Form 720 Amendments: A Quick Guide to Corrections of Excise Tax Filings
The IRS Form 720, or Quarterly Federal Excise Tax Return, is the form used by businesses in reporting and paying federal excise on certain goods and services. Whether this relates to air transportation, highway use, coal, or environmental taxes, firms must make sure that each of their quarterly filings is correct with regard to the Form 720. Well, errors are possible and sometimes taxpayers may have to rectify those errors. For this reason, taxpayers should be aware of how to correct form 720 in order to ensure they fully comply with tax laws and avoid some possible penalties.
Why Does Form 720 Need Correction?
Form 720 needs to be revised if mistakes or omissions are done in the very first return. Such common types of errors include under-reporting of incorrect sums of tax, forgetting some goods or services which must be included for tax charges, or mis-calculations of credits such as CENVAT Credit. Whether the error is made by under-reporting of excise taxes or over-reporting of the same, the amended return allows you to re-correct these errors and your liabilities in proper accordance with the tax due figures.
When to File Form 720 Amendment
Form 720 amendment is a matter of timing. If you notice an error beyond the filing deadline of a quarter then correct this occurrence immediately. In fact, the IRS advises submission of an amended return once the discrepancy has been detected. Failure to comply with errors in a timely manner will lead to penalties and interest on tax payments. One cannot put a specific deadline on any amendment, but delaying a correction can make future filings more cumbersome and increase the possibility of further discrepancies.
How to Amend Form 720: Step-by-Step Tutorial
The process to amend Form 720 is pretty straightforward, but it helps if one understands the specifics of how one would file an amendment in the first place. Here's how you correctly file an amendment for Form 720:
- Same Form 720 Your correction should be submitted with the same form used in the initial return, but indicating it is an "Amended Return" and including the proper tax period, and making clear the changes that have been made.
- Fill in the Right Portions During correction, only fill the portions of the form that are needed to be changed. If the error was based on a specific tax, then only that portion of the return should be corrected. Ensure that all corrections are stamped and that numbers are correct to avoid further corrections.
- Attach an Explanation Attach an explanation why the return is being amended. Include a statement indicating the nature of the error and how it was calculated and rectified. Clear and accurate information would be helpful in facilitating the review process, as well as in minimising the likelihood of further scrutiny.
- Pay Any Additional Taxes Recalculate and pay on an amended return any additional taxes due. Additionally, the late payments will have interest and penalties for late payment, so paying the taxes due correctly is imperative.
- Seek Reimbursement Where Due If you over declared and were owed some amount of refund due to having overpaid, it is also a good time to seek reimbursement via the amendment. It will be expedient to follow IRS procedures for reimbursement of excise tax along with attaching all supporting documentation with your request.
Thankfully, form 720 amending is very simple to do, but there are pitfalls that companies ought to be watchful about. One of the most common is the fact that some do not provide sufficient documentation and explanation about an amendment. This is usually done without elaborating on what went wrong with the facts and evidence that proved your correction, which would most likely delay the processing by the IRS or even request additional information in your amendment.
The most common mistake made is that of an amendment of the wrong tax period. So, it should be made sure that the return that is being amended matches the quarter in which you are supposed to file; if the amendment is made with incorrect data, there may be confusion and once again, discrepancies.
Tips for Making Amendment Process Easier
To make an amendment process easier, here are some tips that may avoid unnecessary delay:
- Verify Original Filing: Ensure the original Form 720 is correct on every part before filing. This may reduce the amendments that may be needed later.
- Maintain meticulous records: Maintain all taxable transactions, payment, and credits. This is because such records may be handy to rectify errors that may pop up during filing in an amendment.
- Make an E-Filing Consideration: Filing Form 720 and any amendments electronically can speed up processing time and minimise human-error errors pertaining to manually filing.
What Happens Once Form 720 Has Been Filed Amended?
Once the amended Form 720 has been filed, the IRS will begin processing the new information. Several weeks or even months may pass before the amendment, based upon the amount of change required in contrast to corrections, but the IRS will analyse the changes. In case you have extra taxes to pay, then you shall be notified of any outstanding sums including interests or penalties. If you are filing for a refund, then be prepared to wait two or three weeks because the IRS needs that period to process your request and facilitate payment.
An amended form 720 is, therefore, necessary whenever there are errors on your quarterly excise tax returns. Learning when and how to make amendments, avoiding common pitfalls, and pro-actively reviewing filings and correcting discrepancies early allows one to remain compliant with IRS regulations and avoid costly penalties.