How to File IRS Form 720: 2011 Excise Tax Guide

Filing federal excise taxes is a responsibility many businesses face, but understanding the process can seem daunting without clear guidance. IRS Form 720, also known as the Quarterly Federal Excise Tax Return, is used to report and pay a variety of excise taxes imposed under the Internal Revenue Code. These taxes apply to specific goods and services, such as motor fuel, air transportation, sport fishing equipment, and tobacco. For the 2011 tax year, the Internal Revenue Service released detailed instructions for Form 720-2011 to help taxpayers remain compliant throughout the calendar year.

Businesses liable for excise tax must file this form each quarter, even if liability is minimal or zero. The due date typically falls at the end of the month following each quarter, with adjustments made if the last day is a Saturday, Sunday, or a legal holiday. Filing accurately and on time is crucial because errors, missed deadlines, or incorrect reporting can result in increased costs due to penalties or interest. The process requires careful attention to the taxes listed on the form and an understanding of how liability is determined.

This guide is designed for businesses that require practical assistance in filing their 2011 excise tax return. It explains filing requirements, provides examples to show how the tax imposed should be calculated, and clarifies what taxpayers must submit to the IRS. By following these instructions, businesses can better manage their obligations, avoid mistakes, and maintain compliance with federal requirements.

What Is IRS Form 720?

IRS Form 720, known as the Quarterly Federal Excise Tax Return, is the form used to report and pay federal excise taxes imposed on specific goods and services. Excise taxes are collected under the Internal Revenue Code and apply to industries such as fuel production, airline services, communications, and the sale of items like sporting goods and tobacco products.

Who Must File Form 720?

A business is required to file Form 720 if it meets either of the following conditions:

The business was liable for excise taxes listed in Parts I or II of the form during a previous quarter and has not yet filed a final return.
The business is liable for excise taxes imposed in the current quarter and is responsible for collecting or paying those taxes.

Quarterly Filing Requirements

Form 720 must be filed quarterly throughout the calendar year. The due date for filing is the last day of the month following the end of the quarter. If the due date falls on a Saturday, Sunday, or legal holiday, the taxpayer may file on the next business day.

Filing on time is essential to avoid penalties and additional costs. Form 720 ensures that taxes imposed on specific goods and services are correctly reported. By filing the excise tax return each quarter, businesses remain compliant with IRS requirements and accurately reflect their net tax liability.

Key Changes for Tax Year 2011

The IRS introduced several significant modifications for the 2011 tax year that substantially impacted how businesses filed their excise tax returns. These changes focused on electronic payment methods and compliance procedures.

Major Updates

The IRS mandated that all federal tax deposits, including excise tax deposits, must be made electronically starting January 1, 2011. This meant that businesses could no longer rely on paper deposit coupons such as Forms 8109 and 8109-B.
The Electronic Federal Tax Payment System (EFTPS) became the standard method for submitting payments. EFTPS provided a secure platform that allowed taxpayers to schedule payments, receive confirmation, and maintain a record of all transactions.
Businesses were given the option to have third parties, such as tax professionals, payroll service providers, or financial institutions, make deposits through EFTPS on their behalf. Although convenient, these services often came with additional costs.

These modifications reflected the government’s move toward secure electronic systems. Businesses that failed to adapt to EFTPS could face delays in processing and the possibility of penalties.

Step-by-Step Filing Instructions

Businesses preparing to file Form 720 must follow a structured process to ensure compliance and accuracy.

Pre-Filing Checklist

Businesses should gather all sales records, invoices, and documentation supporting taxable activities before beginning.
The Employer Identification Number (EIN) must be verified since it is required for every excise tax return.
Taxpayers need to determine which excise taxes apply to their operations by reviewing the taxes listed in Parts I and II of the form.
Each business must calculate its liability for the applicable taxes, using the correct percentage or rate for each category.
Basic information such as business name, address, and account details should be confirmed to ensure accuracy when filing.

Completing the Form

Header information should include the legal name of the business, complete address, EIN, and the calendar quarter being reported.
Part I: Environmental and transportation taxes require taxpayers to report excise taxes on motor fuel, air transportation services, communications services, and ozone-depleting chemicals.
Part II: Other excise taxes covers industries such as sport fishing equipment, tobacco products, alcohol, tires, tanning services, and coal.
Part III: Calculations and payments brings together the total net tax liability, applies credits or refunds, and determines the final balance due or any overpayment.

Example Calculations

A fuel distributor selling 10,000 gallons of diesel fuel would multiply the gallons sold by the tax rate of $0.244 per gallon, resulting in a liability of $2,440.
A manufacturer producing fishing rods would calculate liability by applying the excise tax percentage imposed on each sale, capped at the maximum tax per item.
An airline passenger paying $265.40 for a ticket with a stopover would have liability divided between a percentage tax on the fare and a flat amount per segment.

By carefully following the instructions and examples, taxpayers can reduce the risk of errors and ensure that their excise tax return is completed correctly.

How to File Form 720?

Taxpayers may submit Form 720 either electronically or on paper, depending on their preference and the available filing method.

Electronic Filing (E-File)

The taxpayer must work with an authorized Electronic Return Originator (ERO) to file their tax return electronically.
All required documentation, including supporting schedules, should be submitted to the ERO for preparation and review.
The taxpayer must review the completed return to confirm accuracy before authorizing submission.
Once transmitted through the IRS e-file system, the taxpayer receives confirmation that the filing has been accepted.

Paper Filing

The taxpayer must complete Form 720 using the official 2011 instructions and include all required attachments.
The completed form should be mailed to the IRS processing center in Cincinnati, Ohio, by the due date.
If using an approved private delivery service such as FedEx or UPS, the taxpayer must ensure the package is addressed to the designated street address, since these carriers cannot deliver to P.O. boxes.

Whether filed electronically or on paper, Form 720 must be submitted on or before the required due date. Meeting deadlines ensures compliance and helps taxpayers avoid penalties for late filing.

Payment and Deposit Requirements

For the 2011 tax year, all excise tax deposits had to be made electronically using the Electronic Federal Tax Payment System (EFTPS). Understanding when and how to pay is critical for avoiding penalties and ensuring compliance.

EFTPS Enrollment Process

Taxpayers must begin enrollment by visiting the EFTPS website or calling the toll-free number provided by the IRS. This step ensures the account is registered correctly.
During enrollment, the business must provide its Employer Identification Number (EIN) and relevant banking information so payments can be processed.
Once enrolled, the IRS mails a personal identification number (PIN), which typically arrives within 7 to 10 business days and is required to activate the account.
After activation, taxpayers can schedule payments online, submit deposits electronically, and receive immediate confirmation for each transaction.

Deposit Thresholds

Businesses with quarterly excise tax liability of $2,500 or more are required to make semi-monthly deposits instead of paying the full balance with the return.
Businesses with liability of less than $2,500 for the quarter are permitted to pay the entire balance when filing the return, rather than making separate deposits.
Businesses with liability of $100,000 or more during any deposit period must make a payment by the next business day to remain compliant.

Semi-Monthly Deposit Schedule

When liability arises between the 1st and the 15th of a month, the deposit must be submitted to EFTPS by the 29th of the same month.
When liability arises between the 16th and the last day of the month, the deposit must be submitted by the 14th of the following month.
Taxpayers who make timely deposits equal to their net tax liability may qualify for the safe harbor rule, which protects them from penalties even if deposits are not exact.

Required Schedules and Attachments

Form 720 may require several additional schedules or attachments, depending on the type of excise taxes reported. These documents provide the IRS with detailed information, ensuring accurate reporting.

Schedule A: Excise Tax Liability

Schedule A is used to record the semi-monthly liability for excise taxes listed in Part I of Form 720. This helps confirm whether required deposits were made during each period.
Taxpayers must allocate liability between the regular method and the alternative method, and enter amounts for each semi-monthly period within the quarter.

Schedule C: Claims

Schedule C is required when taxpayers claim refunds or credits for excise taxes they previously paid but are no longer liable for.
Common examples include credits for nontaxable use of fuel, exported fuels, or renewable diesel mixture credits that offset excise tax liability.

Schedule T: Two-Party Exchange Information

Schedule T is completed when businesses exchange motor fuel, kerosene, or gasoline within a terminal between two registered parties.
The schedule requires detailed reporting of the type of fuel, the volume exchanged, and the identity of the other registered business involved in the transaction.

Form 6627: Environmental Taxes

Form 6627 is required when reporting environmental taxes, such as the oil spill liability tax or taxes on ozone-depleting chemicals.
The calculations performed on Form 6627 must then be transferred to the corresponding lines of Form 720 to ensure proper reporting.

Submitting the correct schedules and attachments prevents delays in processing and reduces the risk of the IRS returning the excise tax return as incomplete.

Common Mistakes to Avoid

When filing Form 720, even small mistakes can result in additional costs or penalties. Taxpayers should review their returns carefully to avoid these common problems.

Identification Errors

Some taxpayers mistakenly enter a Social Security Number instead of an Employer Identification Number (EIN), which results in processing issues.
Transposing digits in the EIN or continuing to use an outdated number after a business change often leads to IRS notices and delays.

Calculation and Reporting Errors

Errors frequently occur when taxpayers apply the wrong tax rate for items such as motor fuel, communications services, or other goods.
Misclassifying transactions as taxable when they are not, or excluding taxable sales, leads to incorrect liability reporting.
Mistakes in adding totals, dividing liabilities between periods, or carrying amounts onto other schedules can cause mismatched figures.

Filing and Timing Mistakes

Many taxpayers fail to file by the quarterly due date, which triggers an automatic late-filing penalty.
Deposits that fall on weekends or legal holidays are sometimes submitted late because taxpayers forget that payments must be made on the next business day.
Some filers neglect to include schedules such as Schedule A or Form 6627, which makes the return incomplete and can cause delays in processing.

By double-checking information, confirming calculations, and submitting all required schedules, taxpayers can avoid the most common filing mistakes and ensure their excise tax return is accurate and complete.

Zero Liability and Final Return Guidance

Even when a business has no tax liability, Form 720 may still need to be filed. The IRS requires continued filing until a final return is submitted.

Filing a Zero Return

Businesses must file a zero return if they were previously liable for excise taxes but have not yet filed a final return for those taxes.
A zero return is completed by filling in the header information, entering zero on all applicable tax lines, and writing “None” on Part III, line 3.
Filing by the expected quarterly due date is still required, even if no taxes are owed for that period.

Filing a Final Return

A final return should be filed if the business permanently ceases operations or will no longer be liable for excise taxes listed on Form 720.
Taxpayers must check the “Final return” box above Part I, complete all required sections, and make sure all deposits and payments are up to date.
Records relating to excise tax liability must be kept for at least four years after the final return is filed, in case of IRS review.

Following these steps ensures the business closes out its excise tax responsibilities properly and avoids future filing requirements.

Tips for First-Time Filers

Businesses filing Form 720 for the first time often face uncertainty about the process. Taking a few key steps can make the process smoother and reduce the risk of errors.

Applying for an EIN

A business that does not yet have an Employer Identification Number must obtain one before filing Form 720.
The EIN can be requested online, by phone, or by submitting Form SS-4 through mail or fax.

Identifying Applicable Taxes

First-time filers must carefully review the excise taxes imposed under Parts I and II of Form 720 to determine which apply to their business.
Common examples include motor fuel taxes for distributors, air transportation taxes for airlines, and taxes on sport fishing equipment for manufacturers.

Registration Requirements

Certain business activities require registration with the IRS before filing, such as biodiesel operations, fuel distribution, or chemical manufacturing.
Businesses must confirm whether their activities fall under registration rules to avoid compliance issues.

Recordkeeping Practices

Taxpayers should maintain detailed sales records, invoices, and deposit confirmations from EFTPS for a minimum of four years.
Supporting documents are crucial for verifying the amounts reported on the return and for responding to IRS audits, if necessary.

First-time filers who prepare carefully and maintain accurate records will find the filing process less burdensome and easier to manage.

Frequently Asked Questions

What do the instructions for Form 720 2011 cover?

The Form 720 2011 instructions explain how a taxpayer should complete the excise tax return for the calendar year. They outline which excise taxes imposed must be reported, including motor fuel, tobacco tax, alcohol, sport fishing equipment, and air transportation services. The instructions also detail how to calculate net tax liability, apply credits, claim refunds, and follow special rules related to due dates and extensions.

Who must file a federal excise tax return?

A business must file a federal excise tax return if it is liable for any excise taxes imposed under the Internal Revenue Code. This includes taxes on sales of motor fuel, diesel fuel, communications services, and other goods subject to excise tax. Even if liability for the quarter is low or zero, the IRS requires the taxpayer to file Form 720 to report amounts reflected in the account.

What happens if the due date falls on a legal holiday?

If the due date for Form 720 falls on a Saturday, Sunday, or a legal holiday, the taxpayer may file or pay on the next business day without incurring a penalty. This rule applies to every quarter, regardless of whether it is the first quarter, ending in March, or the last quarter of the year. The IRS includes this process in the instructions to ensure taxes imposed are reported accurately despite date modifications.

How are excise taxes on motor fuel and diesel fuel calculated?

Excise taxes imposed on motor fuel and diesel fuel are calculated by multiplying the number of gallons sold by the tax rate reflected in the law. For example, if a retailer sells 10,000 gallons of diesel fuel, the tax imposed is determined by applying the percentage rate per gallon. These amounts must be reported for the correct period and allocated to the corresponding section of the form.

When should a business file a final return?

A business must file a final return when it no longer has liability for excise taxes listed in Form 720. This occurs if operations have ceased or if sales of taxable goods and services are no longer conducted. The taxpayer must sign and submit the form, check the 'final return' box, and verify that all required deposits have been made. Records must be prepared and retained for a minimum of four years.

Can taxpayers claim credits or refunds on excise taxes imposed?

Yes, taxpayers can use Schedule C to claim refunds or credits for excise taxes imposed on fuel, tobacco, alcohol, or other goods when these amounts were collected in error or later determined to be nontaxable. For example, exported fuel or nontaxable sales of sport fishing equipment may qualify for this exemption. Each claim must be supported by documentation and reported in accordance with the instructions, ensuring the process complies with IRS requirements.

‍

Frequently Asked Questions

How to File IRS Form 720: 2011 Excise Tax Guide

Filing federal excise taxes is a responsibility many businesses face, but understanding the process can seem daunting without clear guidance. IRS Form 720, also known as the Quarterly Federal Excise Tax Return, is used to report and pay a variety of excise taxes imposed under the Internal Revenue Code. These taxes apply to specific goods and services, such as motor fuel, air transportation, sport fishing equipment, and tobacco. For the 2011 tax year, the Internal Revenue Service released detailed instructions for Form 720-2011 to help taxpayers remain compliant throughout the calendar year.

