Common Mistakes to Avoid When Filing Form 6627

• Form filing 6627 requires aligning details with Form 720 to avoid major IRS excise tax mistakes.

• Form 6627 filing mistakes usually come from using an incorrect EIN or from not matching the quarter or business data with what was filed on your Form 720. 

• It's common to see units added incorrectly or calculated incorrectly and IRS excise tax mistakes can happen if you use an outdated rate during tax preparation/filing. 

• One of the more frequently encountered issues leading to IRS rejection during preparation is selecting the wrong tax category on the Form 6627.

The following is an overview of the purpose and filing process for Form 6627, along with common mistakes to avoid:

Purpose of Form 6627

Form 6627 is used for reporting Environmental Taxes, including:

• Ozone-Depleting Chemicals (ODCs) taxes

• Petroleum excise taxes

• Imported Chemical Substance taxes

• Federal Oil Spill Tax Obligations

ALSO CHECK - Form 6627 - Instructions Simplified

• Manufacturers, Importers and Sellers of Chemicals/Petroleum Products

• Businesses with Environmental Hazardous Substances under the IRS Code

• Form 6627 must always be filed along with Form 720, the Quarterly Federal Excise Tax Return. Both Forms 6627 and 720 contain the same data to avoid IRS Excise Tax errors.

Common Filing Mistakes with Form 6627:

Below is a streamlined, point-driven guide to the most frequent issues taxpayers face during Form filing 6627 and how to prevent them:

Common Errors:

• EIN typed incorrectly (Nine-digit)

• Old or Inactive EIN

• Entering another corporation's EIN due to internal miscommunication

Consequences:

• Identifying the wrong taxpayer

• IRS delay in processing/rejecting the tax return

• Have to file corrections, causing unnecessary administrative burden

Checklist to Prevent This Error:

• Use the official EIN verification document

• Cross-check the EIN against your accounting records

• Re-verify the EIN before submitting any quarterly returns

ALSO CHECK - How to File Form 6627[Federal Environmental Taxes]

Common Causes:

• Differences in business name (suffixes, abbreviations and previous legal name)

• Incorrect filing quarter (Q1 for Q2, etc.)

• Payroll systems and excise tax entries differ

Effect:

• Automatically rejected by the IRS system

• Higher likelihood of submitting inaccurate Forms 6627

• Delay when reporting excise tax liability

Best Practices:

• Ensure same business name on both Forms 720 and 6627

• Validate correct quarter before submitting

• Consistent business name structure across all IRS documents

Incorrect Quantity Entries

Common Problems:

• Entering wrong units (tons vs.B(lamins) instead of lbs.

• Reporting an estimate instead of the actual amount(s)

• Typo(s) resulting in inflation of tax/

• Overdue Liability

• Risk of Overpaying Excise Tax

• Risk of Underpaying causing Penalty(

• Calculation mistakes leading to erroneous excise taxes owed to the IRS

How to Resolve/Prevent:

• Monitor production/import documents on-time monthly.

• Facilitating Automation as opposed to Manual Entry.

• Conflicting Quantity with internal inventory systems.

Erroneous Calculation of Total Tax

Where Errors Occur:

• Multiplied Quantity & Tax Rate Incorrectly

• Using Out-of-Date Tax Rates(Effective Rates

• Manual Errors When Calculating

• No Penalty for Underpayment

• Excessive Taxes Paid (Refund Delays in most cases)

• Incorrect Totals on Form 720

Steps to Ensure Accuracy:

• Utilizing Current IRS Tax Rate Tables

• Utilizing Digital Calculators

• Having a secondary Internal Reviewer validated the Total Value

 3 Common issues when form numbers on the IRS do not match: 

• Inaccurate Form Versions Used (Using Versions no longer acceptable)

• Incorrect IRS tax codes selected

• Submitting excise tax categories without matching IRS references.

What Happens When Form 720 Is Not Accepted

Form 720 Will Be Rejected if:

• You have to file amended Forms 720, which can lead to additional delays.

• This Will Increase The Odds of Making A Repeat Filing Error for Form 6627.

Selecting the Wrong Section On Form 6627

Many categories of excise tax have different sections on the Form.

Common Problems Include:

• Petroleum Products filed under the "ODC" section

• Imported Chemical Products Not Being Filed in the Correct Category:

• Oil Spill Tax Filed In The Wrong Section

How To Correct This:

• Be Familiar with All Sections of Form 6627 before completing the Form.

• Check The IRS Category Lists For Each Excise Tax.

• Utilize Filing Software That Will Help You Choose The Correct Sections To Avoid Mistakes.

12 Checks to Avoid Form 6627 Filing Mistakes When Preparing And Filing Form 6627

• Correctly Verify Your EIN Number

• Determine Whether Your Legal Business Name Is The Same Everywhere

• Verify That The Quarter You Are Filing Is Correct

• Determine Whether The IRS Codes You Used On 720 To Complete 6627 match

• Verify That You Used The Correct Rates For Taxes For This Quarterly Return

• Verify That The Units Of Taxation Used Are Correct

• Verify That Quantities Used Are Based On System Reports

• Verify That You Submitted The Correct Values For the Calculation

• Determine That You Selected The Correct Sections For Each Excise Tax

• Complete An Internal Audit Before Filing The Return

• Keep All Supporting Documentation For Audit Purposes In The Non-Filing Season

• Submit Your Filing Online Using An IRS Approved Filing System.

Following This Checklist Will Greatly Reduce The Number Of Errors For Excise Taxes When Filing And Will Facilitate An Easier Processing Of Your File.

Why Accuracy is Important from a Broader Compliance Context

Accurate Form 6627 filing provides:

• Faster acceptance by the IRS

• Reduced compliance risks

• Minimized chances of incurring a penalty if filed late or incorrectly

• Reliable and correct reporting of your environmental tax liability

• Less hassle at quarterly filing intervals

Companies that handle chemicals, oil, and/or taxable products must incorporate compliance into their businesses to prevent costly errors.

Final Thoughts:

By avoiding common errors when completing Form 6627, businesses can complete one-time, hassle-free and error-free filings. The accuracy of quantities, tax calculations, identification information and IRS Code correspondence will eliminate the risk of IRS excise tax mistakes.

Take advantage of our IRS-approved filing software, efile720.com, to quickly and easily complete Form 6627 in a fully compliant manner.

FAQs

1. Is Form 6627 always filed with Form 720?

Yes. You must attach Form 6627 to Form 720 when you file Environmental Excise Taxes.

2. Who must file Form 6627?

Manufacturers, importers and sellers of taxable chemicals, petroleum products, or other substances on which you will pay Environmental Tax.

3. What happens if I include the wrong quantities on Form 6627?

You could incur overpayment or underpayment penalties, or be required to amend your return.

4. Can I reduce Form 6627 errors by filing electronically?

Yes, because electronic filing automates calculations and removes nearly all manual errors and creates a consistent response to the IRS Code.

5. How do I find the right section to use on Form 6627?

Consult the IRS Category Chart or a Filing Guide Tool for assistance in identifying the correct section.