Form 720 2019 Instructions for Filing Federal Excise Taxes

Federal excise taxes apply to specific goods, services, and activities that the government regulates or uses to raise revenue. Many businesses must report and pay excise taxes quarterly using Form 720, the official federal excise tax return issued by the Internal Revenue Service (IRS).

Understanding this form and its requirements is essential for accurate reporting. The 2019 tax year included several updates that affected air transportation taxes, environmental taxes, and the ability to file electronically. Businesses responsible for these taxes must ensure compliance with IRS deadlines and payment procedures to avoid penalties and interest charges.

This guide provides a professional overview of the 2019 Form 720 filing process. It explains who must file, how to prepare and complete the form, and which excise taxes apply to various services subject to tax. Always verify current IRS instructions or seek help from a tax professional or tax advisor when necessary.

Overview of Form 720 

Form 720, the Quarterly Federal Excise Tax Return, allows companies to report specific excise taxes. It applies to industries dealing with fuel, air transportation, communications, insurance, and certain types of manufacturing or services.

Who Must File Form 720

Entities that must file include any business liable for excise taxes in the current or previous quarter. Common filers include fuel distributors, telecommunications companies, airlines, and providers of indoor tanning services.

Quarterly Filing Deadlines

Form 720 must be filed quarterly, covering four distinct periods throughout the year. The due date for each quarter falls at the end of the month following the quarter’s close.

Key Updates and Changes from 2019

The 2019 Form 720 introduced several updates that affected how many businesses file and pay excise taxes. Understanding these changes ensures timely filing and accurate reporting.

Electronic Filing Option

Beginning in 2019, taxpayers could file electronically using approved IRS software or an authorized Electronic Return Originator. This change allowed faster processing, immediate confirmation, and fewer manual errors in the completed form.

Patient-Centered Outcomes Research Fee Increase

The fee applies to specified health insurance policies and self-insured plans. For policy or plan years ending on or after October 1, 2018, but before October 1, 2019, the rate increased to $2.45 per average number of lives covered.

Oil Spill Liability Tax Expiration

The Section 4611 tax on crude oil and petroleum products expired in 2019 unless extended by Congress. Businesses dealing with natural gas and fuel types previously liable under this tax should review updated IRS guidance.

Continued Suspension of Medical Device Tax

The suspension of the medical device tax continued through December 31, 2019. Under this provision, medical equipment manufacturers were not required to pay excise taxes for that year.

Change of Mailing Address

For 2019, businesses filing by mail had to send their Form 720 to the Department of the Treasury, Internal Revenue Service, Ogden, UT 84201-0009. Always confirm the latest mailing address before submitting.

Understanding Parts I, II, and III

Form 720 consists of three main sections that group taxes by type. Each part identifies how businesses must calculate and report their quarterly tax liability.

Part I – Regular Excise Taxes

• Fuel taxes: These taxes apply to gasoline, diesel, and kerosene used for taxable purposes. Companies must calculate their liability based on the gallons sold.
  
  
• Communications taxes: These cover local phone service and teletypewriter exchanges. Providers must report the total amount collected from customers.
  
  
• Manufacturer taxes: These apply to sales of specific products, such as heavy trucks, trailers, or tires. Companies calculate tax based on the total sales price.
  
  
• Retail taxes: Certain products or services sold directly to consumers fall under this category and require separate reporting.

Part II – Environmental and Air Transportation Taxes

• Environmental taxes: This will apply to ozone-depleting chemicals and imported products containing such materials. Businesses report liability using Form 6627 attached to Form 720.
  
  
• Air transportation taxes: Airlines and charter operators report excise taxes on domestic air travel, including percentage- and segment-based fees.
  
  
• Other excise taxes: This section includes specialized assessments, such as foreign insurance taxes and those on specified health insurance policies.

Part III – Summary and Payment Information

Part III summarizes total excise tax liability from Parts I and II, adjusts for credits, and calculates any balance due. Businesses must include deposits, credits from Schedule C, and total payment details before signing the filing form.

Filing Form 720 Quarterly Federal Excise Tax Return

Filing the federal excise tax return requires accuracy and awareness of timing. Businesses can file electronically or by paper, depending on their preference and system access.

Electronic Filing (File Electronically)

• Faster processing: Electronic filing reduces processing time and allows the IRS to confirm receipt almost immediately.
  
  
• Error reduction: Built-in software checks help reduce mathematical or formatting mistakes during submission.
  
  
• Secure transmission: Encrypted electronic filing ensures sensitive business data remains protected.

Paper Filing Option

• Manual completion: Taxpayers must use the official IRS form and complete all required parts clearly in black ink.
  
  
• Mailing address: For the 2019 tax year, send the completed form to the IRS at the Ogden, Utah, address noted in the official instructions.
  
  
• Final return designation: Check the “Final return” box if your business no longer expects future excise tax liability.

Quarterly Basis and Deadlines

Businesses must file Form 720 every quarter, even when no tax liability exists. Submitting a zero return when required prevents potential penalties for failure to file. Timely compliance ensures accurate reporting for each quarter’s due date.

