Form 720 2020 Instructions for Accurate Excise Tax Filing

Filing federal excise taxes can feel complex, especially if you’re completing Form 720 for the first time. This form, officially titled the Quarterly Federal Excise Tax Return, reports and pays taxes on certain goods, services, and activities. From fuel and air transportation to health insurance policies and environmental taxes, Form 720 ensures businesses comply with federal tax regulations.

This guide provides clear, step-by-step instructions for Form 720 2020 to help you complete your filing accurately and on time. It’s designed for business owners, bookkeepers, tax professionals, and small businesses who must understand their quarterly filing obligations. Whether you’re filing electronically or by mail, you’ll learn to complete each part of the form, calculate liability, and avoid penalties.

The 2020 tax year included several important updates that affect excise tax reporting. The CARES Act temporarily suspended aviation taxes, increased PCOR fees, and extended specific fuel tax credits. Understanding these changes before you file Form 72 allows your business to stay compliant and reduce the risk of costly errors.

An Overview of Form 720 and Its Filing Requirements

Form 720 reports and pays federal excise taxes on regulated goods and services, including fuel, air transportation, and health insurance, ensuring business compliance with federal tax requirements.

What Form 720 Covers

Form 720 applies to a range of taxable activities and products. Businesses may be required to file if they sell, manufacture, or provide services in areas where excise taxes apply. Common examples include:

Fuel and energy products: Sellers, distributors, and importers are subject to taxes on gasoline, diesel, kerosene, and other taxable fuel types.
Air transportation and communications services: Businesses providing air travel or phone service must report related air transportation and communications excise taxes.
Environmental and manufacturers' taxes: This includes taxes on ozone-depleting chemicals, coal, tires, and certain automotive or medical products.
Health insurance and specialty services: Plan sponsors and insurers pay excise taxes on specified health insurance policies or services, such as indoor tanning.

Who Must File Form 720

You must file Form 720 if your business had any excise tax liability during the quarter or collected excise taxes on behalf of the federal government. Filing is also required if you:

We're liable for any federal excise taxes in previous quarters and have not filed a final return.
Sell or manufacture taxable goods or provide specific services subject to federal excise tax.
Sponsor self-insured health plans or issue health insurance policies subject to the Patient-Centered Outcomes Research (PCOR) fee.

For complete official guidance, visit the IRS Form 720 information page.

Quarterly Filing Basics

Form 720 is filed quarterly, with due dates falling on the last day of the month following each calendar quarter:

First Quarter: April 30
Second Quarter: July 31
Third Quarter: October 31
Fourth Quarter: January 31

Even if your excise tax liability is minimal or temporary, consistent quarterly filing helps demonstrate compliance and maintain accurate business records.

2020 Updates You Need to Know

The 2020 tax year included several changes that affected how businesses handle their federal excise taxes on Form 720. Understanding these updates is critical to ensure accurate filing and avoid costly mistakes.

CARES Act Aviation Tax Relief (March 28–December 31, 2020)

Under the CARES Act, many air transportation taxes were suspended from March 28 through December 31, 2020. For the affected period, businesses should report zero tax liability on the corresponding lines for air travel.

However, the law requires maintaining proper documentation in case of an IRS review. Importantly, a minimal $0.001 LUST (Leaking Underground Storage Tank) tax on aviation kerosene may still apply if applicable.

PCOR Fee Adjustments

For policy and plan years ending between October 1, 2019, and September 30, 2020, the PCOR (Patient-Centered Outcomes Research) fee increased to $2.54 per covered life. Entities that issue specified health insurance policies or sponsor self-insured plans must reflect that rate in their Form 720 reporting. The fee is typically reported on the second-quarter return.

Fuel Credit Extensions and Medical Device Tax Repeal

Several fuel-related tax credits received extensions for 2020, including the biodiesel, renewable diesel, and alternative fuel mixture credits. These extensions can reduce your excise tax liability if your business qualifies. Meanwhile, the medical device excise tax (Section 4191) was permanently repealed and should not be reported on your 2020 Form 720.

Finally, those changes are reflected in the updated e-file program for businesses filing electronically. Eligible filers should use an IRS-authorized e-file provider for excise tax submissions. For more information, refer to the IRS e-file compliance page.

Deadlines and Deposit Rules

Understanding the deadlines and deposit requirements for Form 720 is essential to maintaining compliance and avoiding late-payment penalties. Businesses filing quarterly federal excise tax returns must follow a specific schedule for both filing and deposits.

Quarterly Due Dates

Form 720 must be filed by the last day of the month following each calendar quarter. The filing schedule is as follows:

First Quarter (January–March): Due April 30
Second Quarter (April–June): Due July 31
Third Quarter (July–September): Due October 31
Fourth Quarter (October–December): Due January 31

If a due date falls on a weekend or legal holiday, the return should be filed on the next available business day. Filing on time each quarter demonstrates compliance and helps avoid unnecessary penalties.

