Form 6627 - Instructions Simplified

Form 6627 serves the purpose of reporting environmental excise taxes including Tax on Petroleum, Chemical, Chemical Substances, and ODCs  These taxes are imposed on certain chemical substances that can harm the environment, as well as on specific fuels, crude oil, and imported petroleum products. The revenue generated from these taxes is used for vital activities like oil spill prevention, environmental response, and cleanup efforts.

The environmental taxes reported on Form 6627 include taxes on Ozone-Depleting Chemicals (ODCs), the ODC tax on imported products, and the tax on floor stocks of ODCs. These taxes help fund important environmental protection and restoration activities.

It's important to note that Form 6627 is always submitted in conjunction with Form 720, rather than on its own. While Form 720 provides the IRS number and tax category, Form 6627 breaks down the specific quantities and tax rates for the substances or products being taxed.

Part I focuses on the taxes imposed on crude oil and petroleum products, particularly in relation to the Federal Oil Spill Tax. These taxes are calculated based on factors such as:

• Crude oil received at U.S. refineries

• Crude oil taxed prior to its arrival at a refinery

• Crude oil used domestically before the tax was imposed

This section also includes taxes on imported petroleum products, both in terms of the superfund tax and the oil spill tax.

The Form 720 IRS numbers covered under Part 1 are:

• IRS Number 53: Domestic petroleum superfund tax

• IRS Number 18: Domestic petroleum oil spill tax

• IRS Number 16: Imported petroleum products superfund tax

Part II deals with the tax on chemicals not classified as ozone-depleting chemicals (ODCs), as outlined in Section 4661 of the tax code. There are 42 chemicals listed, with tax rates ranging from $0.44 to $9.87 per ton, depending on the substance.

The Form 720 IRS number covered under Part 2 is:

Part III pertains to taxes on imported chemical substances. The tax is imposed on substances containing chemicals that account for 20% or more of the value of the substance’s weight.

The Form 720 IRS number covered under Part 3 is:

Part IV addresses taxes on Ozone-Depleting Chemicals (ODCs), which harm the Earth’s ozone layer. This group includes substances like:

• Chlorofluorocarbons (CFCs)

• Hydrochlorofluorocarbons (HCFCs)

• Halons

• Carbon tetrachloride

• Methyl chloroform

The Form 720 IRS number covered under Part 4 is:

Part V is focused on taxes imposed during the import of materials manufactured using ODCs. The tax is calculated based on the amount of ODC used in the production of these materials.

The Form 720 IRS number covered under Part 5 is:

Part VI deals with taxes imposed on floor stocks of ODCs. If ODC materials are stored on the production floor or are readily accessible for manufacturing or maintenance activities, this tax applies.

The Form 720 IRS number covered under Part 6 is:

• IRS Number 20: Floor stocks tax—Ozone-depleting chemicals

This structured breakdown helps clarify the role of Form 6627 in reporting environmental excise taxes while emphasizing its relationship with Form 720, which contains the corresponding IRS numbers and tax categories.

Tips for Filing Form 6627:

Download the Latest Version: Always ensure you download the most up-to-date version of Form 6627 from the official IRS website. The tax rates for chemicals and substances may change in newer versions, so using an outdated form could lead to incorrect tax reporting.

Review Instructions Thoroughly: Before completing Form 6627, carefully read the latest Form 6627 instructions from the IRS website. This will provide essential guidance for understanding the tax categories, how to calculate the taxes, and ensure compliance with the current regulations. Proper preparation helps avoid mistakes and ensures that the form is filed correctly.

Manual filing can be challenging since you need to complete both Form 6627 and Form 720. File your Environmental Excise Tax online with eFile720 with the help of our blog on how to file form 6627 and enjoy the ease and convenience.

WRAP:

After reading this blog, you should now have a clear and comprehensive understanding of the purpose of Form 6627, along with detailed insights into each of its sections. You are now better equipped to navigate the form’s requirements and understand how it relates to reporting environmental excise taxes and the federal oil spill tax.

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