Certain goods and services, like fuel, transport by air, medical devices or some environmental services, attract taxes known as federal excise taxes. These taxes are primarily imposed on the entities engaged in the business of making or selling excise-taxable goods or giving excise-taxable services. In reporting and paying these taxes, businesses will to need to complete IRS Form 720, an excise tax return which is filed quarterly. This document outlines how to acquire, complete, and submit the Form 720 in detail.
Who is qualified to submit Form 720, and what is Form 720?
Form 720 is what a business uses to account for and pay the excise tax liability to the IRS. In accordance with the Internal Revenue Code (IRC), certain goods or activities or provision of services attracts excise tax or duty. In case your business deals with excise tax products or services including sale and importation, selling air transport services or indoor tanning that are all taxed and payment of any excise taxes, it is your obligation to file Form 720. Also those businesses which are concerned with taxes relating to the environment or related to communication are required to file this form.
Form 720 addresses two types of excise taxes. These are: quarterly taxes and annual taxes. The Quarterly excise tax returns are the most common, some of the taxes such as the Patient-Centered Outcomes Research Fee require filing once a year.
Call it Excise Taxes Reporting on Form 720: Types and Meanings.
The following is information before proceeding to Form 720. The following is a summary of certain excise taxes that are reported.
Fuel Taxes: This denotes the tax on gasoline, diesel fuel as well as aviation fuel.
Air Transportation Taxes: These are taxes on the air carriers that are charged for the transportation of either passengers or freight.
Environmental Taxes: These encompass the tax imposed on ozone depleting substances as well as hazardous substances.
Communications And Transportation Taxes: These are excise taxes levied on telephone communication services as well as on aerial transportation of cargo.
Manufacturers Taxes: This is a type of excise tax which is charged on certain specific goods like medical devices, tires, vaccines, etc.
These excise taxes must be defined by your business as a wrong classification could result into fines or filing delays.
Steps to Complete Form 720
- Download Form 720
The first step would be downloading the particular form 720 from the IRS website. This is essentially a return that needs to be made for every quarter in which the exigencies of your business make you liable to pay excise taxes, hence you will fill this for every quarter. It is important to always obtain the latest edition of the form.
- Complete Part I and Part II of the Form
Part I: This part centers on the payment of the quarterly excise taxes. You’ll have to provide the corresponding tax lines for every household or commercial item or service fall within the taxing range of your business. Common items here include tax on fuel, on the interior tanning services and on air transportation. Summit provides numbers better expressed as in the return form with petty categories of excise tax by specific line numbers.
Part II: Under this section, the annual taxes that are filed are recorded. Annual item(s) such as the Patient-Centered Outcomes Research (PCOR) fee which might generate a tax liability for your business is normally reported here.
- Assess the Tax Amount
After assessing the relevant sections of Parts I and II with their tax lines you will need to quantify the total tax payable. It does not mean that taxes fall into self-assessment procedures with options to tax. That steps involves multiplying the taxation rate by taxable units (for example: gallons of fuel, airline passengers). This is important because taxation policies will vary According to the IRS; they have taxes for every excise tax category so do not forget to verify extensive tax calculations.
- Complete Schedule A (If Applicable)
If your company meets any of these conditions, you will want to complete Schedule A. While describing such programs, businesses need to report excise taxes on the return in certain cases, request the refund of excise tax, or quantify certain tax returns and vice versa. The more understandable reasons with respect to use tax credits are the consumption of non-taxable fuels made for some of their purposes for example in generating electricity or the fact that they have exported taxable products.
- Record Total Excise Tax Liability
Below Parts I and II, the last set of fields requires you to update the amounts worked out on excise tax as the total amount to be remitted. The tax amounts per Import Permit and all taxable sales outside may be summed up and the total be entered into the relevant space provided. This lease therefore relates to the total excise tax liability for the quarter under review.
- Submit Payment
When you’ve completed this segment, the excise tax that you owe is payable. There are several methods the IRS allows which include Electronic Federal Tax Payment System (EFTPS) which is the ideal payment system since it is timely and effective for payments. You may wish to deduct any and all relevant Schedule A credits that will reduce the amount of your final payment.
Submission and Due Dates of Form 720
Form 720 is a quarterly form, and its due dates are strict. It must be submitted within the specified dates below:
30th April for the first quarter (January – March)
31st July for the second quarter (April – June)
31st October for the third quarter (July – September)
31st January respond for the fourth quarter (October – December)
Since there is an administrative penalty for delay in filing or late payment of tax with interest imposition, it is imperative to observe the set deadlines.
How to Complete Form 720
There are 2 main ways that a package can be submitted to the IRS through the use of Form 720.
- Electronic Filing (e-File)
The IRS has advised business clients to submit form 720 on the internet owing to the ability of e-Filing IRS Form 720 to reach quicker. This method is efficient as contact is reduced, more faster than the alternative form of filing. Also, with this filing method, all impressed information is automatically analyzed by the system, thus eradicating all possible errors.
- Paper Filing
If you are a proponent of filing via mail, form 720 can be lengthened in a paper format and submitted to the IRS. Note that it may require quite a long duration to obtain IRS confirmation which is not instant and even process your payment.
Staying Compliant with Form 720
It is important to comply with the conditions by filling in Form 720 which is due to the fact that the business is in possession of relationships which entail excise-taxable goods/services. Without a shadow of doubt, knowing which taxes are necessary for your particular business, how to measure those taxes, and how to submit the completed form will surely keep one out of any trouble with federal tax regulations Filing Form 720 can be done online and offline at the risk of exposing Form 720 duly completed in all quarters to errors, which will fetch expensive rewrites and late fines or penalties from the IRS. Once equipped with accurate knowledge and appropriate preparation, it becomes easy to include the reporting of federal excise taxes as part of business activities.