Semi-Monthly Deposit Schedule

Most Part I excise taxes require semi-monthly deposits rather than quarterly payments. Each month is divided into two deposit periods:

The first period runs from the 1st through the 15th.
The second period runs from the 16th through the last day of the month.

Deposits for these periods are due on specific dates. The first semi-monthly deposit is due by the 14th, and the second by the 29th. Businesses using the Electronic Federal Tax Payment System (EFTPS) should schedule payments early to ensure timely processing.

Exceptions to Deposit Requirements

Certain filers may not be required to make semi-monthly deposits. The total excise tax may be paid with the quarterly return if one of the following applies:

The quarter's net liability for Part I taxes is $2,500 or less.
Only the PCOR fee or another Part II excise tax applies.
A final return or one-time filing is being submitted, and no future excise tax obligations are expected.

In these situations, payment can be made by including a check or money order with the quarterly return or submitting payment electronically through EFTPS.

Gather Information and Determine Liability

Preparing to file Form 720 begins with collecting accurate business information and confirming any excise tax liability for the quarter. Having the proper paperwork and records guarantees precise completion of each form section and lowers the possibility of mistakes or delays.

Business Information Needed for Form 720

Before completing the return, gather all required identification and filing details.

Employer Identification Number (EIN): This nine-digit number identifies your business and must appear on each return.
Legal business name and address: Use the full registered name and current mailing address on file with the IRS.
Quarter ending date: Check the appropriate box for the reported quarter—March 31, June 30, September 30, or December 31.
Type of filing: Indicate whether this is a regular filing, an address change, or a final return.

Forms and Records

Supporting forms and historical records help confirm accuracy and document each liability calculation.

Form 6627 (Environmental Taxes): Required when reporting taxes on ozone-depleting chemicals or imported products containing them.
Deposit and payment history: Keep prior EFTPS confirmations or proof of mailed payments.
Transaction logs and invoices: Record all units sold, services subject to excise tax, and any specific services taxed under federal law.

Internal Controls and Verification

Maintaining clear internal procedures strengthens compliance. Businesses should track taxable sales and deposits throughout the quarter, verify that tax amounts match financial records, and review prior filings before submission. Proper recordkeeping supports accuracy and simplifies this process, which includes reconciliation and demonstrates compliance with federal excise tax regulations, particularly in the event of an IRS audit.

Completing Part I—Environmental, Communications, Fuel, and Manufacturers Taxes

Part I of Form 720 covers several major categories of federal excise taxes, including environmental, communications, fuel, and manufacturers taxes. Each section relates to specific goods, services, or activities subject to taxation. Completing this portion accurately ensures that the tax imposed is calculated correctly and supports the proper total tax computation in Part III.

Environmental Taxes (Attach Form 6627)

Environmental taxes apply to ozone-depleting chemicals (ODCs) and imported products containing or manufactured with them. Businesses manufacturing or importing these items must calculate liability based on the chemical type and quantity used.

Form 6627 must be attached to report these amounts accurately. Proper reporting ensures compliance with environmental regulations and helps avoid penalties for underreporting.

Communications and Air Transportation Taxes

These taxes include retail taxes on local telephone and teletypewriter exchange services and taxes on air transportation for passengers and property. For 2020, the CARES Act suspended excise taxes on air transportation for payments made between March 28 and December 31.

However, the $0.001 Leaking Underground Storage Tank (LUST) tax on aviation kerosene still applies. Businesses offering communication or air travel services must accurately track and record all taxable transactions.

Fuel Taxes

Fuel taxes apply to gasoline, diesel, kerosene, aviation fuels, and natural gas products. The tax rate varies by product type and use and is typically expressed per gallon. To determine the liability, multiply the taxable quantity by the corresponding applicable rate. Businesses blending or distributing taxable fuel should maintain transaction records to support each calculation.

Manufacturers’ Taxes and Additional Categories

Manufacturers’ taxes apply to specific goods such as coal, tires, gas-guzzler vehicles, and certain vaccines. These generally affect producers or sellers rather than consumers. Some additional items, such as indoor tanning services, foreign insurance taxes, and other specialty services, are included. Levies are listed in Part II. Filers representing foreign insurers must report premium-based excise liabilities.

Review and Submission

After calculating all liabilities, sum the amounts from Part I and transfer the total to Part III. Review each figure carefully to ensure all entries match source records. Those using the IRS e-file program should verify accuracy before submission. If adjustments apply, complete Schedule C before finalizing.

