How to File Form 720 2014: Federal Excise Tax Guide

IRS Form 720 is the federal excise tax return used by businesses to report and pay quarterly federal excise tax obligations. These excise taxes are levied on a range of products and services, including fuel, air transportation, and certain types of insurance policies. Businesses that are liable for such taxes must file Form 720 to remain compliant with the Internal Revenue Code, even if no tax liability exists for a given quarter.

For the 2014 tax year, the filing process followed specific requirements outlined by the Internal Revenue Service. The form was filed quarterly, with due dates set at the end of the month following each quarter unless the date fell on a weekend or legal holiday. In those cases, the next business day served as the deadline. The filing process included reporting all taxes listed in Parts I and II of the form, calculating net tax liability, and submitting payment through approved methods.

Filing this form correctly helps taxpayers avoid penalties and ensures that excise taxes imposed by the federal government are reported accurately. Businesses were required to prepare the return using the 2014 instructions, determine which taxes applied to their activities, and submit the form by the appropriate due date. Understanding the process is essential for any business subject to federal excise taxes, especially for first-time filers navigating the obligations under federal law.

Understanding IRS Form 720

Form 720, also known as the Federal Excise Tax Return, is the document used by businesses to report and pay excise taxes imposed on specific goods, services, and activities. These include motor fuel, aviation gasoline, sport fishing equipment, air transportation, environmental taxes, and specific insurance policies. The return is filed quarterly and ensures that the federal government collects the required taxes listed under the Internal Revenue Code.

Who Must File?

• A business must file if it is liable for federal excise taxes during a given quarter.
  
  
• A taxpayer is required to continue filing if excise taxes were imposed in a prior quarter and a final return has not been submitted.
  
  
• Businesses that need to claim a credit or refund for excise taxes already paid must also file the form, even if no new liability exists.

Filing Frequency and Timing

• The return must be filed quarterly, with each filing covering a specified period in the calendar year.
  
  
• The due date for filing is the last day of the month following the end of each quarter. For example, the first quarter ending March 31 has a due date of April 30.
  
  
• If a due date falls on a weekend or legal holiday, the next business day is considered the official deadline for submission.

Key Parts of the Form

• Part I reports environmental taxes, communications taxes, air transportation taxes, motor fuel, diesel fuel, and other categories of excise taxes imposed.
  
  
• Part II covers manufacturers’ taxes, self-insured health plans, medical devices, insurance policies, and other fees subject to special rules.
  
  
• Part III provides a summary of all taxes listed, credits claimed, and the taxpayer’s net tax liability for the quarter.

Understanding these requirements helps businesses determine whether they are responsible for filing, identify the correct taxes imposed, and submit the return within the proper timeframe.

What’s New for the 2014 Tax Year?

The IRS introduced essential updates in 2014 that changed how businesses filed and paid excise taxes. These updates ensured that payments were made on time and that reporting remained consistent and accurate.

• All excise tax deposits had to be made electronically through the Electronic Federal Tax Payment System (EFTPS). The federal government no longer accepts paper coupons; therefore, electronic deposits are now mandatory.
  
  
• The Patient-Centered Outcomes Research (PCORI) Fee continued to apply to specific insurance policies and self-insured health plans. Businesses needed to calculate the fee based on the average number of lives covered during the plan year or policy year ending in the filing quarter.
  
  
• Rates for environmental taxes imposed on petroleum products and ozone-depleting chemicals were updated. Taxpayers had to review the 2014 instructions to ensure they used the correct rates when completing their return.

These changes underscored the importance of electronic filing and necessitated that taxpayers carefully review whether their business activities, policies, or products were subject to the updated rules.

Step-by-Step Filing Instructions

The process for completing Form 720 is organized in a way that allows taxpayers to move from preparation to final submission with clarity. Each step builds on the previous one to ensure that excise taxes imposed are reported correctly and that the federal excise tax return is filed without errors.

Step 1: Gather the necessary information.

A business must collect its Employer Identification Number (EIN), legal business name, and complete address. It should also have records of all taxable activities for the specified period, prior quarter returns, deposit confirmations, and supporting documentation for any credit or refund claims. Having these records in order ensures that the return can be prepared accurately and efficiently.

Step 2: Determine which excise taxes apply.

Taxpayers should carefully review the instructions on Form 720-2014 to identify which excise taxes listed apply to their business. Part I includes environmental taxes, communications taxes, air transportation charges, and fuels such as gasoline and diesel fuel. Part II covers manufacturers’ taxes, medical devices, sport fishing equipment, and fees tied to self-insured health plans.