Businesses liable for excise tax must file this form each quarter, even if liability is minimal or zero. The due date typically falls at the end of the month following each quarter, with adjustments made if the last day is a Saturday, Sunday, or a legal holiday. Filing accurately and on time is crucial because errors, missed deadlines, or incorrect reporting can result in increased costs due to penalties or interest. The process requires careful attention to the taxes listed on the form and an understanding of how liability is determined.

This guide is designed for businesses that require practical assistance in filing their 2011 excise tax return. It explains filing requirements, provides examples to show how the tax imposed should be calculated, and clarifies what taxpayers must submit to the IRS. By following these instructions, businesses can better manage their obligations, avoid mistakes, and maintain compliance with federal requirements.

What Is IRS Form 720?

IRS Form 720, known as the Quarterly Federal Excise Tax Return, is the form used to report and pay federal excise taxes imposed on specific goods and services. Excise taxes are collected under the Internal Revenue Code and apply to industries such as fuel production, airline services, communications, and the sale of items like sporting goods and tobacco products.

Who Must File Form 720?

A business is required to file Form 720 if it meets either of the following conditions:

The business was liable for excise taxes listed in Parts I or II of the form during a previous quarter and has not yet filed a final return.
The business is liable for excise taxes imposed in the current quarter and is responsible for collecting or paying those taxes.

Quarterly Filing Requirements

Form 720 must be filed quarterly throughout the calendar year. The due date for filing is the last day of the month following the end of the quarter. If the due date falls on a Saturday, Sunday, or legal holiday, the taxpayer may file on the next business day.

Filing on time is essential to avoid penalties and additional costs. Form 720 ensures that taxes imposed on specific goods and services are correctly reported. By filing the excise tax return each quarter, businesses remain compliant with IRS requirements and accurately reflect their net tax liability.

Key Changes for Tax Year 2011

The IRS introduced several significant modifications for the 2011 tax year that substantially impacted how businesses filed their excise tax returns. These changes focused on electronic payment methods and compliance procedures.

Major Updates

The IRS mandated that all federal tax deposits, including excise tax deposits, must be made electronically starting January 1, 2011. This meant that businesses could no longer rely on paper deposit coupons such as Forms 8109 and 8109-B.
The Electronic Federal Tax Payment System (EFTPS) became the standard method for submitting payments. EFTPS provided a secure platform that allowed taxpayers to schedule payments, receive confirmation, and maintain a record of all transactions.
Businesses were given the option to have third parties, such as tax professionals, payroll service providers, or financial institutions, make deposits through EFTPS on their behalf. Although convenient, these services often came with additional costs.

These modifications reflected the government’s move toward secure electronic systems. Businesses that failed to adapt to EFTPS could face delays in processing and the possibility of penalties.

Step-by-Step Filing Instructions

Businesses preparing to file Form 720 must follow a structured process to ensure compliance and accuracy.

Pre-Filing Checklist

Businesses should gather all sales records, invoices, and documentation supporting taxable activities before beginning.
The Employer Identification Number (EIN) must be verified since it is required for every excise tax return.
Taxpayers need to determine which excise taxes apply to their operations by reviewing the taxes listed in Parts I and II of the form.
Each business must calculate its liability for the applicable taxes, using the correct percentage or rate for each category.
Basic information such as business name, address, and account details should be confirmed to ensure accuracy when filing.

Completing the Form

Header information should include the legal name of the business, complete address, EIN, and the calendar quarter being reported.
Part I: Environmental and transportation taxes require taxpayers to report excise taxes on motor fuel, air transportation services, communications services, and ozone-depleting chemicals.
Part II: Other excise taxes covers industries such as sport fishing equipment, tobacco products, alcohol, tires, tanning services, and coal.
Part III: Calculations and payments brings together the total net tax liability, applies credits or refunds, and determines the final balance due or any overpayment.

Example Calculations

A fuel distributor selling 10,000 gallons of diesel fuel would multiply the gallons sold by the tax rate of $0.244 per gallon, resulting in a liability of $2,440.
A manufacturer producing fishing rods would calculate liability by applying the excise tax percentage imposed on each sale, capped at the maximum tax per item.
An airline passenger paying $265.40 for a ticket with a stopover would have liability divided between a percentage tax on the fare and a flat amount per segment.

By carefully following the instructions and examples, taxpayers can reduce the risk of errors and ensure that their excise tax return is completed correctly.

How to File Form 720?

Taxpayers may submit Form 720 either electronically or on paper, depending on their preference and the available filing method.

Electronic Filing (E-File)

The taxpayer must work with an authorized Electronic Return Originator (ERO) to file their tax return electronically.
All required documentation, including supporting schedules, should be submitted to the ERO for preparation and review.
The taxpayer must review the completed return to confirm accuracy before authorizing submission.
Once transmitted through the IRS e-file system, the taxpayer receives confirmation that the filing has been accepted.

Paper Filing

The taxpayer must complete Form 720 using the official 2011 instructions and include all required attachments.
The completed form should be mailed to the IRS processing center in Cincinnati, Ohio, by the due date.
If using an approved private delivery service such as FedEx or UPS, the taxpayer must ensure the package is addressed to the designated street address, since these carriers cannot deliver to P.O. boxes.

Whether filed electronically or on paper, Form 720 must be submitted on or before the required due date. Meeting deadlines ensures compliance and helps taxpayers avoid penalties for late filing.

Payment and Deposit Requirements

For the 2011 tax year, all excise tax deposits had to be made electronically using the Electronic Federal Tax Payment System (EFTPS). Understanding when and how to pay is critical for avoiding penalties and ensuring compliance.

EFTPS Enrollment Process

Taxpayers must begin enrollment by visiting the EFTPS website or calling the toll-free number provided by the IRS. This step ensures the account is registered correctly.
During enrollment, the business must provide its Employer Identification Number (EIN) and relevant banking information so payments can be processed.
Once enrolled, the IRS mails a personal identification number (PIN), which typically arrives within 7 to 10 business days and is required to activate the account.
After activation, taxpayers can schedule payments online, submit deposits electronically, and receive immediate confirmation for each transaction.

Deposit Thresholds

Businesses with quarterly excise tax liability of $2,500 or more are required to make semi-monthly deposits instead of paying the full balance with the return.
Businesses with liability of less than $2,500 for the quarter are permitted to pay the entire balance when filing the return, rather than making separate deposits.
Businesses with liability of $100,000 or more during any deposit period must make a payment by the next business day to remain compliant.

Semi-Monthly Deposit Schedule

When liability arises between the 1st and the 15th of a month, the deposit must be submitted to EFTPS by the 29th of the same month.
When liability arises between the 16th and the last day of the month, the deposit must be submitted by the 14th of the following month.
Taxpayers who make timely deposits equal to their net tax liability may qualify for the safe harbor rule, which protects them from penalties even if deposits are not exact.

Required Schedules and Attachments

Form 720 may require several additional schedules or attachments, depending on the type of excise taxes reported. These documents provide the IRS with detailed information, ensuring accurate reporting.

Schedule A: Excise Tax Liability

Schedule A is used to record the semi-monthly liability for excise taxes listed in Part I of Form 720. This helps confirm whether required deposits were made during each period.
Taxpayers must allocate liability between the regular method and the alternative method, and enter amounts for each semi-monthly period within the quarter.

Schedule C: Claims

Schedule C is required when taxpayers claim refunds or credits for excise taxes they previously paid but are no longer liable for.
Common examples include credits for nontaxable use of fuel, exported fuels, or renewable diesel mixture credits that offset excise tax liability.

Schedule T: Two-Party Exchange Information

Schedule T is completed when businesses exchange motor fuel, kerosene, or gasoline within a terminal between two registered parties.
The schedule requires detailed reporting of the type of fuel, the volume exchanged, and the identity of the other registered business involved in the transaction.

Form 6627: Environmental Taxes

Form 6627 is required when reporting environmental taxes, such as the oil spill liability tax or taxes on ozone-depleting chemicals.
The calculations performed on Form 6627 must then be transferred to the corresponding lines of Form 720 to ensure proper reporting.

Submitting the correct schedules and attachments prevents delays in processing and reduces the risk of the IRS returning the excise tax return as incomplete.

Common Mistakes to Avoid

When filing Form 720, even small mistakes can result in additional costs or penalties. Taxpayers should review their returns carefully to avoid these common problems.

Identification Errors

Some taxpayers mistakenly enter a Social Security Number instead of an Employer Identification Number (EIN), which results in processing issues.
Transposing digits in the EIN or continuing to use an outdated number after a business change often leads to IRS notices and delays.

Calculation and Reporting Errors

Errors frequently occur when taxpayers apply the wrong tax rate for items such as motor fuel, communications services, or other goods.
Misclassifying transactions as taxable when they are not, or excluding taxable sales, leads to incorrect liability reporting.
Mistakes in adding totals, dividing liabilities between periods, or carrying amounts onto other schedules can cause mismatched figures.

Filing and Timing Mistakes

Many taxpayers fail to file by the quarterly due date, which triggers an automatic late-filing penalty.
Deposits that fall on weekends or legal holidays are sometimes submitted late because taxpayers forget that payments must be made on the next business day.
Some filers neglect to include schedules such as Schedule A or Form 6627, which makes the return incomplete and can cause delays in processing.

By double-checking information, confirming calculations, and submitting all required schedules, taxpayers can avoid the most common filing mistakes and ensure their excise tax return is accurate and complete.

Zero Liability and Final Return Guidance

Even when a business has no tax liability, Form 720 may still need to be filed. The IRS requires continued filing until a final return is submitted.

Filing a Zero Return

Businesses must file a zero return if they were previously liable for excise taxes but have not yet filed a final return for those taxes.
A zero return is completed by filling in the header information, entering zero on all applicable tax lines, and writing “None” on Part III, line 3.
Filing by the expected quarterly due date is still required, even if no taxes are owed for that period.

Filing a Final Return

A final return should be filed if the business permanently ceases operations or will no longer be liable for excise taxes listed on Form 720.
Taxpayers must check the “Final return” box above Part I, complete all required sections, and make sure all deposits and payments are up to date.
Records relating to excise tax liability must be kept for at least four years after the final return is filed, in case of IRS review.

Following these steps ensures the business closes out its excise tax responsibilities properly and avoids future filing requirements.

Tips for First-Time Filers

Businesses filing Form 720 for the first time often face uncertainty about the process. Taking a few key steps can make the process smoother and reduce the risk of errors.

Applying for an EIN

A business that does not yet have an Employer Identification Number must obtain one before filing Form 720.
The EIN can be requested online, by phone, or by submitting Form SS-4 through mail or fax.

Identifying Applicable Taxes

First-time filers must carefully review the excise taxes imposed under Parts I and II of Form 720 to determine which apply to their business.
Common examples include motor fuel taxes for distributors, air transportation taxes for airlines, and taxes on sport fishing equipment for manufacturers.

Registration Requirements

Certain business activities require registration with the IRS before filing, such as biodiesel operations, fuel distribution, or chemical manufacturing.
Businesses must confirm whether their activities fall under registration rules to avoid compliance issues.

Recordkeeping Practices

Taxpayers should maintain detailed sales records, invoices, and deposit confirmations from EFTPS for a minimum of four years.
Supporting documents are crucial for verifying the amounts reported on the return and for responding to IRS audits, if necessary.

First-time filers who prepare carefully and maintain accurate records will find the filing process less burdensome and easier to manage.

Frequently Asked Questions

What do the instructions for Form 720 2011 cover?

The Form 720 2011 instructions explain how a taxpayer should complete the excise tax return for the calendar year. They outline which excise taxes imposed must be reported, including motor fuel, tobacco tax, alcohol, sport fishing equipment, and air transportation services. The instructions also detail how to calculate net tax liability, apply credits, claim refunds, and follow special rules related to due dates and extensions.

Who must file a federal excise tax return?

A business must file a federal excise tax return if it is liable for any excise taxes imposed under the Internal Revenue Code. This includes taxes on sales of motor fuel, diesel fuel, communications services, and other goods subject to excise tax. Even if liability for the quarter is low or zero, the IRS requires the taxpayer to file Form 720 to report amounts reflected in the account.

What happens if the due date falls on a legal holiday?

If the due date for Form 720 falls on a Saturday, Sunday, or a legal holiday, the taxpayer may file or pay on the next business day without incurring a penalty. This rule applies to every quarter, regardless of whether it is the first quarter, ending in March, or the last quarter of the year. The IRS includes this process in the instructions to ensure taxes imposed are reported accurately despite date modifications.

How are excise taxes on motor fuel and diesel fuel calculated?

Excise taxes imposed on motor fuel and diesel fuel are calculated by multiplying the number of gallons sold by the tax rate reflected in the law. For example, if a retailer sells 10,000 gallons of diesel fuel, the tax imposed is determined by applying the percentage rate per gallon. These amounts must be reported for the correct period and allocated to the corresponding section of the form.

When should a business file a final return?

A business must file a final return when it no longer has liability for excise taxes listed in Form 720. This occurs if operations have ceased or if sales of taxable goods and services are no longer conducted. The taxpayer must sign and submit the form, check the 'final return' box, and verify that all required deposits have been made. Records must be prepared and retained for a minimum of four years.

Can taxpayers claim credits or refunds on excise taxes imposed?

Yes, taxpayers can use Schedule C to claim refunds or credits for excise taxes imposed on fuel, tobacco, alcohol, or other goods when these amounts were collected in error or later determined to be nontaxable. For example, exported fuel or nontaxable sales of sport fishing equipment may qualify for this exemption. Each claim must be supported by documentation and reported in accordance with the instructions, ensuring the process complies with IRS requirements.

‍

Frequently Asked Questions

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How to File IRS Form 720: 2011 Excise Tax Guide

Filing federal excise taxes is a responsibility many businesses face, but understanding the process can seem daunting without clear guidance. IRS Form 720, also known as the Quarterly Federal Excise Tax Return, is used to report and pay a variety of excise taxes imposed under the Internal Revenue Code. These taxes apply to specific goods and services, such as motor fuel, air transportation, sport fishing equipment, and tobacco. For the 2011 tax year, the Internal Revenue Service released detailed instructions for Form 720-2011 to help taxpayers remain compliant throughout the calendar year.

Businesses liable for excise tax must file this form each quarter, even if liability is minimal or zero. The due date typically falls at the end of the month following each quarter, with adjustments made if the last day is a Saturday, Sunday, or a legal holiday. Filing accurately and on time is crucial because errors, missed deadlines, or incorrect reporting can result in increased costs due to penalties or interest. The process requires careful attention to the taxes listed on the form and an understanding of how liability is determined.

This guide is designed for businesses that require practical assistance in filing their 2011 excise tax return. It explains filing requirements, provides examples to show how the tax imposed should be calculated, and clarifies what taxpayers must submit to the IRS. By following these instructions, businesses can better manage their obligations, avoid mistakes, and maintain compliance with federal requirements.

What Is IRS Form 720?

IRS Form 720, known as the Quarterly Federal Excise Tax Return, is the form used to report and pay federal excise taxes imposed on specific goods and services. Excise taxes are collected under the Internal Revenue Code and apply to industries such as fuel production, airline services, communications, and the sale of items like sporting goods and tobacco products.

