What are the guidelines to fill form 720?

What is form 720?

IRS Form 720, the Federal Excise Tax Quarterly Return, is a tax form used for making Federal Excise Tax payments. If your business deals in goods or services subject to an excise tax, you must report and pay these taxes using IRS Form 720. In those cases, you must file your IRS Form 720 every quarter.   

What is the Excise Tax?   

You must complete Form 720 if you were responsible for collecting the federal excise taxes mentioned in Parts I and II of Form 720 in the prior quarter but did not file the resulting return. You must complete Form 720 if you are responsible for collecting federal excise taxes mentioned on Parts I and II of Form 720 for the current quarter.   

When do I file form 720?

The IRS Form 720 must be filed every quarter. If your Form 720 filing deadline falls on a Saturday, Sunday, or statutory holiday, you may file your form the following working day.    

You must pay your excise taxes semi-monthly. This means the first semi-monthly period is the first 15 days of a month, while the second monthly period starts on the 16th day of the month and continues until the last day of the month. If you are required to pay the Excise Duty on communications or air travel, you may also pay under the alternate scheme, as mentioned in Instructions Form 720.    

You must deposit the excise taxes via electronic transmission (ACH deposit) and file at least one day before the payment deadline. For example, if the due date is Jan. 15, you must file your payment by Jan. 14. If the due date falls on a weekend or statutory holiday, the following working day becomes the new deadline.    

Where do you find the 720 forms?

 IRS Form 720 is available on IRS’s website.    

How to fill out form 720?

There are two options to file this form. 

  • Either you can first print out the form, fill it out, and then mail it to IRS, or you can first fill out the form on a computer, print it out, and then mail it to IRS.
  •  IRS Form 720 may also be filed electronically by contacting your accountant or tax preparer.   
  • Before filing your IRS Form 720, you must gather the required documents. You must have details related to inventory, gross sales, and so on for your business. 
  • Next, you will want to input your business’s core information, like your name, address, the date for that particular quarter, employee ID number, or EIN.    
  • Environmental taxes include OIL spills, imported petroleum products, and chemicals that deplete ozone. In Part one, you should list what products serve your company. If one of the products qualifies, you will need to use their corresponding rates under “Rates” to compute how much tax is due by your business. Then, depending on the total sales/units sold and the corresponding rates, you need to populate your business’s tax liability in the “Tax” column. At the end of Part I, you will want to sum all of your taxes and put the total.    

If none of the taxes on the excise taxes mentioned in Part I apply to your company, then skip Part I and go to Part II. However, if your business has some taxable income under Part I, you must fill out Schedule A on IRS Form 720. The Schedule A section must be completed if your company has a tax liability for any tax in Part I. If you do not have liability from Part I but a penalty for Part II, you do not have to complete Schedule A. Schedule A defines the net tax liability of your business.   

On Schedule A, you must list your net tax liability on each tax in each bi-monthly period and then record the totals in appropriate boxes. You must complete Box 1 on Schedule A unless you are responsible for one of the alternate methods of taxes, as mentioned under the applicable IRS numbers (22, 26, 28, or 27–in Part I). If your company is responsible for any of these taxes, you must fill out number 2 of Schedule A. Then, you will have to complete Part 2, which is the same as Part 1.    

If your business provides any goods or services in Part 2, you need to compute your taxes using your respective sales records and rates under the Rates column. Then, you are required to enter your calculated tax in the “Tax” column and then total it up at the end of Part II. Remember, health insurance taxes are calculated differently than the other categories. It uses the average number of lives covered rather than units sold or the total amount sold. Before jumping into Part III, you should mention if you must fill out Schedule T or Schedule C on IRS Form 720.

Both these Schedules apply to businesses dealing in fuel. You must fill out Schedule T on your forms if your company produces or sells diesel, kerosene, gasoline, or aviation fuel. This section defines the total amount of taxable fuel gallons received or shipped within the terminal’s two-party trade. If you are the party receiving energy from the two-party exchange, you are responsible for the tax collected from the power removed from the terminal.   

This total can then be used to fill out the third Part of the IRS Form 720. Part 3 is about calculating your total taxes, adding your totals from Parts I and II, and entering the sum into Box 3. Once you have completed your C-schedule, you will want to put all your claims into box number 4. Inbox 5, you must include the excise tax deposits you made during the quarter.    

If you have paid too much for the prior quarter, you must list that amount in boxes 6 and 7. Box 8 references the totals from boxes 5 and 6, while Box 9 references the accommodations from boxes 4 and 8. If the sum of your taxes is more significant than those of box 9, you must then itemize the difference: the amount of the tax due on Box 10.   

This amount must be paid along with the return filed on Form 720. On the other hand, if Box 9 is more significant than Box 3, you may want to include a note about what you may be doing about overpayment. Then, that amount should either be applied towards your following refund or be returned to you. Finally, you need to sign and date the IRS form 720.    

If you wish to name a third party to discuss your return with IRS, you must list that person under “Third Party Designees”. If you are using the services of an accountant or tax preparer, then you need to complete information in the “paying preparer used only” section. Now, you will need to file Form 720 by the specified deadline. There are two ways you can do that. 

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