Step 3: Complete the form header.

The header requires the taxpayer’s EIN, full business address, and the quarter ending date. If the return is a final return or if there has been an address change, the appropriate boxes must be marked. This section identifies the business responsible for filing the quarterly federal excise tax.

Step 4: Fill out Part I.

Part I requires taxpayers to report excise taxes imposed on categories such as petroleum products, ozone-depleting chemicals, motor fuel, and air transportation services. Each line corresponds to a specific type of tax, and amounts must be calculated in accordance with the Internal Revenue Code and applicable IRS rates.

Step 5: Fill out Part II.

Part II focuses on excise taxes imposed on manufacturers, health-related fees, and special categories of goods and services. This section includes fees for insurance policies, self-insured health plans, and other items subject to excise taxes. Taxpayers should complete only the lines that apply to their business operations.

Step 6: Complete Part III.

Part III is the summary section of the federal excise tax return. Taxpayers must add all tax amounts reported in Part I and Part II, subtract any allowable credits, and determine the net tax liability. This section also accounts for deposits already made during the quarter and calculates whether an additional payment is owed or whether a refund should be issued.

Following these steps enables taxpayers to prepare, calculate, and accurately report excise taxes. By completing each part in order, businesses reduce the risk of mistakes that could result in penalties or delayed processing by the IRS.

How to File Form 720?

Taxpayers have two methods to file Form 720, and the choice depends on their preference and ability to use IRS systems.

• Filing electronically is the preferred option because it reduces errors, provides immediate confirmation, and allows both filing and payment through EFTPS. Businesses using approved tax software can submit their returns online at any time, ensuring a secure and efficient process.
  
  
• Filing on paper is still permitted, but it requires careful preparation. The form must be completed in black ink, signed by an authorized individual, and mailed to the IRS with all schedules attached. If the payment is made by check or money order, Form 720-V must be included as a payment voucher.

The IRS sets strict quarterly deadlines: April 30 for the first quarter, July 31 for the second quarter, October 31 for the third quarter, and January 31 of the following year for the fourth quarter. If a due date falls on a weekend or legal holiday, the next business day becomes the filing deadline. Meeting these deadlines is critical, since late submissions can result in penalties and interest.

Payment and Deposit Requirements

Businesses that file Form 720 must also follow the IRS rules for making deposits and payments. The main requirement is that most excise taxes must be deposited electronically through the Electronic Federal Tax Payment System (EFTPS).

• Deposits must be made electronically. Paper coupon deposits are no longer accepted, and electronic payment is the only approved method.
  
  
• Most excise taxes follow a semi-monthly deposit schedule. This means that a taxpayer must deposit taxes owed for the first half of the month by the 29th of that same month, and taxes owed for the second half of the month by the 14th of the following month.
  
  
• A safe harbor rule may apply. Businesses that filed a Form 720 in the look-back quarter may base deposits on one-sixth of that quarter’s net tax liability rather than actual liability.
  
  
• In some cases, deposits are not required. If the net liability for Part I taxes is $2,500 or less in a quarter, if the taxpayer only owes the gas guzzler tax once, or if the liability is for certain Part II taxes, deposits are not necessary.

Understanding when and how to deposit excise taxes helps taxpayers avoid penalties and ensures payments are correctly credited to their accounts.

Required Schedules and Attachments

Several schedules may need to be filed along with Form 720. These attachments provide detailed reporting and support the primary return.

• Schedule A reports excise tax liability for each semi-monthly period. Taxpayers must complete this if they have any liability under Part I, even if the quarterly total is less than $2,500.
  
  
• Schedule C allows taxpayers to claim credits or refunds. These credits may include fuel used for nontaxable purposes, exported taxable fuels, or specific exemptions such as kerosene used in aviation.
  
  
• Schedule T reports fuel transactions for terminal operators. This schedule covers two-party exchanges of taxable fuel and requires details such as product codes, the number of gallons exchanged, and terminal identification numbers.
  
  
• Additional forms may apply depending on the type of tax reported. These include Form 6627 for environmental taxes, Form 720-V as a payment voucher for check payments, and Form 8849 for refund claims that cannot be filed with the return.

Attaching the correct schedules and forms ensures that all excise taxes are reported correctly and that taxpayers can claim any credits to which they are entitled.

Common Mistakes to Avoid

Errors in filing Form 720 are common, but most can be avoided with proper preparation and attention to detail. Mistakes often cause processing delays, penalties, or rejected filings.