Who Must File Form 720?

A business is required to file Form 720 if it meets either of the following conditions:

The business was liable for excise taxes listed in Parts I or II of the form during a previous quarter and has not yet filed a final return.
The business is liable for excise taxes imposed in the current quarter and is responsible for collecting or paying those taxes.

Quarterly Filing Requirements

Form 720 must be filed quarterly throughout the calendar year. The due date for filing is the last day of the month following the end of the quarter. If the due date falls on a Saturday, Sunday, or legal holiday, the taxpayer may file on the next business day.

Filing on time is essential to avoid penalties and additional costs. Form 720 ensures that taxes imposed on specific goods and services are correctly reported. By filing the excise tax return each quarter, businesses remain compliant with IRS requirements and accurately reflect their net tax liability.

Key Changes for Tax Year 2011

The IRS introduced several significant modifications for the 2011 tax year that substantially impacted how businesses filed their excise tax returns. These changes focused on electronic payment methods and compliance procedures.

Major Updates

The IRS mandated that all federal tax deposits, including excise tax deposits, must be made electronically starting January 1, 2011. This meant that businesses could no longer rely on paper deposit coupons such as Forms 8109 and 8109-B.
The Electronic Federal Tax Payment System (EFTPS) became the standard method for submitting payments. EFTPS provided a secure platform that allowed taxpayers to schedule payments, receive confirmation, and maintain a record of all transactions.
Businesses were given the option to have third parties, such as tax professionals, payroll service providers, or financial institutions, make deposits through EFTPS on their behalf. Although convenient, these services often came with additional costs.

These modifications reflected the government’s move toward secure electronic systems. Businesses that failed to adapt to EFTPS could face delays in processing and the possibility of penalties.

Step-by-Step Filing Instructions

Businesses preparing to file Form 720 must follow a structured process to ensure compliance and accuracy.

Pre-Filing Checklist

Businesses should gather all sales records, invoices, and documentation supporting taxable activities before beginning.
The Employer Identification Number (EIN) must be verified since it is required for every excise tax return.
Taxpayers need to determine which excise taxes apply to their operations by reviewing the taxes listed in Parts I and II of the form.
Each business must calculate its liability for the applicable taxes, using the correct percentage or rate for each category.
Basic information such as business name, address, and account details should be confirmed to ensure accuracy when filing.

Completing the Form

Header information should include the legal name of the business, complete address, EIN, and the calendar quarter being reported.
Part I: Environmental and transportation taxes require taxpayers to report excise taxes on motor fuel, air transportation services, communications services, and ozone-depleting chemicals.
Part II: Other excise taxes covers industries such as sport fishing equipment, tobacco products, alcohol, tires, tanning services, and coal.
Part III: Calculations and payments brings together the total net tax liability, applies credits or refunds, and determines the final balance due or any overpayment.

Example Calculations

A fuel distributor selling 10,000 gallons of diesel fuel would multiply the gallons sold by the tax rate of $0.244 per gallon, resulting in a liability of $2,440.
A manufacturer producing fishing rods would calculate liability by applying the excise tax percentage imposed on each sale, capped at the maximum tax per item.
An airline passenger paying $265.40 for a ticket with a stopover would have liability divided between a percentage tax on the fare and a flat amount per segment.

By carefully following the instructions and examples, taxpayers can reduce the risk of errors and ensure that their excise tax return is completed correctly.

How to File Form 720?

Taxpayers may submit Form 720 either electronically or on paper, depending on their preference and the available filing method.

Electronic Filing (E-File)

The taxpayer must work with an authorized Electronic Return Originator (ERO) to file their tax return electronically.
All required documentation, including supporting schedules, should be submitted to the ERO for preparation and review.
The taxpayer must review the completed return to confirm accuracy before authorizing submission.
Once transmitted through the IRS e-file system, the taxpayer receives confirmation that the filing has been accepted.

Paper Filing

The taxpayer must complete Form 720 using the official 2011 instructions and include all required attachments.
The completed form should be mailed to the IRS processing center in Cincinnati, Ohio, by the due date.
If using an approved private delivery service such as FedEx or UPS, the taxpayer must ensure the package is addressed to the designated street address, since these carriers cannot deliver to P.O. boxes.

Whether filed electronically or on paper, Form 720 must be submitted on or before the required due date. Meeting deadlines ensures compliance and helps taxpayers avoid penalties for late filing.

Payment and Deposit Requirements

For the 2011 tax year, all excise tax deposits had to be made electronically using the Electronic Federal Tax Payment System (EFTPS). Understanding when and how to pay is critical for avoiding penalties and ensuring compliance.

EFTPS Enrollment Process

Taxpayers must begin enrollment by visiting the EFTPS website or calling the toll-free number provided by the IRS. This step ensures the account is registered correctly.
During enrollment, the business must provide its Employer Identification Number (EIN) and relevant banking information so payments can be processed.
Once enrolled, the IRS mails a personal identification number (PIN), which typically arrives within 7 to 10 business days and is required to activate the account.
After activation, taxpayers can schedule payments online, submit deposits electronically, and receive immediate confirmation for each transaction.

Deposit Thresholds

Businesses with quarterly excise tax liability of $2,500 or more are required to make semi-monthly deposits instead of paying the full balance with the return.
Businesses with liability of less than $2,500 for the quarter are permitted to pay the entire balance when filing the return, rather than making separate deposits.
Businesses with liability of $100,000 or more during any deposit period must make a payment by the next business day to remain compliant.

Semi-Monthly Deposit Schedule

When liability arises between the 1st and the 15th of a month, the deposit must be submitted to EFTPS by the 29th of the same month.
When liability arises between the 16th and the last day of the month, the deposit must be submitted by the 14th of the following month.
Taxpayers who make timely deposits equal to their net tax liability may qualify for the safe harbor rule, which protects them from penalties even if deposits are not exact.

Required Schedules and Attachments

Form 720 may require several additional schedules or attachments, depending on the type of excise taxes reported. These documents provide the IRS with detailed information, ensuring accurate reporting.

Schedule A: Excise Tax Liability

Schedule A is used to record the semi-monthly liability for excise taxes listed in Part I of Form 720. This helps confirm whether required deposits were made during each period.
Taxpayers must allocate liability between the regular method and the alternative method, and enter amounts for each semi-monthly period within the quarter.

Schedule C: Claims

Schedule C is required when taxpayers claim refunds or credits for excise taxes they previously paid but are no longer liable for.
Common examples include credits for nontaxable use of fuel, exported fuels, or renewable diesel mixture credits that offset excise tax liability.

Schedule T: Two-Party Exchange Information

Schedule T is completed when businesses exchange motor fuel, kerosene, or gasoline within a terminal between two registered parties.
The schedule requires detailed reporting of the type of fuel, the volume exchanged, and the identity of the other registered business involved in the transaction.

Form 6627: Environmental Taxes

Form 6627 is required when reporting environmental taxes, such as the oil spill liability tax or taxes on ozone-depleting chemicals.
The calculations performed on Form 6627 must then be transferred to the corresponding lines of Form 720 to ensure proper reporting.

Submitting the correct schedules and attachments prevents delays in processing and reduces the risk of the IRS returning the excise tax return as incomplete.

Common Mistakes to Avoid

When filing Form 720, even small mistakes can result in additional costs or penalties. Taxpayers should review their returns carefully to avoid these common problems.

Identification Errors

Some taxpayers mistakenly enter a Social Security Number instead of an Employer Identification Number (EIN), which results in processing issues.
Transposing digits in the EIN or continuing to use an outdated number after a business change often leads to IRS notices and delays.

Calculation and Reporting Errors

Errors frequently occur when taxpayers apply the wrong tax rate for items such as motor fuel, communications services, or other goods.
Misclassifying transactions as taxable when they are not, or excluding taxable sales, leads to incorrect liability reporting.
Mistakes in adding totals, dividing liabilities between periods, or carrying amounts onto other schedules can cause mismatched figures.

Filing and Timing Mistakes

Many taxpayers fail to file by the quarterly due date, which triggers an automatic late-filing penalty.
Deposits that fall on weekends or legal holidays are sometimes submitted late because taxpayers forget that payments must be made on the next business day.
Some filers neglect to include schedules such as Schedule A or Form 6627, which makes the return incomplete and can cause delays in processing.

By double-checking information, confirming calculations, and submitting all required schedules, taxpayers can avoid the most common filing mistakes and ensure their excise tax return is accurate and complete.

Zero Liability and Final Return Guidance

Even when a business has no tax liability, Form 720 may still need to be filed. The IRS requires continued filing until a final return is submitted.

Filing a Zero Return

Businesses must file a zero return if they were previously liable for excise taxes but have not yet filed a final return for those taxes.
A zero return is completed by filling in the header information, entering zero on all applicable tax lines, and writing “None” on Part III, line 3.
Filing by the expected quarterly due date is still required, even if no taxes are owed for that period.

Filing a Final Return

A final return should be filed if the business permanently ceases operations or will no longer be liable for excise taxes listed on Form 720.
Taxpayers must check the “Final return” box above Part I, complete all required sections, and make sure all deposits and payments are up to date.
Records relating to excise tax liability must be kept for at least four years after the final return is filed, in case of IRS review.

Following these steps ensures the business closes out its excise tax responsibilities properly and avoids future filing requirements.

Tips for First-Time Filers

Businesses filing Form 720 for the first time often face uncertainty about the process. Taking a few key steps can make the process smoother and reduce the risk of errors.

Applying for an EIN

A business that does not yet have an Employer Identification Number must obtain one before filing Form 720.
The EIN can be requested online, by phone, or by submitting Form SS-4 through mail or fax.

Identifying Applicable Taxes

First-time filers must carefully review the excise taxes imposed under Parts I and II of Form 720 to determine which apply to their business.
Common examples include motor fuel taxes for distributors, air transportation taxes for airlines, and taxes on sport fishing equipment for manufacturers.

Registration Requirements

Certain business activities require registration with the IRS before filing, such as biodiesel operations, fuel distribution, or chemical manufacturing.
Businesses must confirm whether their activities fall under registration rules to avoid compliance issues.

Recordkeeping Practices

Taxpayers should maintain detailed sales records, invoices, and deposit confirmations from EFTPS for a minimum of four years.
Supporting documents are crucial for verifying the amounts reported on the return and for responding to IRS audits, if necessary.

First-time filers who prepare carefully and maintain accurate records will find the filing process less burdensome and easier to manage.

Frequently Asked Questions

What do the instructions for Form 720 2011 cover?

The Form 720 2011 instructions explain how a taxpayer should complete the excise tax return for the calendar year. They outline which excise taxes imposed must be reported, including motor fuel, tobacco tax, alcohol, sport fishing equipment, and air transportation services. The instructions also detail how to calculate net tax liability, apply credits, claim refunds, and follow special rules related to due dates and extensions.

Who must file a federal excise tax return?

A business must file a federal excise tax return if it is liable for any excise taxes imposed under the Internal Revenue Code. This includes taxes on sales of motor fuel, diesel fuel, communications services, and other goods subject to excise tax. Even if liability for the quarter is low or zero, the IRS requires the taxpayer to file Form 720 to report amounts reflected in the account.

What happens if the due date falls on a legal holiday?

If the due date for Form 720 falls on a Saturday, Sunday, or a legal holiday, the taxpayer may file or pay on the next business day without incurring a penalty. This rule applies to every quarter, regardless of whether it is the first quarter, ending in March, or the last quarter of the year. The IRS includes this process in the instructions to ensure taxes imposed are reported accurately despite date modifications.

How are excise taxes on motor fuel and diesel fuel calculated?

Excise taxes imposed on motor fuel and diesel fuel are calculated by multiplying the number of gallons sold by the tax rate reflected in the law. For example, if a retailer sells 10,000 gallons of diesel fuel, the tax imposed is determined by applying the percentage rate per gallon. These amounts must be reported for the correct period and allocated to the corresponding section of the form.

When should a business file a final return?

A business must file a final return when it no longer has liability for excise taxes listed in Form 720. This occurs if operations have ceased or if sales of taxable goods and services are no longer conducted. The taxpayer must sign and submit the form, check the 'final return' box, and verify that all required deposits have been made. Records must be prepared and retained for a minimum of four years.

Can taxpayers claim credits or refunds on excise taxes imposed?

Yes, taxpayers can use Schedule C to claim refunds or credits for excise taxes imposed on fuel, tobacco, alcohol, or other goods when these amounts were collected in error or later determined to be nontaxable. For example, exported fuel or nontaxable sales of sport fishing equipment may qualify for this exemption. Each claim must be supported by documentation and reported in accordance with the instructions, ensuring the process complies with IRS requirements.

‍

Frequently Asked Questions

How to File IRS Form 720: 2011 Excise Tax Guide

Filing federal excise taxes is a responsibility many businesses face, but understanding the process can seem daunting without clear guidance. IRS Form 720, also known as the Quarterly Federal Excise Tax Return, is used to report and pay a variety of excise taxes imposed under the Internal Revenue Code. These taxes apply to specific goods and services, such as motor fuel, air transportation, sport fishing equipment, and tobacco. For the 2011 tax year, the Internal Revenue Service released detailed instructions for Form 720-2011 to help taxpayers remain compliant throughout the calendar year.

Businesses liable for excise tax must file this form each quarter, even if liability is minimal or zero. The due date typically falls at the end of the month following each quarter, with adjustments made if the last day is a Saturday, Sunday, or a legal holiday. Filing accurately and on time is crucial because errors, missed deadlines, or incorrect reporting can result in increased costs due to penalties or interest. The process requires careful attention to the taxes listed on the form and an understanding of how liability is determined.

This guide is designed for businesses that require practical assistance in filing their 2011 excise tax return. It explains filing requirements, provides examples to show how the tax imposed should be calculated, and clarifies what taxpayers must submit to the IRS. By following these instructions, businesses can better manage their obligations, avoid mistakes, and maintain compliance with federal requirements.

What Is IRS Form 720?

IRS Form 720, known as the Quarterly Federal Excise Tax Return, is the form used to report and pay federal excise taxes imposed on specific goods and services. Excise taxes are collected under the Internal Revenue Code and apply to industries such as fuel production, airline services, communications, and the sale of items like sporting goods and tobacco products.

Who Must File Form 720?

A business is required to file Form 720 if it meets either of the following conditions:

The business was liable for excise taxes listed in Parts I or II of the form during a previous quarter and has not yet filed a final return.
The business is liable for excise taxes imposed in the current quarter and is responsible for collecting or paying those taxes.

Quarterly Filing Requirements

Form 720 must be filed quarterly throughout the calendar year. The due date for filing is the last day of the month following the end of the quarter. If the due date falls on a Saturday, Sunday, or legal holiday, the taxpayer may file on the next business day.

