If you are reporting gallons of taxable fuel that may again be subject to tax, you may need to file a first taxpayer’s report. The report must contain all the information as shown in the Model Certificate B in the Appendix of Pub. You can use PDSs designated by the IRS to meet the “timely mailing as timely filing/paying” rule for tax returns and payments. Go to IRS.gov/PDS for the current list of designated services.
How To File Return to Top
- At the top of Form 720, enter “Section 6114 Treaty.” If you have no other transactions reportable on Form 720, complete Form 720 as follows.
- The IRS provides detailed instructions for Form 720, outlining the specific categories and activities subject to excise taxes.
- Based on your total sales/units sold and the respective rate, fill in your business’s tax responsibility in the “Tax” column.
- However, annual claims can’t be made for gasoline and aviation gasoline.
Often, they’re used by governments to discourage the use of products that can be harmful, like tobacco or alcohol (known also as sin taxes). In other cases, they can help fund specific government programs or services. For example, excise taxes on fuel often go towards maintaining roads and transportation infrastructure. If you report a liability on Part I or Part II, you may be eligible to use Schedule C to claim a credit.
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For lines 5c and 5d, the kerosene must have been used during the period of claim for type of use 1, 9, 10, 11, 13, 15, or 16. For lines 4e and 4f, the kerosene must have been used during the period of claim for type of use 2. You must enter the number from the table in the Type of use column as required. The IRS may withdraw the right to make deposits of tax using the safe harbor rule from any person not complying with these rules. If you don’t deposit as required and instead pay the taxes with Form 720, you may be subject to a penalty.
Foreign insurance taxes on IRS Form 720 apply to premiums paid for insurance policies issued by non-U.S. The tax must be reported and paid by the person who pays the premiums, issues the policy, or is insured under the policy. But there are also other types of fuel taxes, one of them being alternative fuels tax. This includes taxes on fuels like liquefied petroleum gas (LPG), compressed natural gas (CNG), and liquefied natural gas (LNG). Excise taxes are usually (but not always) included in the price you pay for the product.
If uncertainty remains after reviewing IRS materials, consulting with a tax advisor who specializes in federal excise taxes can provide clarity tailored to your specific business circumstances. Businesses required to pay these taxes must file Form 720 quarterly (every three months). This form is submitted to the IRS along with payment for any excise taxes due during the quarter.
Penalties for late filing or non-compliance
While the IRS provides detailed instructions, Form 720 is complex, especially when multiple excise categories or refunds are involved. TAS works to resolve large-scale problems that affect many taxpayers. If you know of one of these broad issues, please report it to them at IRS.gov/SAMS.
- Generally, EFTs are made using the Electronic Federal Tax Payment System (EFTPS).
- The SAF credit can’t be claimed for qualified mixtures produced outside the United States or if the transfer of such mixture to the fuel tank of an aircraft occurs outside the United States.
- Refer to the IRS Instructions for Form 720 for a full list of applicable items and rates.
- Claim the section 4051(d) tire credit on Schedule C, line 14a.
The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to be responsible for collecting, accounting for, and paying over these taxes, and who acted willfully in not doing so. In a two-party exchange, the person receiving the fuel, not the person delivering it, is liable for the tax imposed on the removal of taxable fuel from the terminal. If your business deals with any of these fuel types according to the IRS definition of a two-party exchange, complete Schedule T. Based on your total sales/units sold and the respective rate, fill in your business’s tax responsibility in the “Tax” column. At the bottom of Part I, add up all of the taxes and fill in the total. The kerosene sold for use in commercial aviation must have been sold during the period of claim for use in commercial aviation (other than foreign trade).
Depending on the nature of your business, you might be liable to pay excise taxes and file Form 720 to the IRS. Although we can’t respond individually to each comment received, we do appreciate your feedback and will consider your comments and suggestions as we revise our tax forms, instructions, and publications. Do not send tax questions, tax returns, or payments to the above address. The net tax liability for a semimonthly period is the total liability for the period minus any claims allowed on Schedule C for the period.
For example, an excise tax on gasoline might fund local road repairs. Only one claim may be filed for any gallon of gasoline or aviation gasoline. Complete all information requested for each line, including Month your income tax year ends and Period of claim. Enter the month as “MM.” Enter the period of claim as “MM/DD/YYYY – MM/DD/YYYY.” Your claim will be disallowed if you don’t follow the required procedures or don’t provide all the required information.
Who Must File
See Patient-centered outcomes research (PCOR) fee (IRS No. 133) in Part II for special rules about who must file to report the PCOR fee. The tax for health insurance is calculated differently than the other categories. It uses the average number of lives covered, as opposed to units sold or total sales. The Schedule A section of IRS Form 720 is for businesses that have a tax liability in Part I. If you don’t have liability from Part I but do have liability for Part II, you do not need to fill out Schedule A. If the due date for filing Form 720 falls on a weekend or legal holiday, you can file by the next business day.
Does My Business Need to File Form 720? A Complete Guide
If you aren’t registered, use Form 637 to apply for a registration number. For line 5e, the kerosene must have been used during the period of claim for type of use 9. This claim is made in addition to the claim made on lines 5c and 5d for type of use 9.
Are excise taxes collected only on the federal level?
Collectors using the regular method for deposits must use Form 720-X to request a credit or refund. The section 4261 tax on the amount paid for international flights is increased to $22.90 per person for flights that begin or end in the United States. The section 4261 tax per person for domestic segments beginning or ending in Alaska or Hawaii is increased to $11.40 (applies only to departures). Remember, this schedule is crucial for keeping track of your tax obligations at different times in the quarter and ensuring that you’re paying the right amount at the right time. These taxes help fund 720 form instructions various government projects, like road maintenance and transportation infrastructure. Businesses that sell or use these fuels need to collect and pay these taxes to the government.
The charter service collects the tax from Tim and submits it to the government. A paid preparer must sign Form 720 and provide the information in the Paid Preparer Use Only section at the end of the form if the preparer was paid to prepare the form and isn’t an employee of the filing entity. The preparer must give you a copy of the form in addition to the copy to be filed with the IRS. If you are a paid preparer, enter your Preparer Tax Identification Number (PTIN) in the space provided.
The alternative fuel must have been used during the period of claim for type of use 1, 2, 4, 5, 6, 7, 11, 13, 14, or 15. The ultimate purchaser of the taxed alternative fuel is the only person eligible to make this claim. For line 2d, the aviation gasoline must have been used during the period of claim for type of use 9. This claim is made in addition to the claim made on line 2b for type ofuse 9.
Refer to the IRS instructions for Form 720 and the applicable sections for each tax category. If Schedule T applies to your business, you need to identify the two-party exchange and note the gallons of taxable fuel received or delivered under a trade or exchange agreement between two registered entities. The Patient-Centered Outcomes Research (PCOR) fee, reported on IRS Form 720, is a charge for issuers of certain health insurance policies and sponsors of self-insured health plans. The fee, based on the average number of lives covered, is $3.00 per life for policy years ending between October 1, 2022, and October 1, 2023.
Even small businesses may have to file if their products or services fall under excise tax rules. Always check IRS guidance or consult a tax advisor if you’re unsure. The SAF credit can’t be claimed for qualified mixtures produced outside the United States or if the transfer of such mixture to the fuel tank of an aircraft occurs outside the United States. Requirements 1 and 2 below must be met only if the credit exceeds the amount of taxable fuel liability reported.