Excise Tax Form 720: A Comprehensive Guide for Businesses
Form 720 which is also known as the "Quarterly Federal Excise Tax Return" is a vital form for businesses whose members are obliged to report and pay excise tax in the United States. Excise taxes target certain goods like alcoholic drinks, gasoline, cigarettes, air travel, hotel rent, and other forms of luxury taxes. Grasping the objective of the IRS Form 720, identifying the persons mandated to submit the document and its submission procedure can assist companies in observing IRS requirements without attracting heavy fines glorifying the internal revenue systems.
What Is Federal Excise Tax?
Federal excise taxes are taxes confirmed by the availing government on some selected items/services and activities determined by whether luxury oriented or to some degree will be necessary to control. This is different from income tax which is generally applied across all entities. Specific items relate to this. Such regular incidences would include levies on gas, purchase of aeroplane Burton tickets, and the sale of weaponry. Usually such levies are embedded within the market price of the end product and are borne by the customers. However the liability to collect such taxes and Victorian for the IRS using the form 720 procedures lies on the business.
Who Needs to File Form 720?
Form 720 must be filed to report any excise tax liabilities that certain businesses accrue as a result of manufacturing, selling or importing certain taxable commodities and services. This includes the transportation and communication sectors, the fuel sector, health care insurance and certain characteristics of retail industries that include taxable commodities mostly of alcoholic and tobacco products. It's important to note that if your organisation falls within those types of businesses, there are specific procedures regarding what you should do and what possessive documents to file. Furthermore, where your business only occasionally engages in taxable transactions, such requirements are most likely cut out, but excise tax on certain products or services occasionally offered will still warrant the filling of Form 720.
When Is Form 720 Due?
Form 720 must be submitted every 3 months. The filing cut off dates by each quarter in the year are:
- First Quarter: On or before 30th April
- Second Quarter: On or before 31st July
- Third Quarter: On or before 30th October
- Fourth Quarter: On or before 31st January, which is for the next year.
It's necessary for an enterprise to see to it that it does not submit too late in order to escape embarrassment as a penalty. It would be very important to add that excise tax filing and any other that is due should have been made before the given due. Filing after the specified period or late payments is subject to various penalties as well as interest compound.
How to Fill In the Form 720
Submitting Form 720 consists of an Accounting questionnaire with a component of detailing all the taxable sales made or activities carried out in the quarter. As this form is for excise tax, the form has several additional forms in relevance one for one type of excise tax.
- Schedule A: This segment includes environmental taxation, which comprises taxation on petrol products and ODP-CFCs.
- Schedule B: This includes communication taxes and air transport taxes.
- Schedule C: This schedule includes taxes for motor fuel and aviation fuel.
- Schedule T: This schedule is designed for taxes on the sale of alcohol, tobacco products and related products.
Another consideration this time is as you fill in the form 720, be sure there are no taxable items and or services reported under categories that they don’t belong together with the applicable rates for the different types and this is done to avoid reporting errors which can lead to IRS payment sternness or audit or even assessment of fines Therefore so much emphasis should be put on the level of accuracy as it is very critical to the process of filing tax returns.
What Are the Advantages of E-Filing Form 720
Despite taxpayers being permitted to file Form 720 through the traditional mail method, the IRS seeks to see more returns submitted expediently and without all the risks associated with mail and so there is encouragement towards e-filing. E-filing allows a faster process of submission, there is, therefore, less chance of making mistakes, and a person receives an acknowledgment immediately after a successful submission of the form. In addition, companies that choose to file documentation electronically will have more efficient management of such documentation and will not lose it in the post or when filed with administrative staff.
Certain approved software companies by the IRS allow the e-filing of e-excise returns which surely helps speed up the process. For example, this can be a significant time saver for those businesses that operate in large operations or have multiple categories in excise taxes.
Non-Compliance Penalties
More so, if an individual fails to extend and pay excise taxes and/or file Form 720 within the designated period outlined, considerable penalties may apply. The late filing penalty is in addition to the two additional penalties for failure to pay the taxes on time. The failure to pay excise tax brings more penalties because the IRS will charge a fine for delays in payment for taxes. A common fine is 5 percent of the tax owed for every month which elapses before a person settles the tax. This is usually carried out to reinforce against a maximum of 25%. Besides that penalty for the late filing of tax returns, there is a penalty for interest on taxes that are not paid within the required time limit.
Nonetheless, the IRS normally will not penalise businesses so long as they have reasonable cause for the venture’s failure due to reasonable cause factors and therefore there is a need to always talk to the IRS whenever a concern comes in.
The submission of form 720 is relevant in the sense that it helps businesses avoid noncompliance with federal excise taxes. Large transportation companies or retail businesses dealing with excise taxable items or a small entity occasionally that is engaged in excise taxable activity, it is important to know how and when to file this form if you want to stay compliant. Such businesses will strategically file their excise tax returns, avoid the late filing problems and also the inconveniences of filing paper returns, by fully embracing the e-filing option.