Filing on time is essential to avoid penalties and additional costs. Form 720 ensures that taxes imposed on specific goods and services are correctly reported. By filing the excise tax return each quarter, businesses remain compliant with IRS requirements and accurately reflect their net tax liability.

Key Changes for Tax Year 2011

The IRS introduced several significant modifications for the 2011 tax year that substantially impacted how businesses filed their excise tax returns. These changes focused on electronic payment methods and compliance procedures.

Major Updates

The IRS mandated that all federal tax deposits, including excise tax deposits, must be made electronically starting January 1, 2011. This meant that businesses could no longer rely on paper deposit coupons such as Forms 8109 and 8109-B.
The Electronic Federal Tax Payment System (EFTPS) became the standard method for submitting payments. EFTPS provided a secure platform that allowed taxpayers to schedule payments, receive confirmation, and maintain a record of all transactions.
Businesses were given the option to have third parties, such as tax professionals, payroll service providers, or financial institutions, make deposits through EFTPS on their behalf. Although convenient, these services often came with additional costs.

These modifications reflected the government’s move toward secure electronic systems. Businesses that failed to adapt to EFTPS could face delays in processing and the possibility of penalties.

Step-by-Step Filing Instructions

Businesses preparing to file Form 720 must follow a structured process to ensure compliance and accuracy.

Pre-Filing Checklist

Businesses should gather all sales records, invoices, and documentation supporting taxable activities before beginning.
The Employer Identification Number (EIN) must be verified since it is required for every excise tax return.
Taxpayers need to determine which excise taxes apply to their operations by reviewing the taxes listed in Parts I and II of the form.
Each business must calculate its liability for the applicable taxes, using the correct percentage or rate for each category.
Basic information such as business name, address, and account details should be confirmed to ensure accuracy when filing.

Completing the Form

Header information should include the legal name of the business, complete address, EIN, and the calendar quarter being reported.
Part I: Environmental and transportation taxes require taxpayers to report excise taxes on motor fuel, air transportation services, communications services, and ozone-depleting chemicals.
Part II: Other excise taxes covers industries such as sport fishing equipment, tobacco products, alcohol, tires, tanning services, and coal.
Part III: Calculations and payments brings together the total net tax liability, applies credits or refunds, and determines the final balance due or any overpayment.

Example Calculations

A fuel distributor selling 10,000 gallons of diesel fuel would multiply the gallons sold by the tax rate of $0.244 per gallon, resulting in a liability of $2,440.
A manufacturer producing fishing rods would calculate liability by applying the excise tax percentage imposed on each sale, capped at the maximum tax per item.
An airline passenger paying $265.40 for a ticket with a stopover would have liability divided between a percentage tax on the fare and a flat amount per segment.

By carefully following the instructions and examples, taxpayers can reduce the risk of errors and ensure that their excise tax return is completed correctly.

How to File Form 720?

Taxpayers may submit Form 720 either electronically or on paper, depending on their preference and the available filing method.

Electronic Filing (E-File)

The taxpayer must work with an authorized Electronic Return Originator (ERO) to file their tax return electronically.
All required documentation, including supporting schedules, should be submitted to the ERO for preparation and review.
The taxpayer must review the completed return to confirm accuracy before authorizing submission.
Once transmitted through the IRS e-file system, the taxpayer receives confirmation that the filing has been accepted.

Paper Filing

The taxpayer must complete Form 720 using the official 2011 instructions and include all required attachments.
The completed form should be mailed to the IRS processing center in Cincinnati, Ohio, by the due date.
If using an approved private delivery service such as FedEx or UPS, the taxpayer must ensure the package is addressed to the designated street address, since these carriers cannot deliver to P.O. boxes.

Whether filed electronically or on paper, Form 720 must be submitted on or before the required due date. Meeting deadlines ensures compliance and helps taxpayers avoid penalties for late filing.

Payment and Deposit Requirements

For the 2011 tax year, all excise tax deposits had to be made electronically using the Electronic Federal Tax Payment System (EFTPS). Understanding when and how to pay is critical for avoiding penalties and ensuring compliance.

EFTPS Enrollment Process

Taxpayers must begin enrollment by visiting the EFTPS website or calling the toll-free number provided by the IRS. This step ensures the account is registered correctly.
During enrollment, the business must provide its Employer Identification Number (EIN) and relevant banking information so payments can be processed.
Once enrolled, the IRS mails a personal identification number (PIN), which typically arrives within 7 to 10 business days and is required to activate the account.
After activation, taxpayers can schedule payments online, submit deposits electronically, and receive immediate confirmation for each transaction.

Deposit Thresholds

Businesses with quarterly excise tax liability of $2,500 or more are required to make semi-monthly deposits instead of paying the full balance with the return.
Businesses with liability of less than $2,500 for the quarter are permitted to pay the entire balance when filing the return, rather than making separate deposits.
Businesses with liability of $100,000 or more during any deposit period must make a payment by the next business day to remain compliant.

Semi-Monthly Deposit Schedule

When liability arises between the 1st and the 15th of a month, the deposit must be submitted to EFTPS by the 29th of the same month.
When liability arises between the 16th and the last day of the month, the deposit must be submitted by the 14th of the following month.
Taxpayers who make timely deposits equal to their net tax liability may qualify for the safe harbor rule, which protects them from penalties even if deposits are not exact.

Required Schedules and Attachments

Form 720 may require several additional schedules or attachments, depending on the type of excise taxes reported. These documents provide the IRS with detailed information, ensuring accurate reporting.

Schedule A: Excise Tax Liability

Schedule A is used to record the semi-monthly liability for excise taxes listed in Part I of Form 720. This helps confirm whether required deposits were made during each period.
Taxpayers must allocate liability between the regular method and the alternative method, and enter amounts for each semi-monthly period within the quarter.

Schedule C: Claims

Schedule C is required when taxpayers claim refunds or credits for excise taxes they previously paid but are no longer liable for.
Common examples include credits for nontaxable use of fuel, exported fuels, or renewable diesel mixture credits that offset excise tax liability.

Schedule T: Two-Party Exchange Information

Schedule T is completed when businesses exchange motor fuel, kerosene, or gasoline within a terminal between two registered parties.
The schedule requires detailed reporting of the type of fuel, the volume exchanged, and the identity of the other registered business involved in the transaction.

Form 6627: Environmental Taxes

Form 6627 is required when reporting environmental taxes, such as the oil spill liability tax or taxes on ozone-depleting chemicals.
The calculations performed on Form 6627 must then be transferred to the corresponding lines of Form 720 to ensure proper reporting.

Submitting the correct schedules and attachments prevents delays in processing and reduces the risk of the IRS returning the excise tax return as incomplete.

Common Mistakes to Avoid

When filing Form 720, even small mistakes can result in additional costs or penalties. Taxpayers should review their returns carefully to avoid these common problems.

Identification Errors

Some taxpayers mistakenly enter a Social Security Number instead of an Employer Identification Number (EIN), which results in processing issues.
Transposing digits in the EIN or continuing to use an outdated number after a business change often leads to IRS notices and delays.

Calculation and Reporting Errors

Errors frequently occur when taxpayers apply the wrong tax rate for items such as motor fuel, communications services, or other goods.
Misclassifying transactions as taxable when they are not, or excluding taxable sales, leads to incorrect liability reporting.
Mistakes in adding totals, dividing liabilities between periods, or carrying amounts onto other schedules can cause mismatched figures.

Filing and Timing Mistakes

Many taxpayers fail to file by the quarterly due date, which triggers an automatic late-filing penalty.
Deposits that fall on weekends or legal holidays are sometimes submitted late because taxpayers forget that payments must be made on the next business day.
Some filers neglect to include schedules such as Schedule A or Form 6627, which makes the return incomplete and can cause delays in processing.

By double-checking information, confirming calculations, and submitting all required schedules, taxpayers can avoid the most common filing mistakes and ensure their excise tax return is accurate and complete.

Zero Liability and Final Return Guidance

Even when a business has no tax liability, Form 720 may still need to be filed. The IRS requires continued filing until a final return is submitted.

Filing a Zero Return

Businesses must file a zero return if they were previously liable for excise taxes but have not yet filed a final return for those taxes.
A zero return is completed by filling in the header information, entering zero on all applicable tax lines, and writing “None” on Part III, line 3.
Filing by the expected quarterly due date is still required, even if no taxes are owed for that period.

Filing a Final Return

A final return should be filed if the business permanently ceases operations or will no longer be liable for excise taxes listed on Form 720.
Taxpayers must check the “Final return” box above Part I, complete all required sections, and make sure all deposits and payments are up to date.
Records relating to excise tax liability must be kept for at least four years after the final return is filed, in case of IRS review.

Following these steps ensures the business closes out its excise tax responsibilities properly and avoids future filing requirements.

Tips for First-Time Filers

Businesses filing Form 720 for the first time often face uncertainty about the process. Taking a few key steps can make the process smoother and reduce the risk of errors.

Applying for an EIN

A business that does not yet have an Employer Identification Number must obtain one before filing Form 720.
The EIN can be requested online, by phone, or by submitting Form SS-4 through mail or fax.

Identifying Applicable Taxes

First-time filers must carefully review the excise taxes imposed under Parts I and II of Form 720 to determine which apply to their business.
Common examples include motor fuel taxes for distributors, air transportation taxes for airlines, and taxes on sport fishing equipment for manufacturers.

Registration Requirements

Certain business activities require registration with the IRS before filing, such as biodiesel operations, fuel distribution, or chemical manufacturing.
Businesses must confirm whether their activities fall under registration rules to avoid compliance issues.

Recordkeeping Practices

Taxpayers should maintain detailed sales records, invoices, and deposit confirmations from EFTPS for a minimum of four years.
Supporting documents are crucial for verifying the amounts reported on the return and for responding to IRS audits, if necessary.

First-time filers who prepare carefully and maintain accurate records will find the filing process less burdensome and easier to manage.

Frequently Asked Questions

What do the instructions for Form 720 2011 cover?

The Form 720 2011 instructions explain how a taxpayer should complete the excise tax return for the calendar year. They outline which excise taxes imposed must be reported, including motor fuel, tobacco tax, alcohol, sport fishing equipment, and air transportation services. The instructions also detail how to calculate net tax liability, apply credits, claim refunds, and follow special rules related to due dates and extensions.

Who must file a federal excise tax return?

A business must file a federal excise tax return if it is liable for any excise taxes imposed under the Internal Revenue Code. This includes taxes on sales of motor fuel, diesel fuel, communications services, and other goods subject to excise tax. Even if liability for the quarter is low or zero, the IRS requires the taxpayer to file Form 720 to report amounts reflected in the account.

What happens if the due date falls on a legal holiday?

If the due date for Form 720 falls on a Saturday, Sunday, or a legal holiday, the taxpayer may file or pay on the next business day without incurring a penalty. This rule applies to every quarter, regardless of whether it is the first quarter, ending in March, or the last quarter of the year. The IRS includes this process in the instructions to ensure taxes imposed are reported accurately despite date modifications.

How are excise taxes on motor fuel and diesel fuel calculated?

Excise taxes imposed on motor fuel and diesel fuel are calculated by multiplying the number of gallons sold by the tax rate reflected in the law. For example, if a retailer sells 10,000 gallons of diesel fuel, the tax imposed is determined by applying the percentage rate per gallon. These amounts must be reported for the correct period and allocated to the corresponding section of the form.

When should a business file a final return?

A business must file a final return when it no longer has liability for excise taxes listed in Form 720. This occurs if operations have ceased or if sales of taxable goods and services are no longer conducted. The taxpayer must sign and submit the form, check the 'final return' box, and verify that all required deposits have been made. Records must be prepared and retained for a minimum of four years.

Can taxpayers claim credits or refunds on excise taxes imposed?

Yes, taxpayers can use Schedule C to claim refunds or credits for excise taxes imposed on fuel, tobacco, alcohol, or other goods when these amounts were collected in error or later determined to be nontaxable. For example, exported fuel or nontaxable sales of sport fishing equipment may qualify for this exemption. Each claim must be supported by documentation and reported in accordance with the instructions, ensuring the process complies with IRS requirements.

‍

Frequently Asked Questions

How to File IRS Form 720: 2011 Excise Tax Guide

Heading

Filing federal excise taxes is a responsibility many businesses face, but understanding the process can seem daunting without clear guidance. IRS Form 720, also known as the Quarterly Federal Excise Tax Return, is used to report and pay a variety of excise taxes imposed under the Internal Revenue Code. These taxes apply to specific goods and services, such as motor fuel, air transportation, sport fishing equipment, and tobacco. For the 2011 tax year, the Internal Revenue Service released detailed instructions for Form 720-2011 to help taxpayers remain compliant throughout the calendar year.

Businesses liable for excise tax must file this form each quarter, even if liability is minimal or zero. The due date typically falls at the end of the month following each quarter, with adjustments made if the last day is a Saturday, Sunday, or a legal holiday. Filing accurately and on time is crucial because errors, missed deadlines, or incorrect reporting can result in increased costs due to penalties or interest. The process requires careful attention to the taxes listed on the form and an understanding of how liability is determined.

This guide is designed for businesses that require practical assistance in filing their 2011 excise tax return. It explains filing requirements, provides examples to show how the tax imposed should be calculated, and clarifies what taxpayers must submit to the IRS. By following these instructions, businesses can better manage their obligations, avoid mistakes, and maintain compliance with federal requirements.

What Is IRS Form 720?

IRS Form 720, known as the Quarterly Federal Excise Tax Return, is the form used to report and pay federal excise taxes imposed on specific goods and services. Excise taxes are collected under the Internal Revenue Code and apply to industries such as fuel production, airline services, communications, and the sale of items like sporting goods and tobacco products.

Who Must File Form 720?

A business is required to file Form 720 if it meets either of the following conditions:

The business was liable for excise taxes listed in Parts I or II of the form during a previous quarter and has not yet filed a final return.
The business is liable for excise taxes imposed in the current quarter and is responsible for collecting or paying those taxes.

Quarterly Filing Requirements

Form 720 must be filed quarterly throughout the calendar year. The due date for filing is the last day of the month following the end of the quarter. If the due date falls on a Saturday, Sunday, or legal holiday, the taxpayer may file on the next business day.

Filing on time is essential to avoid penalties and additional costs. Form 720 ensures that taxes imposed on specific goods and services are correctly reported. By filing the excise tax return each quarter, businesses remain compliant with IRS requirements and accurately reflect their net tax liability.

Key Changes for Tax Year 2011

The IRS introduced several significant modifications for the 2011 tax year that substantially impacted how businesses filed their excise tax returns. These changes focused on electronic payment methods and compliance procedures.

Major Updates

The IRS mandated that all federal tax deposits, including excise tax deposits, must be made electronically starting January 1, 2011. This meant that businesses could no longer rely on paper deposit coupons such as Forms 8109 and 8109-B.
The Electronic Federal Tax Payment System (EFTPS) became the standard method for submitting payments. EFTPS provided a secure platform that allowed taxpayers to schedule payments, receive confirmation, and maintain a record of all transactions.
Businesses were given the option to have third parties, such as tax professionals, payroll service providers, or financial institutions, make deposits through EFTPS on their behalf. Although convenient, these services often came with additional costs.

