IRS Tax Form 720: Quarterly Federal Excise Tax Return (Rev. June 2023)

IRS Tax Form 720: Quarterly Federal Excise Tax Return (Rev. June 2023)

IRS Form 720, Quarterly Federal Excise Tax Return, is a tax form used by businesses to report and pay federal excise taxes on a variety of goods and services. The form is typically filed quarterly, and it is used to report and pay taxes that are imposed on specific goods, activities, or services, such as fuel, transportation, environmental taxes, and certain luxury items.

Understanding the requirements for Form 720 is crucial for businesses subject to federal excise tax. Failure to file this form properly or on time could result in penalties and interest. This guide will help you understand when and how to file Form 720, what types of excise taxes it covers, and how to avoid common mistakes.

What is IRS Form 720?

IRS Form 720 is used to report and pay federal excise taxes on a wide variety of taxable activities and goods. Excise taxes are typically applied to specific products or services, such as gasoline, diesel fuel, air transportation, and certain types of luxury goods or services. The taxes reported on Form 720 are separate from income taxes, sales taxes, and other business taxes.

Businesses required to file Form 720 include those that produce, sell, or use taxable goods and services. The form covers a range of excise taxes, including but not limited to:

• Fuel taxes (gasoline, diesel, aviation fuel)
• Environmental taxes (e.g., taxes on chemicals or ozone-depleting substances)
• Taxes on certain manufacturers or importers of goods
• Communications taxes (e.g., telephone services)
• Taxes on air transportation
• Certain luxury taxes (e.g., high-end cars or boats)

Form 720 is filed quarterly, and businesses must report the excise taxes they owe during the previous quarter.

Who Needs to File IRS Form 720?

Form 720 is required for businesses that engage in specific taxable activities. Some of the most common businesses that need to file Form 720 include:

1. Businesses that Sell or Use Fuel:
   This includes gasoline, diesel, and aviation fuel. If you sell or use fuel that is subject to excise taxes, you are required to file Form 720 to report and pay the taxes.

2. Airline and Aviation Industry:
   Airlines or businesses involved in the transportation of passengers by air must report the excise tax on their operations using Form 720.

3. Manufacturers or Importers of Taxable Goods:
   Certain manufacturers or importers of goods that are subject to excise taxes, such as motor vehicles, tires, or tires for use on motor vehicles, need to report and remit the appropriate taxes on Form 720.

4. Telecommunications and Communications Providers:
   Businesses in the telecommunications industry, including those providing phone, internet, and cable services, must file Form 720 to report excise taxes related to communications.

5. Environmental Taxpayers:
   Businesses involved in the production, importation, or sale of goods that have an environmental impact (such as certain chemicals) must file Form 720 to report excise taxes imposed to protect the environment.

6. Businesses in the Luxury Goods Industry:
   Businesses that sell certain luxury items, such as high-end cars, boats, and aircraft, may be required to report the excise tax on these items.

Key Sections of IRS Form 720

Form 720 consists of several sections and schedules, each designed to report a different type of excise tax. Below are the key sections of the form:

1. Part I: Excise Taxes
   This section is where businesses report the excise taxes they owe for the quarter. Part I includes the most commonly reported taxes, such as fuel taxes, air transportation taxes, and taxes on specific goods like tires and heavy trucks. Each line on Part I corresponds to a specific type of excise tax.

2. Part II: Environmental Taxes
   If your business is involved in the production, importation, or sale of goods that are subject to environmental taxes, such as ozone-depleting chemicals, you will report these taxes on Part II of Form 720. This section is used to report taxes related to the environmental impact of certain substances.

3. Part III: Communications Taxes
   Businesses that provide telecommunications services must report and pay the communications excise tax in this section. The taxes may apply to phone services, internet access, or cable TV services.

4. Part IV: Other Excise Taxes
   This section includes other excise taxes that may apply to specific industries, such as taxes on the sale of certain luxury goods or products subject to specific tax laws.

5. Schedule A, B, C
   These schedules are used to break down more complex taxes that may apply to a business, such as taxes on manufacturers or importers of specific products. They allow businesses to report these specialized taxes in more detail.

6. Part V: Summary of Tax Liability
   After filling out the relevant sections, businesses must summarize their total excise tax liability in Part V. This section allows businesses to calculate how much they owe for the quarter and how much they have already paid.

Filing Deadlines for IRS Form 720

Form 720 must be filed quarterly. The deadlines for filing are as follows:

• First Quarter (January – March): Due by April 30.
• Second Quarter (April – June): Due by July 31.
• Third Quarter (July – September): Due by October 31.
• Fourth Quarter (October – December): Due by January 31 of the following year.

If the due date falls on a weekend or holiday, the deadline is extended to the next business day.

How to File IRS Form 720

1. Paper Filing:
   If you are filing Form 720 on paper, you can download the form directly from the IRS website. Complete the form and mail it to the IRS service center indicated in the instructions. Ensure that you keep a copy of the completed form for your records.

2. Electronic Filing:
   The IRS allows businesses to file Form 720 electronically using the IRS e-file system. Electronic filing is quicker and more efficient than paper filing, and it allows for faster processing and payment of any taxes owed.

3. Payment of Taxes:
   When filing Form 720, businesses must also remit the excise taxes they owe. Payments can be made electronically using the IRS’s Electronic Federal Tax Payment System (EFTPS), or businesses can pay by check or money order when submitting their paper forms.

Common Types of Excise Taxes Reported on Form 720

The following are some of the most common excise taxes that businesses report on Form 720:

• Fuel Taxes:
  Includes taxes on gasoline, diesel, kerosene, and aviation fuel.

• Air Transportation Taxes:
  Applies to air carriers and other businesses involved in air transportation.

• Environmental Taxes:
  Includes taxes related to chemicals and substances that harm the environment, such as ozone-depleting chemicals.

• Tire Taxes:
  Manufacturers or importers of tires for use on motor vehicles must report excise taxes in this category.

• Communications Taxes:
  Businesses providing telecommunications services must report and pay taxes related to phone services, internet access, and other forms of communication.

• Luxury Taxes:
  Taxes on certain high-end goods such as cars, boats, and private aircraft.