In the US, if your business includes the manufacturing, distribution, or sale of fuels, then you are required to have knowledge of how to file Form 720 for federal excise taxes. In this guide, we will discuss everything there is to know about fuel excise Form 720 with the goal to help you and your business remain compliant with the IRS.
What Is Form 720
Also known as Quarterly Federal Excise Tax Return, it is used to declare and pay excise tax in fuels and some other selected goods and services.
You may be staring at the requirement to file form 720 if you happen to be involved in any one or more of the following activities:
- Manufacturing or importing gasoline, diesel and kerosene.
- Distributing taxable fuels.
- Fuel blender operations.
Fuel Types with Federal Excise Taxes
Excise fuel taxes are imposed on different types of fuel, including:
- Gasoline
- Diesel fuel
- Aviation fuel
- Kerosene
- Alternative fuel sources
These taxes provide funding for building, improving, and maintaining the highways and roads, as well as travel infrastructure in the country.
Form 720 Due Date
Form 720 is due Every 3 months. The following dates are when the forms are due:
- 1st Quarter: 30th April
- 2nd Quarter: 31st July
- 3rd Quarter: 31st October
- 4th Quarter: 31st January
Be sure to file the forms on these dates exactly to avoid paying penalties or interest on the overdue payments.
Listing of Instructions for filing Form 720
Stage 1: Have All Required Documents Ready
The document filing process can only start once the following records have been collected:
- The sales exchanges concerning taxable fuel liquids.
- Proof of blending fuels.
- Adjustments or applicable credits that could apply.
Step 2: Go to IRS’ Website to Download Form 720
The updated version of Form 720 can be obtained using the IRS’ official page. It is essential to check that there are no newer versions of the form and the accompanying instructions.
Step 3: Complete Parts I And II
- Part I: Report the gasoline or diesel or Kerosene related excise taxes on the fuel. Report the due tax on the applicable rates to the fuel and calculate the due tax.
- Part II: Do not complete this section if you are not reporting on other taxables as it covers other none fuel excise taxes.
Step 4: If Any Excise Credits Applies Clearly State Them
If there are any non taxable fuel uses for which your entity qualifies for tax credits, list them on the appropriate section.
This can assist with minimizing the overall amount of tax that you need to pay.
Step 5: Figure the Total Tax Owed
Combine the taxes from Part I, and then credit any applicable payments to find out the total excise tax liability that you owe.
Step 6: Make the Payment
You can pay the amount of excise tax due by electronic means through the IRS Electronic Federal Tax Payment System (EFTPS) or check/money order.
Step 7: File By Mail or Electronically Form 720
- Electronic Filing (Best practice): E-filing is the best and quickest method for filing Form 720 because it eliminates many filing errors and improves the processing time.
- By Mail: Send the printed Form 720 to the relevant address of the IRS which is given with the instructions to the form if you wish to file by mail.
Mistakes To Not Make When Filing Form 720
Remain vigilant to not fall into these common mistakes to have the smooth filing process:
- Missing the filing deadline – This can bring penalties and interest.
- Wrong tax computations – Check your calculations thoroughly.
- Not claiming tax credits that are entitled – Ensure to capture any savings opportunities that tax credits offer.
- Using an outdated form – Get the up to date version of Form 720 on the IRS webpage.
Why E-Filing Form 720 Is The Best Option
E-filing allows you to submit your returns faster and from the comfort of your home making it more convenient. Most IRS sanctioned e-filing platforms have built-in error checks, simple completion of the forms, and provide instant confirmation.
At first, filing Form 720 for federal fuel excise taxes may seem complex, but with the help of this comprehensive guide you can make the process easier while remaining compliant. Managing your excise tax responsibilities properly will help your business avoid unnecessary fines and maintain seamless functionality.
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