Mail filers may include a check or payment voucher, while electronic filing users can pay through EFTPS. Consult a qualified tax advisor for guidance when uncertain about rates or exemptions.

Completing Part II—PCOR Fee and Other Taxes

Part II of Form 720 focuses on the Patient-Centered Outcomes Research (PCOR) fee and additional excise taxes for specific services and products. For accuracy, each entry in this section must reflect the proper tax imposed and filing period.

Patient-Centered Outcomes Research (PCOR) Fee (IRS No. 133)

The PCOR fee applies to issuers of specified health insurance policies and self-insured plan sponsors. For 2020, the rate is $2.54 per covered life, reported on the second-quarter return. Calculate using an approved counting method and retain documentation supporting covered lives and calculations for IRS verification.

Other Part II Taxes

Part II also includes several other taxes that may apply to specific industries. Common examples include:

Vaccines: Certain vaccines, such as those for influenza and measles, are subject to excise tax.
Indoor tanning services: A 10% excise tax applies to amounts paid for tanning services using UV equipment.
Sport fishing and archery equipment: Taxes apply to selling fishing rods, reels, electric motors, bows, and arrows.
Floor stock taxes may apply to inventories of ozone-depleting chemicals and similar substances held for sale.

Each applicable category must be entered with the proper IRS number, tax rate, and total amount. Double-check figures for accuracy before completing Part III.

Part III Summary and Required Schedules (A, C, T) and Form 6627

Part III of Form 720 serves as the summary section where all calculations from earlier parts are finalized. This section combines your total liabilities, credits, deposits, and any balance due or overpayment. Accuracy here is essential because errors in totals or documentation can delay processing or trigger IRS correspondence.

Part III—Totals, Credits, Deposits, and Balances

Begin by entering the total tax from Parts I and II. Next, list any applicable credits claimed on Schedule C. Subtract the total credits from your gross tax amount to calculate the net tax after credits. Include all semi-monthly deposits made during the quarter and indicate whether a balance remains or an overpayment occurred.

If a balance is due, payment can be made electronically through EFTPS or with a check and payment voucher (Form 720-V). For overpayments, indicate whether the amount should be applied to the next quarter or refunded.

Schedule A—Semi-Monthly Liability

Schedule A must be completed when reporting Part I excise taxes. Enter the tax liability for each semi-monthly period using the regular method unless the alternative method applies to specific communications or air transportation taxes. Ensure that the totals on Schedule A align with the corresponding entries in Part III.

Schedule C—Claims and Credits

Use Schedule C to claim credits or refunds for nontaxable uses, sales, or adjustments such as overpaid fuel taxes. Attach detailed explanations or documentation for each credit claimed. Businesses should ensure that the credit amount does not exceed the tax liability reported for the quarter.

Schedule T—Two-Party Exchanges

Complete Schedule T if your business transfers or receives taxable fuel through two-party exchanges at terminals. Include the terminal control number, product code, and volume exchanged. Retain transaction records to support entries.

Form 6627—Environmental Taxes

Attach Form 6627 when reporting any environmental taxes related to ozone-depleting chemicals or imported products containing those chemicals. Verify that the figures reported here align with the amounts shown in Part I.

Carefully reviewing all schedules and supporting forms before submission ensures a complete and accurate federal excise tax return, reducing the risk of processing delays or IRS inquiries.

Filing Methods—E-file vs. Paper

Businesses submitting Form 720 can file electronically through the IRS system or mail a paper return. The method chosen should depend on technical capability, filing volume, and how quickly confirmation is needed.

Electronic Filing (E-file)

Filing through the IRS e-file program is the preferred option for most businesses because it is fast, accurate, and secure. Benefits include:

Faster processing: Returns are received and accepted more quickly than paper filings.
Error reduction: Built-in validation checks minimize common mistakes.
Immediate confirmation: The IRS provides electronic proof of receipt within minutes.
Secure submission: Encrypted transmission protects sensitive business information.
Compatibility with schedules: The system supports all required attachments, such as Schedule A, Schedule C, and Form 6627.

To file electronically, use an authorized Electronic Return Originator (ERO) or transmitter listed on the IRS website. Retain a copy of the completed form and acceptance acknowledgment for your records. Consistent electronic filing helps businesses maintain timely compliance and avoid processing delays.

Paper Filing

Paper filing remains available for businesses that prefer physical submission or cannot access e-file services. Mail the completed return and all attachments to:

Department of the Treasury
Internal Revenue Service
Ogden, UT 84201-0009

Be sure the form is signed and includes all necessary schedules. If paying by check, attach a payment voucher (Form 720-V) and use certified mail or a trackable delivery service to confirm receipt.

