For enterprises operating in diesel fuel trading, this is one of the important filings that needs to be made as an excise tax, along with the necessities for using Form 720 by the Internal Revenue Service. While filing taxes the old way can be one hell of a very strenuous and hassle-laden task, the IRS has worked out a much simpler route now that allows for online form 720 filing. In this guide, we will break down everything you need to know about the Diesel Fuel Excise Tax, Form 720, and the online filing process.
Understanding the Diesel Fuel Excise Tax
The Diesel Fuel Excise Tax is a federal tax levied on the use of diesel fuel for any vehicle and other purposes. It is conducted to collect revenues to offset infrastructure improvements such as roads, bridges, and transportation systems. Those businesses which manufacture, import or retail diesel fuel collect and pay this tax to the Internal Revenue Service.
Who Must File?
If your business falls under any of the following activities, you might be expected to file Form 720 for diesel fuel excise tax:
- Manufacture or Production of Diesel Fuel: As long as a company manufactures or produces diesel fuel, it will automatically have an additional burden from the tax.
- Selling or Importation of Diesel Fuel: Any importing or selling company or business needs to comply with this regulation regarding the tax.
- Usage of Diesel Fuel for Non-Taxable Operations: Businesses that use diesel fuel for agricultural or off-road activities may claim tax credits or refunds. In this case, a form 720 also needs to be filed within the prescribed period to claim the advantage.
What is IRS Form 720?
Form 720 is known as the Quarterly Federal Excise Tax Return. It aggregates various types of federal excise taxes, such as diesel fuel taxes, gasoline, aviation fuel, and other taxable items. This form needs to be filed with the IRS as a declaration and payment by businesses for their excise tax liability.
Diesel fuel excise taxes are reported on Part I of Form 720. The form is submitted quarterly, and due dates fall on the last day of the month following the end of each calendar quarter. Thus, deadlines fall on April 30, July 31, October 31, and January 31.
Why File Online?
Technological advancement has helped the IRS in making the process of filing Form 720 easy through online filing options. The ease that is provided with the e-filing offers many significant benefits as listed below:
1. Convenience and Speed
Form 720 e-filing reduces the amount of paperwork, which enables the companies to submit it from the comfort of their office. The process from inputting data to submission becomes less time-consuming and labor-intensive.
- Accuracy and Error Reduction
In manual filing, there is a chance of errors, which can lead to delay or fees. Online filing systems have checks and validations that help bring down chances of error, thus ensuring that it correctly fills your form.
3. Instant Confirmation
Whereas with paper filing, one may have to wait for several weeks for them to receive a confirmation that has been filed, online submissions guarantee instant notifications once correctly filed into the system, which gives companies confidence that they are in conformity with the regulations.
4. Cost Savings
Online filing greatly saves on costs in relation to printing, postage, and also on possible penalties due to errors. Besides, most of the online firms usually have relatively cheap e-filing services, and it is therefore more economic in the long run.
How to File Diesel Fuel Excise Tax Form 720 Online
How to file diesel fuel excise tax Form 720 online might actually be a less cumbersome activity than most think. For step-by-step guidance on how to file online, here’s the process:
Step 1: Choose an IRS-Authorized e-File Provider
You’ll need to select an IRS authorized e-file provider to file Form 720 through e-filing. These are developed and accepted by the IRS in terms of security and accuracy in submission. Do your research and identify the one that will best suit your needs with regard to features, cost, and quality customer support.
Step 2: Gather Required Information
You should start compiling all the information you need when you begin filing online. This includes:
- Employer Identification Number (EIN)
- Total gallons of diesel fuel sold, produced, or imported
- Tax calculation on the IRS excise tax rate for diesel fuel
- Previous credits or payments, if any
Step 3: Open Your Account and Login
After you’ve selected your e-file provider, create an account using some basic information about your business. Then, log into the portal to access the interface for online Form 720 filing.
Step 4: Complete Form 720 Online
Using the online interface, fill in the applicable portions of Part I of Form 720 relating to diesel fuel excise tax. This section has much detail regarding gallons and tax rate. The computer does the taxes for you; it will determine your liabilities based on the input.
Step 5: Review and Submit
For accuracy, double-check your form. It is possible for mistakes and omission to cause delays or even expose you to some penalties, so long as the information there is correct, it shall be submitted electronically. Most providers of e-filing services will automatically send you a confirmation message once they know that the IRS has successfully received the form.
Step 7: Make Payment
According to the amount of excise tax due, arrange for an electronic funds transfer or make a payment through one of the online payment options. Pay by the date due of the quarter, so you do not incur interest and penalties.
Benefits of E-File Form 720 Diesel Fuel Excise Tax
Filing Form 720 online is not only convenient but also adds the benefit of accuracy and compliance. Here are a few reasons why businesses are making the shift:
Faster processing: Online submission of Form 720 ensures its receipt at the IRS immediately; this minimizes processing time with hardly any hold-ups.
Less chances of errors: Validation checks on an online filing platform largely minimize error-prone errors due to human fallibility.
- Record-Keeping and Reporting: Some e-file systems also offer the ability to hold prior filings in storage and create detailed reports, which can be useful in an audit or for future reference.
- Eco-Friendly: Paper forms, postage, and printing are also eliminated so businesses can become more environmentally friendly.
For instance, one would think that dealing with the Diesel Fuel Excise Tax and the Form 720 is very complicated. But of course, the good people from the Internal Revenue Service have come up with electronic filing, which keeps life even more streamlined for the different businesses. That which would take hours and garner unnecessary costs in terms of printing and mailing can now be e-filed, easier, faster, and within federal regulations compliance.
If you have diesel fuel used in your business and are obligated to pay excise taxes, a change to the electronic filing of Form 720 would help you stay in strict compliance with IRS requirements, since you avoided traditional headaches stemming from it. To get the most out of your choice, you have only two things to do: select a reliable e-file service provider, be extremely organized, and make quarterly submissions.