FORM 720 Excise Taxes: Instructions and Guidelines

There are penalties for both failing to file form 720, and failing to pay the taxes owing. For example, in April of 2017, the excise tax for a pack of 20 cigarettes in the State of California was increased by $2.00 per pack, from .87 to $2.87. According to CNBC, sales throughout the state were reported to have dropped by as much as 50%, as a result. A third party may collect the excise tax, file Form 720, and send the tax to the IRS. For example, airlines collect the excise tax on airline tickets sold from the purchaser of the tickets. If the IRS approves the application, it issues an Approval of Excise Tax Registration Letter (3689).

A person’s return is a first return if the person was not required under this part 40 to file a return (other than a final return) for the preceding period. If your company offers a self-insured health plan, such as an HRA, you must pay the PCORI fee. Specified health insurance policies subject to PCORI fees are generally prepaid health coverage arrangements with fixed premiums for accident or health coverage.

Having your Excise Taxes Paid

These fuel businesses must fill out the Schedule C section of Form 720 by inputting the case number, tax rate, gallon amount, and total dollar amount of the claim, followed by the total on line 15. On IRS Form 720, you’ll see a line for each type of excise tax that you may owe, usually based on unit sales or weight. If you owe excise tax when you file your Form 720, the IRS requires you to make payment using electronic funds transfer. To avoid penalties, you must insure that your payment reaches the IRS by the deadline.

Other excise taxes are imposed on activities such as wagering and environmental protection. Still, other excise taxes may be imposed on a variety of other activities and products. In most cases, you will need to complete a Form in order to report an excise tax.

Instructions for How to Fill in IRS Form 720

However, you may be unaware that you are paying this tax because it is frequently included in the price of commodities, such as gasoline for your automobile. Businesses that sell products and services that are subject to excise tax must file a Form 720 with the IRS quarterly. Let’s see the instructions on how to file Form 720 and the excise taxes.

How To Fill Out Form 720

Form 720 outlines all of the goods and services that necessitate the payment of excise taxes by a firm. If your company does not sell any of the products or provide any of the services listed on the form, you are not subject to excise taxes and do not need to fill out this tax form. The government imposes certain excise taxes to discourage the use of products and services or change behavior, like tobacco, alcohol, firearms, and gambling. Taxpayers must fill out part II of Form 720 if their business sells certain health insurance policies, fishing equipment, indoor tanning services, waterway fuel, or electric outdoor motors. Use the appropriate columns and rates to fill out this section and calculate the total, taking note of the different calculations needed for health plans. IRS Form 720 is divided into three sections, as well as sections for Schedule A, Schedule T, and Schedule C, as well as a payment voucher (called Form 720-V).

Which IRS forms Cannot be electronically filed?

The return of any tax to which this part 40 applies must be made on Form 720, Quarterly Federal Excise Tax Return, according to the instructions applicable to the form. The requirement for filing a return under this part 40 applies separately to each tax listed by IRS Number on Form 720. Except as provided in this paragraph (a)(1), an entry must be made on the line for the IRS Number in order to file a return of the tax corresponding to that number. The entry on an IRS Number line of the word “none,” “zero,” or comparable entry clearly indicating a denial of liability constitutes a return of that tax. The entry of the word “none” across the return or in the summary portion, provided it clearly indicates a denial of liability for all taxes, constitutes a return of all taxes listed on Form 720. With an employer-sponsored HRA that’s integrated with a fully-insured medical plan, it’s a requirement to pay the fee only with respect to each HRA participant.

How To Fill Out Form 720

By specifying the obligations in the first and second parts of the form, you have the right to receive a loan (column C). Form 720 can be e-filed using the IRS website or your tax software. You can also pay an extra excise tax using the government’s Electronic Federal Tax Payment System (EFTPS). Under the Affordable Care Act (ACA), sponsors of self-insured health plans must pay a fee to fund the Patient-Centered Outcomes Research Institute (PCORI).

Fill Out Schedule A

Form 720, known as the Quarterly Federal Excise Tax Return7, is used by organizations to report any federal excise taxes collected. For example, an expat taxpayer who has an interest in a specific type of foreign life insurance plan would have to use IRS form 720 to report the excise taxes on that interest. Excise taxes are taxes paid when purchases are made on a specific good. As a consumer, you might not even realize you’re paying excise tax since it’s usually included in the price of goods. If your business does owe any taxes in Part I, you’ll have to complete Schedule A as well. This is where you’ll fill out your net tax liability for each semi-monthly period, then combine them for the total liability.

  • For groups participating in CBIA’s Fixed Funding Solutions self-insured plan.
  • You’ll multiply that number by the tax rate to arrive at the tax liability.
  • You will also need to list the types and quantities of excise-taxable products that you have sold during the quarter.

For example, various types of diesel fuel require the payment of approximately 24 cents for each gallon. For this type of good, you simply input the number of gallons sold and multiply it by the rate per gallon. Don’t let Form 720 sour your impression of filing your taxes. The most common business tax documents are less painful, especially when you have tax software at the ready.

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