• Many taxpayers enter an incorrect Employer Identification Number or omit required business details, which can prevent the IRS from matching the return with its records.
  
  
• Late filing is a frequent issue. Since the form is filed quarterly, taxpayers must be aware of deadlines and submit it by the last day allowed or the next business day if the due date falls on a weekend or legal holiday.
  
  
• Some taxpayers forget to include Schedule A, even when their net tax liability is small. This omission results in the return being considered incomplete.
  
  
• Mathematical errors often occur when adding tax amounts in Part I and Part II or when calculating totals in Part III. These errors may change the liability reported and delay processing.
  
  
• Many taxpayers fail to make timely deposits. The IRS requires deposits to be initiated by 8:00 PM Eastern Time on the business day before the due date.

By carefully reviewing entries, verifying calculations, and closely monitoring deadlines, businesses can minimize errors and avoid penalties when filing Form 720.

Zero Activity and Final Return Guidance

Even when a business has no excise tax liability for a quarter, filing may still be required. The IRS has clear rules for when a zero return is necessary and when it is not.

• A zero return must be filed if a business filed Form 720 in a prior quarter and has not yet filed a final return.
  
  
• Taxpayers who are registered for excise tax purposes, such as terminal operators, must continue to file even if no tax liability.
  
  
• If the IRS has notified a taxpayer that filing must continue, a zero return is required until a final return is accepted and processed.
  
  
• No filing is required if the business has never been liable for excise taxes, has already filed a final return, or is only responsible for the PCORI fee due with the second quarter filing.

When a business permanently stops activities that create excise tax liability, it should file a final return. Checking the “final return” box on the form header signals to the IRS that quarterly filing is no longer required.

First-Time Filer Tips

Filing Form 720 for the first time can be challenging, but careful preparation makes the process manageable. New filers should follow a checklist before beginning.

• A taxpayer should obtain an Employer Identification Number (EIN) and register for EFTPS to make required deposits.
  
  
• Businesses should download the current Form 720 and its instructions from the IRS, and review Publication 510 for details on excise taxes.
  
  
• Records must be organized to include taxable transactions, deposit confirmations, and supporting documents for any credits.
  
  
• Filers should identify which excise taxes apply to their activities, such as motor fuel, aviation gasoline, or air transportation.
  
  
• If liability exceeds $2,500 in a quarter, deposits must be made semi-monthly. For example, excise tax on diesel fuel sold during the first half of July would be due later that same month.

By preparing in advance, new taxpayers can submit their first quarterly federal excise tax return accurately and on time, establishing good compliance habits from the beginning.

Frequently Asked Questions

What are the Form 720 2014 instructions?

The Form 720 2014 instructions explain how to file the quarterly federal excise tax return. They guide taxpayers through Parts I, II, and III, detailing excise taxes imposed on motor fuel, aviation gasoline, sport fishing equipment, environmental taxes, and specific insurance policies. These instructions also cover how to calculate net tax liability, apply credits, and follow special rules. Taxpayers should always prepare and submit using the correct instructions for the specified period.

Who is required to file IRS Form 720?

Any business liable for federal excise taxes during a quarter must file IRS Form 720. This includes companies that sell taxable fuel, provide air transportation services, or maintain self-insured health plans subject to fees. The federal government requires that the return be filed quarterly, even if no tax is due. A final return should be filed if the business has ceased activities that create ongoing excise tax liability.

How are due dates determined for Form 720?

Form 720 is filed quarterly, with deadlines on the last day of the month following the end of each quarter. For example, the first quarter ending March 31 has a due date of April 30. If the deadline falls on a weekend or legal holiday, the next business day becomes the official filing date. Electronic filing is recommended; however, paper filing may also be used if properly signed and submitted.

What types of excise taxes are listed on Form 720?

Form 720 covers a wide range of excise taxes imposed under the Internal Revenue Code. These include environmental taxes, communications taxes, air transportation fees, and manufacturers’ taxes. Specific items include motor fuel, diesel fuel, aviation gasoline, and even sport fishing equipment. Each line of the form relates to taxes listed in Part I or Part II, while Part III summarizes the total tax, credits, and the taxpayer’s final net tax liability.

Can credits and refunds be claimed on a federal excise tax return?

Yes, taxpayers may claim credits or refunds for excise taxes imposed on items such as gasoline or diesel fuel used for exempt purposes. For example, fuel sold for export or used in specific nontaxable activities may qualify. Credits are reported using Schedule C, while some claims require Form 8849. To claim, taxpayers must keep records that determine eligibility and support each refund request for at least four years after the return is filed.