These modifications reflected the government’s move toward secure electronic systems. Businesses that failed to adapt to EFTPS could face delays in processing and the possibility of penalties.

Step-by-Step Filing Instructions

Businesses preparing to file Form 720 must follow a structured process to ensure compliance and accuracy.

Pre-Filing Checklist

Businesses should gather all sales records, invoices, and documentation supporting taxable activities before beginning.
The Employer Identification Number (EIN) must be verified since it is required for every excise tax return.
Taxpayers need to determine which excise taxes apply to their operations by reviewing the taxes listed in Parts I and II of the form.
Each business must calculate its liability for the applicable taxes, using the correct percentage or rate for each category.
Basic information such as business name, address, and account details should be confirmed to ensure accuracy when filing.

Completing the Form

Header information should include the legal name of the business, complete address, EIN, and the calendar quarter being reported.
Part I: Environmental and transportation taxes require taxpayers to report excise taxes on motor fuel, air transportation services, communications services, and ozone-depleting chemicals.
Part II: Other excise taxes covers industries such as sport fishing equipment, tobacco products, alcohol, tires, tanning services, and coal.
Part III: Calculations and payments brings together the total net tax liability, applies credits or refunds, and determines the final balance due or any overpayment.

Example Calculations

A fuel distributor selling 10,000 gallons of diesel fuel would multiply the gallons sold by the tax rate of $0.244 per gallon, resulting in a liability of $2,440.
A manufacturer producing fishing rods would calculate liability by applying the excise tax percentage imposed on each sale, capped at the maximum tax per item.
An airline passenger paying $265.40 for a ticket with a stopover would have liability divided between a percentage tax on the fare and a flat amount per segment.

By carefully following the instructions and examples, taxpayers can reduce the risk of errors and ensure that their excise tax return is completed correctly.

How to File Form 720?

Taxpayers may submit Form 720 either electronically or on paper, depending on their preference and the available filing method.

Electronic Filing (E-File)

The taxpayer must work with an authorized Electronic Return Originator (ERO) to file their tax return electronically.
All required documentation, including supporting schedules, should be submitted to the ERO for preparation and review.
The taxpayer must review the completed return to confirm accuracy before authorizing submission.
Once transmitted through the IRS e-file system, the taxpayer receives confirmation that the filing has been accepted.

Paper Filing

The taxpayer must complete Form 720 using the official 2011 instructions and include all required attachments.
The completed form should be mailed to the IRS processing center in Cincinnati, Ohio, by the due date.
If using an approved private delivery service such as FedEx or UPS, the taxpayer must ensure the package is addressed to the designated street address, since these carriers cannot deliver to P.O. boxes.

Whether filed electronically or on paper, Form 720 must be submitted on or before the required due date. Meeting deadlines ensures compliance and helps taxpayers avoid penalties for late filing.

Payment and Deposit Requirements

For the 2011 tax year, all excise tax deposits had to be made electronically using the Electronic Federal Tax Payment System (EFTPS). Understanding when and how to pay is critical for avoiding penalties and ensuring compliance.

EFTPS Enrollment Process

Taxpayers must begin enrollment by visiting the EFTPS website or calling the toll-free number provided by the IRS. This step ensures the account is registered correctly.
During enrollment, the business must provide its Employer Identification Number (EIN) and relevant banking information so payments can be processed.
Once enrolled, the IRS mails a personal identification number (PIN), which typically arrives within 7 to 10 business days and is required to activate the account.
After activation, taxpayers can schedule payments online, submit deposits electronically, and receive immediate confirmation for each transaction.

Deposit Thresholds

Businesses with quarterly excise tax liability of $2,500 or more are required to make semi-monthly deposits instead of paying the full balance with the return.
Businesses with liability of less than $2,500 for the quarter are permitted to pay the entire balance when filing the return, rather than making separate deposits.
Businesses with liability of $100,000 or more during any deposit period must make a payment by the next business day to remain compliant.

Semi-Monthly Deposit Schedule

When liability arises between the 1st and the 15th of a month, the deposit must be submitted to EFTPS by the 29th of the same month.
When liability arises between the 16th and the last day of the month, the deposit must be submitted by the 14th of the following month.
Taxpayers who make timely deposits equal to their net tax liability may qualify for the safe harbor rule, which protects them from penalties even if deposits are not exact.

Required Schedules and Attachments

Form 720 may require several additional schedules or attachments, depending on the type of excise taxes reported. These documents provide the IRS with detailed information, ensuring accurate reporting.

Schedule A: Excise Tax Liability

Schedule A is used to record the semi-monthly liability for excise taxes listed in Part I of Form 720. This helps confirm whether required deposits were made during each period.
Taxpayers must allocate liability between the regular method and the alternative method, and enter amounts for each semi-monthly period within the quarter.

Schedule C: Claims

Schedule C is required when taxpayers claim refunds or credits for excise taxes they previously paid but are no longer liable for.
Common examples include credits for nontaxable use of fuel, exported fuels, or renewable diesel mixture credits that offset excise tax liability.

Schedule T: Two-Party Exchange Information

Schedule T is completed when businesses exchange motor fuel, kerosene, or gasoline within a terminal between two registered parties.
The schedule requires detailed reporting of the type of fuel, the volume exchanged, and the identity of the other registered business involved in the transaction.

Form 6627: Environmental Taxes

Form 6627 is required when reporting environmental taxes, such as the oil spill liability tax or taxes on ozone-depleting chemicals.
The calculations performed on Form 6627 must then be transferred to the corresponding lines of Form 720 to ensure proper reporting.

Submitting the correct schedules and attachments prevents delays in processing and reduces the risk of the IRS returning the excise tax return as incomplete.

Common Mistakes to Avoid

When filing Form 720, even small mistakes can result in additional costs or penalties. Taxpayers should review their returns carefully to avoid these common problems.

Identification Errors

Some taxpayers mistakenly enter a Social Security Number instead of an Employer Identification Number (EIN), which results in processing issues.
Transposing digits in the EIN or continuing to use an outdated number after a business change often leads to IRS notices and delays.

Calculation and Reporting Errors

Errors frequently occur when taxpayers apply the wrong tax rate for items such as motor fuel, communications services, or other goods.
Misclassifying transactions as taxable when they are not, or excluding taxable sales, leads to incorrect liability reporting.
Mistakes in adding totals, dividing liabilities between periods, or carrying amounts onto other schedules can cause mismatched figures.

Filing and Timing Mistakes

Many taxpayers fail to file by the quarterly due date, which triggers an automatic late-filing penalty.
Deposits that fall on weekends or legal holidays are sometimes submitted late because taxpayers forget that payments must be made on the next business day.
Some filers neglect to include schedules such as Schedule A or Form 6627, which makes the return incomplete and can cause delays in processing.

By double-checking information, confirming calculations, and submitting all required schedules, taxpayers can avoid the most common filing mistakes and ensure their excise tax return is accurate and complete.

Zero Liability and Final Return Guidance

Even when a business has no tax liability, Form 720 may still need to be filed. The IRS requires continued filing until a final return is submitted.

Filing a Zero Return

Businesses must file a zero return if they were previously liable for excise taxes but have not yet filed a final return for those taxes.
A zero return is completed by filling in the header information, entering zero on all applicable tax lines, and writing “None” on Part III, line 3.
Filing by the expected quarterly due date is still required, even if no taxes are owed for that period.

Filing a Final Return

A final return should be filed if the business permanently ceases operations or will no longer be liable for excise taxes listed on Form 720.
Taxpayers must check the “Final return” box above Part I, complete all required sections, and make sure all deposits and payments are up to date.
Records relating to excise tax liability must be kept for at least four years after the final return is filed, in case of IRS review.

Following these steps ensures the business closes out its excise tax responsibilities properly and avoids future filing requirements.

Tips for First-Time Filers

Businesses filing Form 720 for the first time often face uncertainty about the process. Taking a few key steps can make the process smoother and reduce the risk of errors.

Applying for an EIN

A business that does not yet have an Employer Identification Number must obtain one before filing Form 720.
The EIN can be requested online, by phone, or by submitting Form SS-4 through mail or fax.

Identifying Applicable Taxes

First-time filers must carefully review the excise taxes imposed under Parts I and II of Form 720 to determine which apply to their business.
Common examples include motor fuel taxes for distributors, air transportation taxes for airlines, and taxes on sport fishing equipment for manufacturers.

Registration Requirements

Certain business activities require registration with the IRS before filing, such as biodiesel operations, fuel distribution, or chemical manufacturing.
Businesses must confirm whether their activities fall under registration rules to avoid compliance issues.

Recordkeeping Practices

Taxpayers should maintain detailed sales records, invoices, and deposit confirmations from EFTPS for a minimum of four years.
Supporting documents are crucial for verifying the amounts reported on the return and for responding to IRS audits, if necessary.

First-time filers who prepare carefully and maintain accurate records will find the filing process less burdensome and easier to manage.

Frequently Asked Questions

What do the instructions for Form 720 2011 cover?

The Form 720 2011 instructions explain how a taxpayer should complete the excise tax return for the calendar year. They outline which excise taxes imposed must be reported, including motor fuel, tobacco tax, alcohol, sport fishing equipment, and air transportation services. The instructions also detail how to calculate net tax liability, apply credits, claim refunds, and follow special rules related to due dates and extensions.

Who must file a federal excise tax return?

A business must file a federal excise tax return if it is liable for any excise taxes imposed under the Internal Revenue Code. This includes taxes on sales of motor fuel, diesel fuel, communications services, and other goods subject to excise tax. Even if liability for the quarter is low or zero, the IRS requires the taxpayer to file Form 720 to report amounts reflected in the account.

What happens if the due date falls on a legal holiday?

If the due date for Form 720 falls on a Saturday, Sunday, or a legal holiday, the taxpayer may file or pay on the next business day without incurring a penalty. This rule applies to every quarter, regardless of whether it is the first quarter, ending in March, or the last quarter of the year. The IRS includes this process in the instructions to ensure taxes imposed are reported accurately despite date modifications.

How are excise taxes on motor fuel and diesel fuel calculated?

Excise taxes imposed on motor fuel and diesel fuel are calculated by multiplying the number of gallons sold by the tax rate reflected in the law. For example, if a retailer sells 10,000 gallons of diesel fuel, the tax imposed is determined by applying the percentage rate per gallon. These amounts must be reported for the correct period and allocated to the corresponding section of the form.

When should a business file a final return?

A business must file a final return when it no longer has liability for excise taxes listed in Form 720. This occurs if operations have ceased or if sales of taxable goods and services are no longer conducted. The taxpayer must sign and submit the form, check the 'final return' box, and verify that all required deposits have been made. Records must be prepared and retained for a minimum of four years.

Can taxpayers claim credits or refunds on excise taxes imposed?

Yes, taxpayers can use Schedule C to claim refunds or credits for excise taxes imposed on fuel, tobacco, alcohol, or other goods when these amounts were collected in error or later determined to be nontaxable. For example, exported fuel or nontaxable sales of sport fishing equipment may qualify for this exemption. Each claim must be supported by documentation and reported in accordance with the instructions, ensuring the process complies with IRS requirements.

‍

How to File IRS Form 720: 2011 Excise Tax Guide

Frequently Asked Questions

How to File IRS Form 720: 2011 Excise Tax Guide

Filing federal excise taxes is a responsibility many businesses face, but understanding the process can seem daunting without clear guidance. IRS Form 720, also known as the Quarterly Federal Excise Tax Return, is used to report and pay a variety of excise taxes imposed under the Internal Revenue Code. These taxes apply to specific goods and services, such as motor fuel, air transportation, sport fishing equipment, and tobacco. For the 2011 tax year, the Internal Revenue Service released detailed instructions for Form 720-2011 to help taxpayers remain compliant throughout the calendar year.

Businesses liable for excise tax must file this form each quarter, even if liability is minimal or zero. The due date typically falls at the end of the month following each quarter, with adjustments made if the last day is a Saturday, Sunday, or a legal holiday. Filing accurately and on time is crucial because errors, missed deadlines, or incorrect reporting can result in increased costs due to penalties or interest. The process requires careful attention to the taxes listed on the form and an understanding of how liability is determined.

This guide is designed for businesses that require practical assistance in filing their 2011 excise tax return. It explains filing requirements, provides examples to show how the tax imposed should be calculated, and clarifies what taxpayers must submit to the IRS. By following these instructions, businesses can better manage their obligations, avoid mistakes, and maintain compliance with federal requirements.

What Is IRS Form 720?

IRS Form 720, known as the Quarterly Federal Excise Tax Return, is the form used to report and pay federal excise taxes imposed on specific goods and services. Excise taxes are collected under the Internal Revenue Code and apply to industries such as fuel production, airline services, communications, and the sale of items like sporting goods and tobacco products.

Who Must File Form 720?

A business is required to file Form 720 if it meets either of the following conditions:

The business was liable for excise taxes listed in Parts I or II of the form during a previous quarter and has not yet filed a final return.
The business is liable for excise taxes imposed in the current quarter and is responsible for collecting or paying those taxes.

Quarterly Filing Requirements

Form 720 must be filed quarterly throughout the calendar year. The due date for filing is the last day of the month following the end of the quarter. If the due date falls on a Saturday, Sunday, or legal holiday, the taxpayer may file on the next business day.

Filing on time is essential to avoid penalties and additional costs. Form 720 ensures that taxes imposed on specific goods and services are correctly reported. By filing the excise tax return each quarter, businesses remain compliant with IRS requirements and accurately reflect their net tax liability.

Key Changes for Tax Year 2011

The IRS introduced several significant modifications for the 2011 tax year that substantially impacted how businesses filed their excise tax returns. These changes focused on electronic payment methods and compliance procedures.

Major Updates

The IRS mandated that all federal tax deposits, including excise tax deposits, must be made electronically starting January 1, 2011. This meant that businesses could no longer rely on paper deposit coupons such as Forms 8109 and 8109-B.
The Electronic Federal Tax Payment System (EFTPS) became the standard method for submitting payments. EFTPS provided a secure platform that allowed taxpayers to schedule payments, receive confirmation, and maintain a record of all transactions.
Businesses were given the option to have third parties, such as tax professionals, payroll service providers, or financial institutions, make deposits through EFTPS on their behalf. Although convenient, these services often came with additional costs.

These modifications reflected the government’s move toward secure electronic systems. Businesses that failed to adapt to EFTPS could face delays in processing and the possibility of penalties.

Step-by-Step Filing Instructions

Businesses preparing to file Form 720 must follow a structured process to ensure compliance and accuracy.

Pre-Filing Checklist

Businesses should gather all sales records, invoices, and documentation supporting taxable activities before beginning.
The Employer Identification Number (EIN) must be verified since it is required for every excise tax return.
Taxpayers need to determine which excise taxes apply to their operations by reviewing the taxes listed in Parts I and II of the form.
Each business must calculate its liability for the applicable taxes, using the correct percentage or rate for each category.
Basic information such as business name, address, and account details should be confirmed to ensure accuracy when filing.

