form 720 to achieve accurate excise tax filings.
What is Form 720?
Form 720 is the quarterly federal excise tax return that is applied in reporting and paying federal excise taxes imposed on air transportation, fuel, environmental taxes, among others. This form should be filed quarterly and due to the large number of taxes that must be reported, careful handling is necessary. Any corrections made should be done as soon as possible without carrying them over to another period unless absolutely necessary because otherwise, problems such as penalties or added interest may be incurred.
Typical Reasons to Amend Form 720
You are most likely to be driven to file amendments with Form 720 when:
Math Mistakes: There could be a simple arithmetic error leading to overpayment or underpayment of the taxes.
Filing in the Wrong Quarter. The failure to file on the right quarter can work a lot of mischief in tax compliance.
Adjusting for Credits or Refunds. You may need to amend your form if your business qualifies for an excise tax refund or credit.
When Do You Need to Amend Form 720?
The amendments to Form 720 should be done immediately upon detecting an error. The Internal Revenue Service urges businesses to correct errors as soon as possible to avoid penalties, interest, or complications in the event of an audit. Even so, filing amended returns for prior quarters is permissible; however, you have to remember that there are deadlines associated with obtaining refunds or adjustments.
For example, amended Form 720 refunds are generally due in three years from the original due date of the return or two years from the date the tax was paid, whichever is later. This time period often impacts when you must file your amendment, especially in terms of the time you wish to obtain a refund.
How to Amend Form 720
The step in amending Form 720 is relatively straightforward, although much fine-tuning is required as the amended form must be so treated. Here’s how to do it.
- Acquire New Form 720
Go to the IRS website or get one through your tax software provider where you can download a blank version of Form 720. You’ll be submitting a new copy of the form although you are correcting something on a previously filed return. The IRS will not permit you to amend the actual prior return.
- Check the “Amended Return” Box
On the right-hand side of the form, at the top, there is a small box labeled “Amended Return.” Mark this so that the IRS will be aware of the amended return rather than an original return.
- Correct Information Input
Fill up the form as a new filing this time but with correct information this time around. Make sure that you walk through every step of the form and include the actual amount for each category of excise tax with further details in case you’re adjusting credits or previous overpayment.
- Attach an Explanation Statement
The IRS wants to view an appropriate justification on why you are amending your return. That can be presented on a separate statement or attach as annexed statement to your return explaining what type of error occurred and how you’ve corrected it. The more elaborate and transparent your narration, the smoother will be your approach to the amendment.
- File Your Amended Form 720
Once you have completed the form and written your explanation statement, you can submit your updated Form 720 to the Internal Revenue Service. If you e-filed Form 720 originally, you will probably be allowed to e-file your amended return using the same e-file method that you used to e-file originally. You will mail the amended return to the correct IRS service center if you filed on paper.
More and more businesses are using e-filing for their excise taxes, and the flexibility applies here as well with an amendment of your Form 720. Electronic corrections through the IRS-authorized system are submitted much faster, and lost papers are significantly less likely to occur, increasing the chances of timely processing. Many tax software providers will also enable you to amend past submissions right from their system, updating the calculations and classifications.
What happens after filing for amended form 720?
The IRS will then calculate additional taxes if any are due, or a refund if that is the case. If the IRS determines that you owe additional taxes with respect to your original filing, they may send you a bill for the difference along with potential interest or penalties. Conversely, if your amended Form 720 shows an overpayment, then you could be eligible for a refund or a credit towards your next tax payment.
Don’t forget that it can take the IRS up to several weeks, or even months, to process an amendment, and especially for a refund claim. Organizing and keeping copies of all your filings can assist you in tracking down the status on your amended return.
Mistakes in an excise tax filing could occur, but the IRS makes it extremely streamlined and straightforward in its process of amending Form 720. Of course, this ensures that your business remains compliant. The fact of the matter is, by making corrections promptly, providing detailed explanations, and resorting to electronic filing whenever possible, you’ll be minimizing the possibility of penalties and keeping your excise tax reporting on track. Remember that attention to detail should be paramount as if this were the first time you completed the form or if you made amendments. This guide shall walk you through the steps of facilitating an amended process and keeping your tax filings good and clear.