Within the realm of state and federal tax regimes, federal excise taxes hardly need justification for most businesses where certain goods and services are. Most people confused them with income taxes or sales taxes, unlike those broad based taxes, excise taxes are narrower in scope, rather applying to particular goods, activities or services. This two pager contains the overall screenshot of the taxes paid to IRS by every business other than income tax- tax form 720. There are tasks related to filing as well as what the excise taxes are, who has to pay them and whether additionally there are some requirements for companies to reclaim.
What Are Federal Excise Taxes?
Consumption taxes that are indirectly collected by the government for specific goods, services, or business activities are known as excise taxes. Unlike in a sales tax, which the end buyer pays at the point of purchase, in an excise tax, the tax amount is usually included in the total cost of the good and it is the responsibility of the business to pay the excise tax to the federal government.
Excise taxes cover quite a number of sectors and items, which are:
Petroleum Products (including gasoline, diesel and other substances for motors)
Products containing tobacco as well as any form of alcoholic beverages
Services involving air transport
Services dealing with indoor tanning
Selected medical insurance policies which cover the USA health act
Dicing and betting systems
Such excise taxes are levied either on the basis of a fixed amount for a unit (for example: a certain amount of tax on a gallon of petrol) or at a rate of a sell amount. Most firms that manufacture, make, sell, and or bring into the country excisable products, are usually required 720 excise tax returns.
Who Can Be Exempted from Filing Form 720?
Form 720 is a requirement for every business that deals with products that attract excise tax or deals with a servicing or provision of activities that are taxed federally. This covers a wider spectrum of businesses hence it is important for every business to assess their activities and determine the different areas that attract excise taxes.
Below are some industries and situations that require Form 720:
Fuel Industry: Businesses which are engaged in import or sales activity of any fuel related products like gasoline or diesel are also required to pay excise taxes. This also applies to firms that specialize in biodiesel, aviation fuel and other such alternative fuels.
Alcohol and Tobacco: Those involved in the production, importation or even distribution of any alcohol and tobacco items also pay federal taxes and file this Form 720 to account for these taxes.
Airlines and Transportation Services: This includes fares for air transport of either passengers or cargo as both are liable for excise duties.
Indoor Tanning Services: Another area which is subjected to this mode of taxation is indoor tanning businesses due to initiative of affordable health care act, a 10% indoor tanning excise tax must be filed via form 720.
Providers of Health Insurance Services: There are certain health insurance policies, for example those whose premiums are high under the recommendations of the Affordable Care Act that are subject to taxation. Insurance companies are required to complete form 720 to declare these taxes.
Major parts of Form 720
Form 720 is divided into several parts covering respective excise taxation types. Here’s an overview of some of the most relevant sections:
Part I: Federal excise taxes that are payable on a quarterly basis are also reported in this section which includes taxes on the sale of specifics like air fuel, or on air transportation, or on indoor tanning etc. Businesses state quantities sold or services offered in relation to the fuel and other taxable commodities and then calculate the corresponding tax.
Part II: This is for the excise tax claiming parties for instance manufacturers and sellers of goods that attracts excise tax such as medical drugs, particular health insurance and other categories of items. This part of the sections contains summary revocable tax returns which collect and report semiannual and annual excise tax sales.
Schedule C: If an excise tax that was previously paid by the business is being sought for recovery or relief under tax legislations that obviate taxation, then Schedule C of 720 must be completed. This is mostly the case where a business has erroneously charged a higher tax, or it is looking to recover an exempt-sale-related tax it paid, for example, taxes paid on sales of fuel for government or non-profit use.
Schedule T: This part is relevant for enterprises that manufacture, mix or commercially distribute biodiesel, blended fuels, or any alternative fuels. It provides them with a framework to account for production and sale of these fuel mixtures and compute the credits relating to them.
The forms are broken down into parts to enable taxpayers capture the specified information, and businesses must ensure that relevant portions for their industry and activities are duly completed.
Filing Deadlines and Frequency
Form 720 shall be prepared and submitted four times in a year and the due dates are otherwise the last date of the very last month following after the end of the quarter as follows:
First Quarter (January – March): Due by the end of April 30
Second Quarter (April – June): Due on July 31
Third Quarter (July – September): Due on October 31
Fourth Quarter (October – December): Due on January 31 the following year
The clients must file an excise tax return even in a period during quarter in which no taxed activities have taken place. There may be fines and interest charges for late filing and therefore cut off dates must be adhered to.
E-Filing Form 720: The Easiest Way
E-filing is the option of choice for the Form 720 which is convenient for many businesses since it has several benefits compared to paper filing. The IRS supports e-filling because it reduces the potential for mistakes, provides proof of filing instantly, and ensures that the paperwork is processed faster.
For the purpose of filing Form 720 electronically, the businesses could engage the services of e-file providers that are recognized by the IRS. Most of the programs offer information in manageable portions and perform e-file validation checks so that chances of rejection are minimized due to invalid or insufficient information provided. E-filing has been noted as possessing significant advantages mainly by corporates whose tax issues are rather complex as it reduces the burden of filing while meeting the IRS obligations.
Errors that should be avoided in the filing of Form 720
Exempt tax return filing can be quite a challenge more so on the side of those who are not acquainted with the filing requirements due to impositions of the excise tax. The following factors can help avoid the pitfalls:
Correct Demographics: There may be Missing Love types Of code 941-a contro, try to Complete form 941-v type ex2022 at50004 that you can bypass strikes off at us home.
Omission of Taxable Services: For example if you sell fuels, health taxation among others then you need to declare excise taxable stores in form 720 at all times.
Late Filing: Don’t lose sight of the quarterly deadline because some late lodgments attract nasty penalties. Have reminders or take advantage of e-filing systems that will remind you of the upcoming deadlines.
Incorrect Tax Calculations: Take extra care in situations of calculation especially when specific excise tax rates are to be levied on unit basis e.g. Gallagher tank of fuel or passenger mile for complicated airline transport.
Form 720 is frequently employed to promote the adherence of businesses to federal excise tax regulations. If you take part in such activities as selling fuel, offering air transport services, or producing goods that attract excise tax, you know that proper and timely filing of Form 720 is of necessity if you comply with IRS policies.
It becomes easier when one has been e-filing and knowing the kind of taxes that affect their business especially in the tax reporting system because penalties would be avoided somewhere and concentration on enhancing the business would be done.