Completing the Form

Header information should include the legal name of the business, complete address, EIN, and the calendar quarter being reported.
Part I: Environmental and transportation taxes require taxpayers to report excise taxes on motor fuel, air transportation services, communications services, and ozone-depleting chemicals.
Part II: Other excise taxes covers industries such as sport fishing equipment, tobacco products, alcohol, tires, tanning services, and coal.
Part III: Calculations and payments brings together the total net tax liability, applies credits or refunds, and determines the final balance due or any overpayment.

Example Calculations

A fuel distributor selling 10,000 gallons of diesel fuel would multiply the gallons sold by the tax rate of $0.244 per gallon, resulting in a liability of $2,440.
A manufacturer producing fishing rods would calculate liability by applying the excise tax percentage imposed on each sale, capped at the maximum tax per item.
An airline passenger paying $265.40 for a ticket with a stopover would have liability divided between a percentage tax on the fare and a flat amount per segment.

By carefully following the instructions and examples, taxpayers can reduce the risk of errors and ensure that their excise tax return is completed correctly.

How to File Form 720?

Taxpayers may submit Form 720 either electronically or on paper, depending on their preference and the available filing method.

Electronic Filing (E-File)

The taxpayer must work with an authorized Electronic Return Originator (ERO) to file their tax return electronically.
All required documentation, including supporting schedules, should be submitted to the ERO for preparation and review.
The taxpayer must review the completed return to confirm accuracy before authorizing submission.
Once transmitted through the IRS e-file system, the taxpayer receives confirmation that the filing has been accepted.

Paper Filing

The taxpayer must complete Form 720 using the official 2011 instructions and include all required attachments.
The completed form should be mailed to the IRS processing center in Cincinnati, Ohio, by the due date.
If using an approved private delivery service such as FedEx or UPS, the taxpayer must ensure the package is addressed to the designated street address, since these carriers cannot deliver to P.O. boxes.

Whether filed electronically or on paper, Form 720 must be submitted on or before the required due date. Meeting deadlines ensures compliance and helps taxpayers avoid penalties for late filing.

Payment and Deposit Requirements

For the 2011 tax year, all excise tax deposits had to be made electronically using the Electronic Federal Tax Payment System (EFTPS). Understanding when and how to pay is critical for avoiding penalties and ensuring compliance.

EFTPS Enrollment Process

Taxpayers must begin enrollment by visiting the EFTPS website or calling the toll-free number provided by the IRS. This step ensures the account is registered correctly.
During enrollment, the business must provide its Employer Identification Number (EIN) and relevant banking information so payments can be processed.
Once enrolled, the IRS mails a personal identification number (PIN), which typically arrives within 7 to 10 business days and is required to activate the account.
After activation, taxpayers can schedule payments online, submit deposits electronically, and receive immediate confirmation for each transaction.

Deposit Thresholds

Businesses with quarterly excise tax liability of $2,500 or more are required to make semi-monthly deposits instead of paying the full balance with the return.
Businesses with liability of less than $2,500 for the quarter are permitted to pay the entire balance when filing the return, rather than making separate deposits.
Businesses with liability of $100,000 or more during any deposit period must make a payment by the next business day to remain compliant.

Semi-Monthly Deposit Schedule

When liability arises between the 1st and the 15th of a month, the deposit must be submitted to EFTPS by the 29th of the same month.
When liability arises between the 16th and the last day of the month, the deposit must be submitted by the 14th of the following month.
Taxpayers who make timely deposits equal to their net tax liability may qualify for the safe harbor rule, which protects them from penalties even if deposits are not exact.

Required Schedules and Attachments

Form 720 may require several additional schedules or attachments, depending on the type of excise taxes reported. These documents provide the IRS with detailed information, ensuring accurate reporting.

Schedule A: Excise Tax Liability

Schedule A is used to record the semi-monthly liability for excise taxes listed in Part I of Form 720. This helps confirm whether required deposits were made during each period.
Taxpayers must allocate liability between the regular method and the alternative method, and enter amounts for each semi-monthly period within the quarter.

Schedule C: Claims

Schedule C is required when taxpayers claim refunds or credits for excise taxes they previously paid but are no longer liable for.
Common examples include credits for nontaxable use of fuel, exported fuels, or renewable diesel mixture credits that offset excise tax liability.

Schedule T: Two-Party Exchange Information

Schedule T is completed when businesses exchange motor fuel, kerosene, or gasoline within a terminal between two registered parties.
The schedule requires detailed reporting of the type of fuel, the volume exchanged, and the identity of the other registered business involved in the transaction.

Form 6627: Environmental Taxes

Form 6627 is required when reporting environmental taxes, such as the oil spill liability tax or taxes on ozone-depleting chemicals.
The calculations performed on Form 6627 must then be transferred to the corresponding lines of Form 720 to ensure proper reporting.

Submitting the correct schedules and attachments prevents delays in processing and reduces the risk of the IRS returning the excise tax return as incomplete.

Common Mistakes to Avoid

When filing Form 720, even small mistakes can result in additional costs or penalties. Taxpayers should review their returns carefully to avoid these common problems.

Identification Errors

Some taxpayers mistakenly enter a Social Security Number instead of an Employer Identification Number (EIN), which results in processing issues.
Transposing digits in the EIN or continuing to use an outdated number after a business change often leads to IRS notices and delays.

Calculation and Reporting Errors

Errors frequently occur when taxpayers apply the wrong tax rate for items such as motor fuel, communications services, or other goods.
Misclassifying transactions as taxable when they are not, or excluding taxable sales, leads to incorrect liability reporting.
Mistakes in adding totals, dividing liabilities between periods, or carrying amounts onto other schedules can cause mismatched figures.

Filing and Timing Mistakes

Many taxpayers fail to file by the quarterly due date, which triggers an automatic late-filing penalty.
Deposits that fall on weekends or legal holidays are sometimes submitted late because taxpayers forget that payments must be made on the next business day.
Some filers neglect to include schedules such as Schedule A or Form 6627, which makes the return incomplete and can cause delays in processing.

By double-checking information, confirming calculations, and submitting all required schedules, taxpayers can avoid the most common filing mistakes and ensure their excise tax return is accurate and complete.

Zero Liability and Final Return Guidance

Even when a business has no tax liability, Form 720 may still need to be filed. The IRS requires continued filing until a final return is submitted.

Filing a Zero Return

Businesses must file a zero return if they were previously liable for excise taxes but have not yet filed a final return for those taxes.
A zero return is completed by filling in the header information, entering zero on all applicable tax lines, and writing “None” on Part III, line 3.
Filing by the expected quarterly due date is still required, even if no taxes are owed for that period.

Filing a Final Return

A final return should be filed if the business permanently ceases operations or will no longer be liable for excise taxes listed on Form 720.
Taxpayers must check the “Final return” box above Part I, complete all required sections, and make sure all deposits and payments are up to date.
Records relating to excise tax liability must be kept for at least four years after the final return is filed, in case of IRS review.

Following these steps ensures the business closes out its excise tax responsibilities properly and avoids future filing requirements.

Tips for First-Time Filers

Businesses filing Form 720 for the first time often face uncertainty about the process. Taking a few key steps can make the process smoother and reduce the risk of errors.

Applying for an EIN

A business that does not yet have an Employer Identification Number must obtain one before filing Form 720.
The EIN can be requested online, by phone, or by submitting Form SS-4 through mail or fax.

Identifying Applicable Taxes

First-time filers must carefully review the excise taxes imposed under Parts I and II of Form 720 to determine which apply to their business.
Common examples include motor fuel taxes for distributors, air transportation taxes for airlines, and taxes on sport fishing equipment for manufacturers.

Registration Requirements

Certain business activities require registration with the IRS before filing, such as biodiesel operations, fuel distribution, or chemical manufacturing.
Businesses must confirm whether their activities fall under registration rules to avoid compliance issues.

Recordkeeping Practices

Taxpayers should maintain detailed sales records, invoices, and deposit confirmations from EFTPS for a minimum of four years.
Supporting documents are crucial for verifying the amounts reported on the return and for responding to IRS audits, if necessary.

First-time filers who prepare carefully and maintain accurate records will find the filing process less burdensome and easier to manage.

Frequently Asked Questions

What do the instructions for Form 720 2011 cover?

The Form 720 2011 instructions explain how a taxpayer should complete the excise tax return for the calendar year. They outline which excise taxes imposed must be reported, including motor fuel, tobacco tax, alcohol, sport fishing equipment, and air transportation services. The instructions also detail how to calculate net tax liability, apply credits, claim refunds, and follow special rules related to due dates and extensions.

Who must file a federal excise tax return?

A business must file a federal excise tax return if it is liable for any excise taxes imposed under the Internal Revenue Code. This includes taxes on sales of motor fuel, diesel fuel, communications services, and other goods subject to excise tax. Even if liability for the quarter is low or zero, the IRS requires the taxpayer to file Form 720 to report amounts reflected in the account.

What happens if the due date falls on a legal holiday?

If the due date for Form 720 falls on a Saturday, Sunday, or a legal holiday, the taxpayer may file or pay on the next business day without incurring a penalty. This rule applies to every quarter, regardless of whether it is the first quarter, ending in March, or the last quarter of the year. The IRS includes this process in the instructions to ensure taxes imposed are reported accurately despite date modifications.

How are excise taxes on motor fuel and diesel fuel calculated?

Excise taxes imposed on motor fuel and diesel fuel are calculated by multiplying the number of gallons sold by the tax rate reflected in the law. For example, if a retailer sells 10,000 gallons of diesel fuel, the tax imposed is determined by applying the percentage rate per gallon. These amounts must be reported for the correct period and allocated to the corresponding section of the form.

When should a business file a final return?

A business must file a final return when it no longer has liability for excise taxes listed in Form 720. This occurs if operations have ceased or if sales of taxable goods and services are no longer conducted. The taxpayer must sign and submit the form, check the 'final return' box, and verify that all required deposits have been made. Records must be prepared and retained for a minimum of four years.

Can taxpayers claim credits or refunds on excise taxes imposed?

Yes, taxpayers can use Schedule C to claim refunds or credits for excise taxes imposed on fuel, tobacco, alcohol, or other goods when these amounts were collected in error or later determined to be nontaxable. For example, exported fuel or nontaxable sales of sport fishing equipment may qualify for this exemption. Each claim must be supported by documentation and reported in accordance with the instructions, ensuring the process complies with IRS requirements.

‍

Frequently Asked Questions

How to File IRS Form 720: 2011 Excise Tax Guide

Filing federal excise taxes is a responsibility many businesses face, but understanding the process can seem daunting without clear guidance. IRS Form 720, also known as the Quarterly Federal Excise Tax Return, is used to report and pay a variety of excise taxes imposed under the Internal Revenue Code. These taxes apply to specific goods and services, such as motor fuel, air transportation, sport fishing equipment, and tobacco. For the 2011 tax year, the Internal Revenue Service released detailed instructions for Form 720-2011 to help taxpayers remain compliant throughout the calendar year.

Businesses liable for excise tax must file this form each quarter, even if liability is minimal or zero. The due date typically falls at the end of the month following each quarter, with adjustments made if the last day is a Saturday, Sunday, or a legal holiday. Filing accurately and on time is crucial because errors, missed deadlines, or incorrect reporting can result in increased costs due to penalties or interest. The process requires careful attention to the taxes listed on the form and an understanding of how liability is determined.

This guide is designed for businesses that require practical assistance in filing their 2011 excise tax return. It explains filing requirements, provides examples to show how the tax imposed should be calculated, and clarifies what taxpayers must submit to the IRS. By following these instructions, businesses can better manage their obligations, avoid mistakes, and maintain compliance with federal requirements.

What Is IRS Form 720?

IRS Form 720, known as the Quarterly Federal Excise Tax Return, is the form used to report and pay federal excise taxes imposed on specific goods and services. Excise taxes are collected under the Internal Revenue Code and apply to industries such as fuel production, airline services, communications, and the sale of items like sporting goods and tobacco products.

Who Must File Form 720?

A business is required to file Form 720 if it meets either of the following conditions:

The business was liable for excise taxes listed in Parts I or II of the form during a previous quarter and has not yet filed a final return.
The business is liable for excise taxes imposed in the current quarter and is responsible for collecting or paying those taxes.

Quarterly Filing Requirements

Form 720 must be filed quarterly throughout the calendar year. The due date for filing is the last day of the month following the end of the quarter. If the due date falls on a Saturday, Sunday, or legal holiday, the taxpayer may file on the next business day.

Filing on time is essential to avoid penalties and additional costs. Form 720 ensures that taxes imposed on specific goods and services are correctly reported. By filing the excise tax return each quarter, businesses remain compliant with IRS requirements and accurately reflect their net tax liability.

Key Changes for Tax Year 2011

The IRS introduced several significant modifications for the 2011 tax year that substantially impacted how businesses filed their excise tax returns. These changes focused on electronic payment methods and compliance procedures.

Major Updates

The IRS mandated that all federal tax deposits, including excise tax deposits, must be made electronically starting January 1, 2011. This meant that businesses could no longer rely on paper deposit coupons such as Forms 8109 and 8109-B.
The Electronic Federal Tax Payment System (EFTPS) became the standard method for submitting payments. EFTPS provided a secure platform that allowed taxpayers to schedule payments, receive confirmation, and maintain a record of all transactions.
Businesses were given the option to have third parties, such as tax professionals, payroll service providers, or financial institutions, make deposits through EFTPS on their behalf. Although convenient, these services often came with additional costs.

These modifications reflected the government’s move toward secure electronic systems. Businesses that failed to adapt to EFTPS could face delays in processing and the possibility of penalties.

Step-by-Step Filing Instructions

Businesses preparing to file Form 720 must follow a structured process to ensure compliance and accuracy.

Pre-Filing Checklist

Businesses should gather all sales records, invoices, and documentation supporting taxable activities before beginning.
The Employer Identification Number (EIN) must be verified since it is required for every excise tax return.
Taxpayers need to determine which excise taxes apply to their operations by reviewing the taxes listed in Parts I and II of the form.
Each business must calculate its liability for the applicable taxes, using the correct percentage or rate for each category.
Basic information such as business name, address, and account details should be confirmed to ensure accuracy when filing.

Completing the Form

Header information should include the legal name of the business, complete address, EIN, and the calendar quarter being reported.
Part I: Environmental and transportation taxes require taxpayers to report excise taxes on motor fuel, air transportation services, communications services, and ozone-depleting chemicals.
Part II: Other excise taxes covers industries such as sport fishing equipment, tobacco products, alcohol, tires, tanning services, and coal.
Part III: Calculations and payments brings together the total net tax liability, applies credits or refunds, and determines the final balance due or any overpayment.