Step-by-Step Instructions for Completing IRS Form 720

Accurate filing depends on carefully following each step in the process. Each form part collects essential information about liability, payment, and schedule attachments.

Step 1: Gather Required Information

Gather your business's quarterly excise tax records before preparing the IRS form. Include your legal name, current mailing address, and EIN. Review taxable activities, quantities of goods, and applicable tax rates. Keep all documentation available to ensure accurate calculations and timely filing.

Step 2: Complete the Header Section

Enter identifying details accurately at the top of the form. Include your employer identification number, business name, address, and the quarter ending date. Check the box if your address has changed since the last filing.

Step 3: Fill Out Part I – Regular Excise Taxes

In Part I, report your tax liability by IRS number and product type. Enter taxable quantities, applicable tax rates, and the total amount owed for each line item. Ensure accurate calculations to avoid later adjustments.

Step 4: Fill Out Part II – Environmental and Communication Taxes

Part II reports environmental taxes and communications-related excise taxes. Use attached schedules such as Form 6627 for ozone-depleting chemicals and Schedule T for two-party fuel exchanges if applicable.

Step 5: Complete Part III – Summary and Payment Section

Part III compiles totals from prior sections, including deposits and credits from Schedule C. Calculate the total tax owed or refund due, attach a payment voucher if necessary, and verify all entries before submission.

Step 6: Sign and Submit the Completed Form

The form must be signed by an authorized individual such as a corporate officer, owner, or designated representative. Unsigned filings are considered incomplete and may delay processing or result in penalties.

Payment and Deposit Rules for Federal Excise Taxes

Businesses liable for excise taxes must pay using approved methods and follow specific deposit schedules. The IRS requires electronic deposits for most filers, though limited exceptions allow payment with the return. Timely deposits prevent penalties and interest charges on unpaid tax amounts.

Electronic Deposit Requirement

• Mandatory deposits: Most businesses must deposit excise tax electronically instead of sending paper checks to the IRS.
  
  
• Payment timing: Transactions should be initiated at least one business day before the due date to ensure on-time posting.
  
  
• Confirmation records: Keep all electronic payment receipts to verify that the IRS processed payments accurately.

Semimonthly Deposit Schedule

Excise taxes must be deposited twice per month unless exempt. Deposits are due on or before the 29th day of the same month (or the 28th/29th for February) for the first period, and by the 14th of the following month for the second.

• First Semimonthly Period
  • Days Covered: 1st–15th
  • Deposit Due Date: 29th of the same month
• Second Semimonthly Period
  • Days Covered: 16th–end of the month
  • Deposit Due Date: 14th of the following month

Pay-With-Return Exceptions

• Low liability threshold: If total quarterly liability does not exceed $2,500, you may pay with the return.
  
  
• Special cases: Payments for gas guzzler tax, patient-centered outcomes research fees in the second quarter, or certain Part II taxes may qualify.

Calculating Net Tax Liability

• Consistent application: Once a calculation method is chosen, it must be used for all semimonthly periods during that quarter.
  
  
• Accuracy importance: Miscalculations can lead to underpayment penalties and interest charges from the IRS.

EFTPS Processing and Timing

Payments through EFTPS must be scheduled before 8:00 p.m. Eastern Time on the business day before the due date. Late transactions can result in processing delays or penalties. Always confirm the transaction before the cutoff time and maintain proof of each completed payment.

Required Schedules and Attachments

Form 720 requires several supporting schedules and forms to report excise tax liability, credits, and adjustments accurately. Each attachment provides the IRS with additional details that verify reported totals and claims for exemptions or refunds. Businesses must include all applicable schedules to ensure their filing is considered complete.

• Schedule A: This schedule summarizes excise tax liabilities for each semimonthly period. Even if the quarterly liability is less than $2,500, it must be completed to show a detailed payment history.
  
  
• Schedule C: This schedule reports credits for nontaxable uses, exports, or qualified sales. Supporting documentation is required, and missing information will result in the IRS denial of the claim.
  
  
• Schedule T: This schedule applies to taxable fuel exchanges within terminals. It identifies the number of gallons received or delivered and lists both parties involved in the trade.
  
  
• Form 6627: This form calculates environmental taxes related to ozone-depleting chemicals and imported products. This form must always accompany Form 720 when these chemicals are reported.
  
  
• Form 6197: This form is used by vehicle manufacturers and importers to calculate gas guzzler taxes on vehicles failing fuel economy standards. Each model must be listed with its applicable rate.
  
  
• Supporting documentation: Additional attachments may include sales certificates, export proofs, or computation sheets. For identification, each page must show the business name and employer identification number.
  
  

Common Errors and How to Avoid Them

Accurate filing of federal excise taxes requires careful review of all amounts and schedules. Small mistakes can lead to processing delays, penalties, or IRS notices. Understanding common filing errors helps businesses prevent unnecessary complications and maintain compliance with quarterly filing deadlines.

• Deposit errors: Many businesses receive penalties for failing to make semimonthly electronic deposits on time or using paper checks instead of electronic payments.
  
  
• Incorrect calculations: Reporting incorrect quantities, tax rates, or total amounts owed can cause underpayment or overpayment of excise taxes.
  
