Form 720 Requirements

Form 720, the Quarterly Federal Excise Tax Return, is used to calculate and pay excise taxes on certain types of income or assets. To ensure a smooth and error-free filing experience, you need to gather specific information and follow certain procedures.

You have the option to file Form 720 either manually or online. Both methods require the same information, but the process for making payments and calculating taxes may vary slightly between the two options.

1. Employer Identification Number:

The EIN is a unique 9-digit number assigned by the IRS to identify your business entity. It is crucial for filing Form 720 and is used by the IRS to track your business's tax obligations. You can apply for an EIN directly through the IRS, and the process is straightforward and typically quick.

2. Business Name and Address:

You must provide the full name of your business along with its complete address, including the street name, city, state, country, and postal code (ZIP code). It is essential to ensure that this information is accurate, as the IRS will use this address for all correspondence related to your tax filings.

3. Tax Period and Quarter:

The tax period refers to the financial year for which you are filing Form 720. The year is divided into four quarters, and it’s crucial to select the correct quarter for your filing. Ensure that you accurately identify both the tax year and the specific quarter you are reporting on, as selecting the wrong period can lead to errors or delays in processing.

4. Quantity/Units for Tax Payment:

Form 720 covers various categories of excise taxes, each with its own measurement units. It is essential to accurately determine the quantity or units relevant to your tax obligations. 

Depending on the category, this could include measurements such as gallons, tons, number of passengers, number of live covered, percentage of sales price, or other relevant units. Ensure you correctly identify and report these quantities to ensure accurate tax calculation and compliance.

5. Tax Calculator:

When filing Form 720 manually, it is crucial to accurately calculate the tax amount based on the specific parameters related to the category you are reporting. For example, the PCORI Fee is calculated by dividing the number of covered lives by the number of days in the plan year. Each tax category may have its own method for calculation, so precise computation is essential to avoid errors.

To simplify this process, consider using authorized online tax calculators available on reputable websites. These tools can help ensure accurate calculations and reduce the risk of errors.

Alternatively, if you opt for online filing, the tax amount is typically calculated automatically by the filing portal, which then displays the amount on your dashboard. You only need to review and confirm the details before proceeding with payment. This method can significantly reduce the complexity and risk of manual calculations.

6. Mailing Address:

If you are filing Form 720 manually, once you have completed the form, you must mail it to the appropriate IRS 720 mailing address. 

Opting for an IRS-approved online filing portal can simplify this process, as these portals will electronically submit your form directly to the IRS, eliminating the need for physical mailing.

7. Payment Details:

When filing Form 720, you have two options for submitting your payment:

1. Manual Filing: If you choose to file Form 720 manually by mail, you will need to include a Cheque for the payment amount along with Form 720 V . The Cheque should  be attached securely to the completed form before sending it to the IRS. Make sure to double-check that the Cheque is filled out correctly, including the payable amount, date, and your signature, to avoid any processing delays.

2. Online Filing: If you opt for the convenience of filing Form 720 online, you will need to provide your payment details electronically. Depending on your preferred payment method, you can use your bank account information for a direct debit or your credit/debit card details for processing the payment. Ensure that all the information you enter is accurate to facilitate a smooth and timely filing process.

The IRS recommends online filing over manual filing for several reasons, including speed, accuracy, and convenience. Don’t make your filing process harder than it needs to be—choose the smart way to file by going online. File your Form 720 now with our IRS-approved online portal, eFile720, and enjoy a quick, easy, and secure filing experience.

WRAP:

After reading this blog, you will gain a detailed understanding of the necessary preparations for filing your excise taxes using Form 720. By following these guidelines, you'll be equipped to ensure a smooth and hassle-free filing experience.