Example Calculations

A fuel distributor selling 10,000 gallons of diesel fuel would multiply the gallons sold by the tax rate of $0.244 per gallon, resulting in a liability of $2,440.
A manufacturer producing fishing rods would calculate liability by applying the excise tax percentage imposed on each sale, capped at the maximum tax per item.
An airline passenger paying $265.40 for a ticket with a stopover would have liability divided between a percentage tax on the fare and a flat amount per segment.

By carefully following the instructions and examples, taxpayers can reduce the risk of errors and ensure that their excise tax return is completed correctly.

How to File Form 720?

Taxpayers may submit Form 720 either electronically or on paper, depending on their preference and the available filing method.

Electronic Filing (E-File)

The taxpayer must work with an authorized Electronic Return Originator (ERO) to file their tax return electronically.
All required documentation, including supporting schedules, should be submitted to the ERO for preparation and review.
The taxpayer must review the completed return to confirm accuracy before authorizing submission.
Once transmitted through the IRS e-file system, the taxpayer receives confirmation that the filing has been accepted.

Paper Filing

The taxpayer must complete Form 720 using the official 2011 instructions and include all required attachments.
The completed form should be mailed to the IRS processing center in Cincinnati, Ohio, by the due date.
If using an approved private delivery service such as FedEx or UPS, the taxpayer must ensure the package is addressed to the designated street address, since these carriers cannot deliver to P.O. boxes.

Whether filed electronically or on paper, Form 720 must be submitted on or before the required due date. Meeting deadlines ensures compliance and helps taxpayers avoid penalties for late filing.

Payment and Deposit Requirements

For the 2011 tax year, all excise tax deposits had to be made electronically using the Electronic Federal Tax Payment System (EFTPS). Understanding when and how to pay is critical for avoiding penalties and ensuring compliance.

EFTPS Enrollment Process

Taxpayers must begin enrollment by visiting the EFTPS website or calling the toll-free number provided by the IRS. This step ensures the account is registered correctly.
During enrollment, the business must provide its Employer Identification Number (EIN) and relevant banking information so payments can be processed.
Once enrolled, the IRS mails a personal identification number (PIN), which typically arrives within 7 to 10 business days and is required to activate the account.
After activation, taxpayers can schedule payments online, submit deposits electronically, and receive immediate confirmation for each transaction.

Deposit Thresholds

Businesses with quarterly excise tax liability of $2,500 or more are required to make semi-monthly deposits instead of paying the full balance with the return.
Businesses with liability of less than $2,500 for the quarter are permitted to pay the entire balance when filing the return, rather than making separate deposits.
Businesses with liability of $100,000 or more during any deposit period must make a payment by the next business day to remain compliant.

Semi-Monthly Deposit Schedule

When liability arises between the 1st and the 15th of a month, the deposit must be submitted to EFTPS by the 29th of the same month.
When liability arises between the 16th and the last day of the month, the deposit must be submitted by the 14th of the following month.
Taxpayers who make timely deposits equal to their net tax liability may qualify for the safe harbor rule, which protects them from penalties even if deposits are not exact.

Required Schedules and Attachments

Form 720 may require several additional schedules or attachments, depending on the type of excise taxes reported. These documents provide the IRS with detailed information, ensuring accurate reporting.

Schedule A: Excise Tax Liability

Schedule A is used to record the semi-monthly liability for excise taxes listed in Part I of Form 720. This helps confirm whether required deposits were made during each period.
Taxpayers must allocate liability between the regular method and the alternative method, and enter amounts for each semi-monthly period within the quarter.

Schedule C: Claims

Schedule C is required when taxpayers claim refunds or credits for excise taxes they previously paid but are no longer liable for.
Common examples include credits for nontaxable use of fuel, exported fuels, or renewable diesel mixture credits that offset excise tax liability.

Schedule T: Two-Party Exchange Information

Schedule T is completed when businesses exchange motor fuel, kerosene, or gasoline within a terminal between two registered parties.
The schedule requires detailed reporting of the type of fuel, the volume exchanged, and the identity of the other registered business involved in the transaction.

Form 6627: Environmental Taxes

Form 6627 is required when reporting environmental taxes, such as the oil spill liability tax or taxes on ozone-depleting chemicals.
The calculations performed on Form 6627 must then be transferred to the corresponding lines of Form 720 to ensure proper reporting.

Submitting the correct schedules and attachments prevents delays in processing and reduces the risk of the IRS returning the excise tax return as incomplete.

Common Mistakes to Avoid

When filing Form 720, even small mistakes can result in additional costs or penalties. Taxpayers should review their returns carefully to avoid these common problems.

Identification Errors

Some taxpayers mistakenly enter a Social Security Number instead of an Employer Identification Number (EIN), which results in processing issues.
Transposing digits in the EIN or continuing to use an outdated number after a business change often leads to IRS notices and delays.

Calculation and Reporting Errors

Errors frequently occur when taxpayers apply the wrong tax rate for items such as motor fuel, communications services, or other goods.
Misclassifying transactions as taxable when they are not, or excluding taxable sales, leads to incorrect liability reporting.
Mistakes in adding totals, dividing liabilities between periods, or carrying amounts onto other schedules can cause mismatched figures.

Filing and Timing Mistakes

Many taxpayers fail to file by the quarterly due date, which triggers an automatic late-filing penalty.
Deposits that fall on weekends or legal holidays are sometimes submitted late because taxpayers forget that payments must be made on the next business day.
Some filers neglect to include schedules such as Schedule A or Form 6627, which makes the return incomplete and can cause delays in processing.

By double-checking information, confirming calculations, and submitting all required schedules, taxpayers can avoid the most common filing mistakes and ensure their excise tax return is accurate and complete.

Zero Liability and Final Return Guidance

Even when a business has no tax liability, Form 720 may still need to be filed. The IRS requires continued filing until a final return is submitted.

Filing a Zero Return

Businesses must file a zero return if they were previously liable for excise taxes but have not yet filed a final return for those taxes.
A zero return is completed by filling in the header information, entering zero on all applicable tax lines, and writing “None” on Part III, line 3.
Filing by the expected quarterly due date is still required, even if no taxes are owed for that period.

Filing a Final Return

A final return should be filed if the business permanently ceases operations or will no longer be liable for excise taxes listed on Form 720.
Taxpayers must check the “Final return” box above Part I, complete all required sections, and make sure all deposits and payments are up to date.
Records relating to excise tax liability must be kept for at least four years after the final return is filed, in case of IRS review.

Following these steps ensures the business closes out its excise tax responsibilities properly and avoids future filing requirements.

Tips for First-Time Filers

Businesses filing Form 720 for the first time often face uncertainty about the process. Taking a few key steps can make the process smoother and reduce the risk of errors.

Applying for an EIN

A business that does not yet have an Employer Identification Number must obtain one before filing Form 720.
The EIN can be requested online, by phone, or by submitting Form SS-4 through mail or fax.

Identifying Applicable Taxes

First-time filers must carefully review the excise taxes imposed under Parts I and II of Form 720 to determine which apply to their business.
Common examples include motor fuel taxes for distributors, air transportation taxes for airlines, and taxes on sport fishing equipment for manufacturers.

Registration Requirements

Certain business activities require registration with the IRS before filing, such as biodiesel operations, fuel distribution, or chemical manufacturing.
Businesses must confirm whether their activities fall under registration rules to avoid compliance issues.

Recordkeeping Practices

Taxpayers should maintain detailed sales records, invoices, and deposit confirmations from EFTPS for a minimum of four years.
Supporting documents are crucial for verifying the amounts reported on the return and for responding to IRS audits, if necessary.

First-time filers who prepare carefully and maintain accurate records will find the filing process less burdensome and easier to manage.

Frequently Asked Questions

What do the instructions for Form 720 2011 cover?

The Form 720 2011 instructions explain how a taxpayer should complete the excise tax return for the calendar year. They outline which excise taxes imposed must be reported, including motor fuel, tobacco tax, alcohol, sport fishing equipment, and air transportation services. The instructions also detail how to calculate net tax liability, apply credits, claim refunds, and follow special rules related to due dates and extensions.

Who must file a federal excise tax return?

A business must file a federal excise tax return if it is liable for any excise taxes imposed under the Internal Revenue Code. This includes taxes on sales of motor fuel, diesel fuel, communications services, and other goods subject to excise tax. Even if liability for the quarter is low or zero, the IRS requires the taxpayer to file Form 720 to report amounts reflected in the account.

What happens if the due date falls on a legal holiday?

If the due date for Form 720 falls on a Saturday, Sunday, or a legal holiday, the taxpayer may file or pay on the next business day without incurring a penalty. This rule applies to every quarter, regardless of whether it is the first quarter, ending in March, or the last quarter of the year. The IRS includes this process in the instructions to ensure taxes imposed are reported accurately despite date modifications.

How are excise taxes on motor fuel and diesel fuel calculated?

Excise taxes imposed on motor fuel and diesel fuel are calculated by multiplying the number of gallons sold by the tax rate reflected in the law. For example, if a retailer sells 10,000 gallons of diesel fuel, the tax imposed is determined by applying the percentage rate per gallon. These amounts must be reported for the correct period and allocated to the corresponding section of the form.

When should a business file a final return?

A business must file a final return when it no longer has liability for excise taxes listed in Form 720. This occurs if operations have ceased or if sales of taxable goods and services are no longer conducted. The taxpayer must sign and submit the form, check the 'final return' box, and verify that all required deposits have been made. Records must be prepared and retained for a minimum of four years.

Can taxpayers claim credits or refunds on excise taxes imposed?

Yes, taxpayers can use Schedule C to claim refunds or credits for excise taxes imposed on fuel, tobacco, alcohol, or other goods when these amounts were collected in error or later determined to be nontaxable. For example, exported fuel or nontaxable sales of sport fishing equipment may qualify for this exemption. Each claim must be supported by documentation and reported in accordance with the instructions, ensuring the process complies with IRS requirements.

‍

Frequently Asked Questions

How to File IRS Form 720: 2011 Excise Tax Guide

Filing federal excise taxes is a responsibility many businesses face, but understanding the process can seem daunting without clear guidance. IRS Form 720, also known as the Quarterly Federal Excise Tax Return, is used to report and pay a variety of excise taxes imposed under the Internal Revenue Code. These taxes apply to specific goods and services, such as motor fuel, air transportation, sport fishing equipment, and tobacco. For the 2011 tax year, the Internal Revenue Service released detailed instructions for Form 720-2011 to help taxpayers remain compliant throughout the calendar year.

Businesses liable for excise tax must file this form each quarter, even if liability is minimal or zero. The due date typically falls at the end of the month following each quarter, with adjustments made if the last day is a Saturday, Sunday, or a legal holiday. Filing accurately and on time is crucial because errors, missed deadlines, or incorrect reporting can result in increased costs due to penalties or interest. The process requires careful attention to the taxes listed on the form and an understanding of how liability is determined.

This guide is designed for businesses that require practical assistance in filing their 2011 excise tax return. It explains filing requirements, provides examples to show how the tax imposed should be calculated, and clarifies what taxpayers must submit to the IRS. By following these instructions, businesses can better manage their obligations, avoid mistakes, and maintain compliance with federal requirements.

What Is IRS Form 720?

IRS Form 720, known as the Quarterly Federal Excise Tax Return, is the form used to report and pay federal excise taxes imposed on specific goods and services. Excise taxes are collected under the Internal Revenue Code and apply to industries such as fuel production, airline services, communications, and the sale of items like sporting goods and tobacco products.

Who Must File Form 720?

A business is required to file Form 720 if it meets either of the following conditions:

The business was liable for excise taxes listed in Parts I or II of the form during a previous quarter and has not yet filed a final return.
The business is liable for excise taxes imposed in the current quarter and is responsible for collecting or paying those taxes.

Quarterly Filing Requirements

Form 720 must be filed quarterly throughout the calendar year. The due date for filing is the last day of the month following the end of the quarter. If the due date falls on a Saturday, Sunday, or legal holiday, the taxpayer may file on the next business day.

Filing on time is essential to avoid penalties and additional costs. Form 720 ensures that taxes imposed on specific goods and services are correctly reported. By filing the excise tax return each quarter, businesses remain compliant with IRS requirements and accurately reflect their net tax liability.

Key Changes for Tax Year 2011

The IRS introduced several significant modifications for the 2011 tax year that substantially impacted how businesses filed their excise tax returns. These changes focused on electronic payment methods and compliance procedures.

Major Updates

The IRS mandated that all federal tax deposits, including excise tax deposits, must be made electronically starting January 1, 2011. This meant that businesses could no longer rely on paper deposit coupons such as Forms 8109 and 8109-B.
The Electronic Federal Tax Payment System (EFTPS) became the standard method for submitting payments. EFTPS provided a secure platform that allowed taxpayers to schedule payments, receive confirmation, and maintain a record of all transactions.
Businesses were given the option to have third parties, such as tax professionals, payroll service providers, or financial institutions, make deposits through EFTPS on their behalf. Although convenient, these services often came with additional costs.

These modifications reflected the government’s move toward secure electronic systems. Businesses that failed to adapt to EFTPS could face delays in processing and the possibility of penalties.

Step-by-Step Filing Instructions

Businesses preparing to file Form 720 must follow a structured process to ensure compliance and accuracy.

Pre-Filing Checklist

Businesses should gather all sales records, invoices, and documentation supporting taxable activities before beginning.
The Employer Identification Number (EIN) must be verified since it is required for every excise tax return.
Taxpayers need to determine which excise taxes apply to their operations by reviewing the taxes listed in Parts I and II of the form.
Each business must calculate its liability for the applicable taxes, using the correct percentage or rate for each category.
Basic information such as business name, address, and account details should be confirmed to ensure accuracy when filing.

Completing the Form

Header information should include the legal name of the business, complete address, EIN, and the calendar quarter being reported.
Part I: Environmental and transportation taxes require taxpayers to report excise taxes on motor fuel, air transportation services, communications services, and ozone-depleting chemicals.
Part II: Other excise taxes covers industries such as sport fishing equipment, tobacco products, alcohol, tires, tanning services, and coal.
Part III: Calculations and payments brings together the total net tax liability, applies credits or refunds, and determines the final balance due or any overpayment.

Example Calculations

A fuel distributor selling 10,000 gallons of diesel fuel would multiply the gallons sold by the tax rate of $0.244 per gallon, resulting in a liability of $2,440.
A manufacturer producing fishing rods would calculate liability by applying the excise tax percentage imposed on each sale, capped at the maximum tax per item.
An airline passenger paying $265.40 for a ticket with a stopover would have liability divided between a percentage tax on the fare and a flat amount per segment.

By carefully following the instructions and examples, taxpayers can reduce the risk of errors and ensure that their excise tax return is completed correctly.

How to File Form 720?

Taxpayers may submit Form 720 either electronically or on paper, depending on their preference and the available filing method.