  
• Incomplete schedules: Omitting required forms such as Schedule A or Schedule C may result in rejected filings or loss of available credits.
  
  
• Identification issues: Missing or incorrect employer identification numbers delay IRS processing and may trigger correspondence for verification.
  
  
• Unsigned returns: Submitting an unsigned form is considered invalid and will not be processed, increasing the risk of late-filing penalties.
  
  

Zero Activity and Dormant Period Filings

Businesses must still file Form 720 during quarters when no excise taxes are due unless they submit a final return. Filing zero returns demonstrates compliance and prevents penalties for failing to report quarterly activity.

• Zero activity reporting: Enter zeros on applicable tax lines and write “None” on Part III line 3, indicating no quarter tax liability.
  
  
• Filing requirement: You must submit Form 720 until a final return is filed, even when your business has no taxable sales or services.
  
  
• Final return rule: If operations permanently end or no future liability is expected, check the “Final return” box and complete all remaining fields accurately.
  
  
• Seasonal businesses: Companies operating only during certain months must file quarterly returns even during inactive periods to comply with IRS requirements.
  
  
• Penalty prevention: Filing timely zero returns protects your business from interest charges and penalties associated with failure-to-file violations.
  
  

First-Time Filer Essentials

Filing Form 720 for the first time requires clear organization and familiarity with IRS procedures. New filers should focus on accurate data entry, documentation, and deposit compliance to establish consistent filing habits.

• Preparation: Obtain an employer identification number, confirm which excise taxes apply, and register for electronic payment systems such as EFTPS.
  
  
• Recordkeeping: Maintain complete transaction records, including receipts, certificates, and electronic confirmations for each deposit or claim filed.
  
  
• Professional guidance: Consult a qualified tax professional or tax advisor if your company handles multiple excise tax types or environmental taxes.
  
  
• Quarterly discipline: Mark each quarter’s due date to avoid missing filing deadlines and accumulate accurate totals for reporting.
  
  
• Review and verify: Double-check all schedules, attachments, and totals before submission to ensure your completed form meets IRS requirements.
  
  

Special Categories of Excise Taxes

Excise taxes apply to a wide range of goods and services. Form 720 divides these liabilities by category so businesses can report accurately according to their activities and the products they sell.

• Fuel taxes: These cover gasoline, diesel, kerosene, and other fuel types. Businesses calculate liability based on volume sold and current federal tax rates.
  
  
• Air transportation taxes: Airlines and charter companies must report domestic air travel taxes, including percentage-based ticket taxes and per-segment fees.
  
  
• Environmental taxes: Manufacturers or importers dealing with ozone-depleting chemicals must report these under Form 6627, ensuring the correct rates for each product.
  
  
• Communications taxes: Telephone and other communication service providers report federal taxes collected from customers for phone service and related services subject to tax.
  
  
• Manufacturer taxes: Companies producing specific taxable items, such as heavy vehicles or tires, report liability based on the total sales amount for the quarter.
  
  
• Insurance and health-related fees: Foreign insurers and companies issuing specified health insurance policies must report applicable fees based on the number of lives covered.
  
  

Frequently Asked Questions

What happens if I miss a Form 720 quarterly filing deadline?

If you miss the quarterly filing deadline, the IRS may impose a failure-to-file penalty of 5% of the unpaid tax for each month the return is late, up to 25%. Interest will also accrue on any unpaid tax amount. File the tax form and pay the balance as soon as possible to limit penalties and further interest charges.

Is electronic filing required for Form 720, or can I mail a paper return?

Electronic filing is not mandatory for the 2019 tax year, but the IRS highly recommends it. When you file electronically, you receive faster confirmation, fewer calculation errors, and secure data transmission. Mailing a paper return is acceptable, but processing time may take several weeks longer than an electronically filed return.

Can I pay excise taxes with the return instead of making deposits?

You may pay excise taxes with your quarterly filing form if the total liability for that period does not exceed $2,500. If your liability exceeds this threshold, you must deposit the funds electronically using the Electronic Federal Tax Payment System (EFTPS). Depositing on time prevents IRS penalties and ensures compliance with payment and reporting requirements.

Do I need to file a return if I had no taxable activity during the quarter?

Yes, even if your business had no taxable sales or activity for a quarter, the IRS still requires you to file a zero return. Filing confirms that your company remains in compliance and prevents automatic penalty assessments. You can stop filing future quarterly federal excise tax returns only after submitting a final return.

When should I use Schedule C on Form 720?

Use Schedule C when claiming credits for fuel exported, nontaxable uses, or other qualified exemptions under federal excise tax rules. Each claim must include complete documentation, such as sales certificates or export records. Incomplete or unsupported claims may be denied, delaying refunds or adjustments to your total tax liability for the quarter.

What are common penalties for late or incorrect excise tax payments?

Common penalties include late filing and payment fines, increasing the longer your tax remains unpaid. The IRS may charge interest on any unpaid tax balance and impose a 10% penalty for failure to deposit electronically. Correcting errors quickly and paying promptly helps reduce additional costs and maintain compliance with IRS regulations.