Payments—EFTPS, Vouchers, and Safe Harbors

Businesses paying excise taxes reported on Form 720 can use the Electronic Federal Tax Payment System (EFTPS), a paper payment voucher, or follow specific safe harbor rules for deposits. Selecting the proper payment method ensures compliance and prevents late-payment penalties.

EFTPS Deposits

Most filers must use EFTPS to make semi-monthly deposits or quarterly payments—schedule payments at least one day before the due date to ensure timely processing. Transactions completed by 8:00 p.m. Eastern Time on the prior business day are considered on time. EFTPS provides immediate confirmation, making it the most reliable payment method.

Payment with Return (Form 720-V)

If eligible to pay when filing, include a check or money order with Form 720-V. Make checks payable to the United States Treasury and write “Form 720” and the Employer Identification Number (EIN) on the payment.

Safe Harbor and Shortfall Rules

Under IRS safe harbor provisions, deposits must cover at least 95% of actual liability for each period. Minor shortfalls of $100 or less generally avoid penalties if corrected promptly. Monitoring payments throughout the quarter helps maintain accuracy and compliance with federal excise tax regulations.

Common Errors and How to Fix Them

Filing Form 720 accurately is critical for maintaining compliance and avoiding IRS penalties. Many errors occur due to simple oversights, incomplete schedules, or incorrect tax rate entries. Reviewing the form carefully before submission can prevent costly corrections.

Frequent Mistakes

Incorrect quarter selection: Using the wrong quarter dates can misalign deposits and cause return rejections. Always verify the reporting period before filing.
Missing schedules: One of the most common filing mistakes is omitting Schedule A, Schedule C, or Form 6627 when required.
Math or calculation errors: Double-check all figures, including total deposits and credits, to ensure they match supporting records.
Outdated PCOR fee or aviation relief entries: Ensure the 2020 tax rate is accurate and verify that the CARES Act suspensions are applied correctly.

How to Correct Mistakes

Use Form 720-X to amend previously filed returns. Clearly identify the quarter, explain the correction, and attach the supporting documentation. If deposits or payments were affected, reconcile the difference through EFTPS or future filings. Keeping complete records and verifying each entry before submission minimizes the need for amendments and helps maintain compliance with IRS excise tax regulations.

First-Time Filer Tips

Filing Form 720 for the first time can feel challenging, especially for small businesses unfamiliar with federal excise taxes. Preparing properly helps ensure accuracy, avoid penalties, and simplify future filings.

Preparation Steps

Set up EFTPS early: Most filers must use the Electronic Federal Tax Payment System (EFTPS) for deposits and payments. Register at least one week before your first payment is due.
Gather business records: Collect invoices, transaction logs, and previous filings to confirm your tax liability and any required schedules.
Mark filing dates: Add quarterly due dates—April 30, July 31, October 31, and January 31—to a business calendar or reminder system.

Filing Approach

Review IRS instructions: Use the official IRS Form 720 instructions for current rules and tax rates.
Work section by section: Complete one part at a time—Parts I, II, and III—to reduce mistakes.
Check totals and attachments: Verify all math, ensure each schedule is included, and sign the form before submission.

Consulting a qualified tax advisor or accountant familiar with excise taxes can also help ensure compliance and establish a reliable filing routine for future quarters.

Frequently Asked Questions (FAQs)

What is IRS Form 720, and when must it be filed?

Form 720 is the Quarterly Federal Excise Tax Return to report specific federal excise taxes. It must be filed for any quarter in which a business has excise tax liability or previously filed and has not submitted a final return. Returns are due by the last day of the month following each quarter—April 30, July 31, October 31, and January 31.

How did the CARES Act affect aviation excise taxes in 2020?

The CARES Act suspended aviation excise taxes on air transportation of passengers, property, and kerosene fuel from March 28 through December 31, 2020. Filers must report zero tax on affected lines during this period, but continue reporting the $0.001 LUST tax on aviation kerosene. Accurate records confirming payment dates are essential since relief applies only to amounts paid within those dates.

When are deposits required instead of paying with the return?

Semi-monthly deposits are required for most Part I excise taxes. Payments are due on the 14th and 29th of the month following each deposit period. However, filers with quarterly liabilities of taxpayers who owe $2,500 or less, those reporting certain one-time taxes, or those paying the PCOR fee in the second quarter, may pay with their quarterly return instead.

What is the PCOR fee for 2020, and who must report it?

The PCOR fee applies to issuers of specified health insurance policies and sponsors of self-insured plans. For plan years ending between October 1, 2019, and September 30, 2020, the rate is $2.54 per covered life. It’s reported on the second-quarter Form 720, due July 31. Supporting documentation should reflect how the average number of covered lives was calculated.

Checklist for Form 720 2020 Instructions for Accurate Excise Tax Filing