Form 720 Preparation Guide

Form 720 is used by businesses to report and pay federal excise taxes on certain goods, services, or activities. This form helps businesses calculate their excise tax liability, organized by IRS category numbers, and ensures that the appropriate taxes are paid on time to comply with IRS regulations.

Failure to file Form 720 can result in penalties, so it's crucial to stay compliant. To assist you in accurately completing Form 720, we've prepared a detailed step-by-step guide to help you navigate the preparation process.

STEP 1 – Determine Eligibility and Analyze Quantities

Excise taxes are generally imposed on specific goods, such as gasoline, coal, and communication equipment, as well as on certain activities or services, like air travel and indoor tanning services. To start, you need to determine whether your business is required to file Form 720. For a clearer understanding of this, refer to our blog post on does my llc need to file form 720.

Once you've confirmed that your business needs to file the quarterly federal excise tax return, the next step is to accurately identify and separate the quantities according to their relevant units, as Form 720 includes various categories. 

For instance, fuel taxes such as those for diesel or kerosene are calculated based on the number of gallons, while the ship passenger tax is calculated by the number of passengers, the PCORI fee is based on the number of lives covered, etc. Therefore, it's crucial to have these quantities with precise units before filing Form 720 to ensure that the correct tax amount is calculated and paid.

STEP 2 – Gather Requirements for Form 720

To ensure a smooth filing experience for Form 720, you'll need to gather the following essential details:

• Employer Identification Number (EIN): Your business’s EIN is required to identify your tax account.

• Name and Address: Ensure that your business name and address are up-to-date and correctly entered on the form.

• Tax Period and Quarter: Indicate the appropriate tax period and quarter for which you are filing.

• Quantity/Units for Tax Payment: Specify the quantities or units of goods, services, or activities that are subject to excise tax.

• Payment Information: Have your check, bank account, or card details ready for payment if you are paying electronically or through a check.

• Tax Calculator: Use a tax calculator to accurately compute your excise tax liability if you are filing manually.

• IRS Mailing Address: If filing manually, ensure you have the correct IRS Form 720 V mailing address to send your completed form and payment.

Gathering these details in advance will help streamline the filing process and reduce the likelihood of errors or delays.

STEP 3 – Choose Your Filing Method for Form 720

You have two methods available for filing Form 720:

1. Manual Filing: This traditional method involves downloading Form 720 from the IRS website, filling it out manually, and mailing it to the IRS at the correct address. Ensure all information is accurate, and include your payment if applicable.

2. Online Filing: This is a faster and more efficient way to file Form 720. You can use any IRS-approved online portal to complete the filing process. For a quick and hassle-free experience, consider using our online portal, eFile720, which offers a streamlined and user-friendly filing process.

For detailed guidance on these methods, check out our blog on where to file Form 720. Selecting the method that best suits your needs will help ensure a smooth filing process.

STEP 4 – Save Your Acknowledgement After Filing

Once you've completed the filing process using either method, it's essential to keep an acknowledgment of your Form 720 filing as proof of your federal excise tax return.

• Form 720-V (Payment Voucher): If you filed manually, Form 720-V is the payment voucher found at the end of Form 720. This form should be filled out and submitted with your payment. It serves as your acknowledgment for the manual filing method.

• Confirmation Receipt: For online filings, after submitting through an IRS-approved portal, you will receive an acknowledgment receipt once the IRS processes and approves your filing. You can download this receipt for your records. Additionally, you can check the status of your filing through our online portal you used.

Keeping these acknowledgments is crucial for your records and can be helpful in case of any discrepancies or questions about your filing status.

WRAP:

By reading the blog, you'll gain a comprehensive understanding of how to file your Form 720. This guide will help you gather all the necessary information and requirements for accurately completing your excise tax filing, ensuring a smooth and complaint filing process.

File your Excise Tax Online with us today!