Electronic Filing (E-File)

The taxpayer must work with an authorized Electronic Return Originator (ERO) to file their tax return electronically.
All required documentation, including supporting schedules, should be submitted to the ERO for preparation and review.
The taxpayer must review the completed return to confirm accuracy before authorizing submission.
Once transmitted through the IRS e-file system, the taxpayer receives confirmation that the filing has been accepted.

Paper Filing

The taxpayer must complete Form 720 using the official 2011 instructions and include all required attachments.
The completed form should be mailed to the IRS processing center in Cincinnati, Ohio, by the due date.
If using an approved private delivery service such as FedEx or UPS, the taxpayer must ensure the package is addressed to the designated street address, since these carriers cannot deliver to P.O. boxes.

Whether filed electronically or on paper, Form 720 must be submitted on or before the required due date. Meeting deadlines ensures compliance and helps taxpayers avoid penalties for late filing.

Payment and Deposit Requirements

For the 2011 tax year, all excise tax deposits had to be made electronically using the Electronic Federal Tax Payment System (EFTPS). Understanding when and how to pay is critical for avoiding penalties and ensuring compliance.

EFTPS Enrollment Process

Taxpayers must begin enrollment by visiting the EFTPS website or calling the toll-free number provided by the IRS. This step ensures the account is registered correctly.
During enrollment, the business must provide its Employer Identification Number (EIN) and relevant banking information so payments can be processed.
Once enrolled, the IRS mails a personal identification number (PIN), which typically arrives within 7 to 10 business days and is required to activate the account.
After activation, taxpayers can schedule payments online, submit deposits electronically, and receive immediate confirmation for each transaction.

Deposit Thresholds

Businesses with quarterly excise tax liability of $2,500 or more are required to make semi-monthly deposits instead of paying the full balance with the return.
Businesses with liability of less than $2,500 for the quarter are permitted to pay the entire balance when filing the return, rather than making separate deposits.
Businesses with liability of $100,000 or more during any deposit period must make a payment by the next business day to remain compliant.

Semi-Monthly Deposit Schedule

When liability arises between the 1st and the 15th of a month, the deposit must be submitted to EFTPS by the 29th of the same month.
When liability arises between the 16th and the last day of the month, the deposit must be submitted by the 14th of the following month.
Taxpayers who make timely deposits equal to their net tax liability may qualify for the safe harbor rule, which protects them from penalties even if deposits are not exact.

Required Schedules and Attachments

Form 720 may require several additional schedules or attachments, depending on the type of excise taxes reported. These documents provide the IRS with detailed information, ensuring accurate reporting.

Schedule A: Excise Tax Liability

Schedule A is used to record the semi-monthly liability for excise taxes listed in Part I of Form 720. This helps confirm whether required deposits were made during each period.
Taxpayers must allocate liability between the regular method and the alternative method, and enter amounts for each semi-monthly period within the quarter.

Schedule C: Claims

Schedule C is required when taxpayers claim refunds or credits for excise taxes they previously paid but are no longer liable for.
Common examples include credits for nontaxable use of fuel, exported fuels, or renewable diesel mixture credits that offset excise tax liability.

Schedule T: Two-Party Exchange Information

Schedule T is completed when businesses exchange motor fuel, kerosene, or gasoline within a terminal between two registered parties.
The schedule requires detailed reporting of the type of fuel, the volume exchanged, and the identity of the other registered business involved in the transaction.

Form 6627: Environmental Taxes

Form 6627 is required when reporting environmental taxes, such as the oil spill liability tax or taxes on ozone-depleting chemicals.
The calculations performed on Form 6627 must then be transferred to the corresponding lines of Form 720 to ensure proper reporting.

Submitting the correct schedules and attachments prevents delays in processing and reduces the risk of the IRS returning the excise tax return as incomplete.

Common Mistakes to Avoid

When filing Form 720, even small mistakes can result in additional costs or penalties. Taxpayers should review their returns carefully to avoid these common problems.

Identification Errors

Some taxpayers mistakenly enter a Social Security Number instead of an Employer Identification Number (EIN), which results in processing issues.
Transposing digits in the EIN or continuing to use an outdated number after a business change often leads to IRS notices and delays.

Calculation and Reporting Errors

Errors frequently occur when taxpayers apply the wrong tax rate for items such as motor fuel, communications services, or other goods.
Misclassifying transactions as taxable when they are not, or excluding taxable sales, leads to incorrect liability reporting.
Mistakes in adding totals, dividing liabilities between periods, or carrying amounts onto other schedules can cause mismatched figures.

Filing and Timing Mistakes

Many taxpayers fail to file by the quarterly due date, which triggers an automatic late-filing penalty.
Deposits that fall on weekends or legal holidays are sometimes submitted late because taxpayers forget that payments must be made on the next business day.
Some filers neglect to include schedules such as Schedule A or Form 6627, which makes the return incomplete and can cause delays in processing.

By double-checking information, confirming calculations, and submitting all required schedules, taxpayers can avoid the most common filing mistakes and ensure their excise tax return is accurate and complete.

Zero Liability and Final Return Guidance

Even when a business has no tax liability, Form 720 may still need to be filed. The IRS requires continued filing until a final return is submitted.

Filing a Zero Return

Businesses must file a zero return if they were previously liable for excise taxes but have not yet filed a final return for those taxes.
A zero return is completed by filling in the header information, entering zero on all applicable tax lines, and writing “None” on Part III, line 3.
Filing by the expected quarterly due date is still required, even if no taxes are owed for that period.

Filing a Final Return

A final return should be filed if the business permanently ceases operations or will no longer be liable for excise taxes listed on Form 720.
Taxpayers must check the “Final return” box above Part I, complete all required sections, and make sure all deposits and payments are up to date.
Records relating to excise tax liability must be kept for at least four years after the final return is filed, in case of IRS review.

Following these steps ensures the business closes out its excise tax responsibilities properly and avoids future filing requirements.

Tips for First-Time Filers

Businesses filing Form 720 for the first time often face uncertainty about the process. Taking a few key steps can make the process smoother and reduce the risk of errors.

Applying for an EIN

A business that does not yet have an Employer Identification Number must obtain one before filing Form 720.
The EIN can be requested online, by phone, or by submitting Form SS-4 through mail or fax.

Identifying Applicable Taxes

First-time filers must carefully review the excise taxes imposed under Parts I and II of Form 720 to determine which apply to their business.
Common examples include motor fuel taxes for distributors, air transportation taxes for airlines, and taxes on sport fishing equipment for manufacturers.

Registration Requirements

Certain business activities require registration with the IRS before filing, such as biodiesel operations, fuel distribution, or chemical manufacturing.
Businesses must confirm whether their activities fall under registration rules to avoid compliance issues.

Recordkeeping Practices

Taxpayers should maintain detailed sales records, invoices, and deposit confirmations from EFTPS for a minimum of four years.
Supporting documents are crucial for verifying the amounts reported on the return and for responding to IRS audits, if necessary.

First-time filers who prepare carefully and maintain accurate records will find the filing process less burdensome and easier to manage.

Frequently Asked Questions

What do the instructions for Form 720 2011 cover?

The Form 720 2011 instructions explain how a taxpayer should complete the excise tax return for the calendar year. They outline which excise taxes imposed must be reported, including motor fuel, tobacco tax, alcohol, sport fishing equipment, and air transportation services. The instructions also detail how to calculate net tax liability, apply credits, claim refunds, and follow special rules related to due dates and extensions.

Who must file a federal excise tax return?

A business must file a federal excise tax return if it is liable for any excise taxes imposed under the Internal Revenue Code. This includes taxes on sales of motor fuel, diesel fuel, communications services, and other goods subject to excise tax. Even if liability for the quarter is low or zero, the IRS requires the taxpayer to file Form 720 to report amounts reflected in the account.

What happens if the due date falls on a legal holiday?

If the due date for Form 720 falls on a Saturday, Sunday, or a legal holiday, the taxpayer may file or pay on the next business day without incurring a penalty. This rule applies to every quarter, regardless of whether it is the first quarter, ending in March, or the last quarter of the year. The IRS includes this process in the instructions to ensure taxes imposed are reported accurately despite date modifications.

How are excise taxes on motor fuel and diesel fuel calculated?

Excise taxes imposed on motor fuel and diesel fuel are calculated by multiplying the number of gallons sold by the tax rate reflected in the law. For example, if a retailer sells 10,000 gallons of diesel fuel, the tax imposed is determined by applying the percentage rate per gallon. These amounts must be reported for the correct period and allocated to the corresponding section of the form.

When should a business file a final return?

A business must file a final return when it no longer has liability for excise taxes listed in Form 720. This occurs if operations have ceased or if sales of taxable goods and services are no longer conducted. The taxpayer must sign and submit the form, check the 'final return' box, and verify that all required deposits have been made. Records must be prepared and retained for a minimum of four years.

Can taxpayers claim credits or refunds on excise taxes imposed?

Yes, taxpayers can use Schedule C to claim refunds or credits for excise taxes imposed on fuel, tobacco, alcohol, or other goods when these amounts were collected in error or later determined to be nontaxable. For example, exported fuel or nontaxable sales of sport fishing equipment may qualify for this exemption. Each claim must be supported by documentation and reported in accordance with the instructions, ensuring the process complies with IRS requirements.

‍

Frequently Asked Questions

How to File IRS Form 720: 2011 Excise Tax Guide

Filing federal excise taxes is a responsibility many businesses face, but understanding the process can seem daunting without clear guidance. IRS Form 720, also known as the Quarterly Federal Excise Tax Return, is used to report and pay a variety of excise taxes imposed under the Internal Revenue Code. These taxes apply to specific goods and services, such as motor fuel, air transportation, sport fishing equipment, and tobacco. For the 2011 tax year, the Internal Revenue Service released detailed instructions for Form 720-2011 to help taxpayers remain compliant throughout the calendar year.

Businesses liable for excise tax must file this form each quarter, even if liability is minimal or zero. The due date typically falls at the end of the month following each quarter, with adjustments made if the last day is a Saturday, Sunday, or a legal holiday. Filing accurately and on time is crucial because errors, missed deadlines, or incorrect reporting can result in increased costs due to penalties or interest. The process requires careful attention to the taxes listed on the form and an understanding of how liability is determined.

This guide is designed for businesses that require practical assistance in filing their 2011 excise tax return. It explains filing requirements, provides examples to show how the tax imposed should be calculated, and clarifies what taxpayers must submit to the IRS. By following these instructions, businesses can better manage their obligations, avoid mistakes, and maintain compliance with federal requirements.

What Is IRS Form 720?

IRS Form 720, known as the Quarterly Federal Excise Tax Return, is the form used to report and pay federal excise taxes imposed on specific goods and services. Excise taxes are collected under the Internal Revenue Code and apply to industries such as fuel production, airline services, communications, and the sale of items like sporting goods and tobacco products.

Who Must File Form 720?

A business is required to file Form 720 if it meets either of the following conditions:

The business was liable for excise taxes listed in Parts I or II of the form during a previous quarter and has not yet filed a final return.
The business is liable for excise taxes imposed in the current quarter and is responsible for collecting or paying those taxes.

Quarterly Filing Requirements

Form 720 must be filed quarterly throughout the calendar year. The due date for filing is the last day of the month following the end of the quarter. If the due date falls on a Saturday, Sunday, or legal holiday, the taxpayer may file on the next business day.

Filing on time is essential to avoid penalties and additional costs. Form 720 ensures that taxes imposed on specific goods and services are correctly reported. By filing the excise tax return each quarter, businesses remain compliant with IRS requirements and accurately reflect their net tax liability.

Key Changes for Tax Year 2011

The IRS introduced several significant modifications for the 2011 tax year that substantially impacted how businesses filed their excise tax returns. These changes focused on electronic payment methods and compliance procedures.

Major Updates

The IRS mandated that all federal tax deposits, including excise tax deposits, must be made electronically starting January 1, 2011. This meant that businesses could no longer rely on paper deposit coupons such as Forms 8109 and 8109-B.
The Electronic Federal Tax Payment System (EFTPS) became the standard method for submitting payments. EFTPS provided a secure platform that allowed taxpayers to schedule payments, receive confirmation, and maintain a record of all transactions.
Businesses were given the option to have third parties, such as tax professionals, payroll service providers, or financial institutions, make deposits through EFTPS on their behalf. Although convenient, these services often came with additional costs.

These modifications reflected the government’s move toward secure electronic systems. Businesses that failed to adapt to EFTPS could face delays in processing and the possibility of penalties.

Step-by-Step Filing Instructions

Businesses preparing to file Form 720 must follow a structured process to ensure compliance and accuracy.

Pre-Filing Checklist

Businesses should gather all sales records, invoices, and documentation supporting taxable activities before beginning.
The Employer Identification Number (EIN) must be verified since it is required for every excise tax return.
Taxpayers need to determine which excise taxes apply to their operations by reviewing the taxes listed in Parts I and II of the form.
Each business must calculate its liability for the applicable taxes, using the correct percentage or rate for each category.
Basic information such as business name, address, and account details should be confirmed to ensure accuracy when filing.

Completing the Form

Header information should include the legal name of the business, complete address, EIN, and the calendar quarter being reported.
Part I: Environmental and transportation taxes require taxpayers to report excise taxes on motor fuel, air transportation services, communications services, and ozone-depleting chemicals.
Part II: Other excise taxes covers industries such as sport fishing equipment, tobacco products, alcohol, tires, tanning services, and coal.
Part III: Calculations and payments brings together the total net tax liability, applies credits or refunds, and determines the final balance due or any overpayment.

Example Calculations

A fuel distributor selling 10,000 gallons of diesel fuel would multiply the gallons sold by the tax rate of $0.244 per gallon, resulting in a liability of $2,440.
A manufacturer producing fishing rods would calculate liability by applying the excise tax percentage imposed on each sale, capped at the maximum tax per item.
An airline passenger paying $265.40 for a ticket with a stopover would have liability divided between a percentage tax on the fare and a flat amount per segment.

By carefully following the instructions and examples, taxpayers can reduce the risk of errors and ensure that their excise tax return is completed correctly.

How to File Form 720?

Taxpayers may submit Form 720 either electronically or on paper, depending on their preference and the available filing method.

Electronic Filing (E-File)

The taxpayer must work with an authorized Electronic Return Originator (ERO) to file their tax return electronically.
All required documentation, including supporting schedules, should be submitted to the ERO for preparation and review.
The taxpayer must review the completed return to confirm accuracy before authorizing submission.
Once transmitted through the IRS e-file system, the taxpayer receives confirmation that the filing has been accepted.

Paper Filing

The taxpayer must complete Form 720 using the official 2011 instructions and include all required attachments.
The completed form should be mailed to the IRS processing center in Cincinnati, Ohio, by the due date.
If using an approved private delivery service such as FedEx or UPS, the taxpayer must ensure the package is addressed to the designated street address, since these carriers cannot deliver to P.O. boxes.

Whether filed electronically or on paper, Form 720 must be submitted on or before the required due date. Meeting deadlines ensures compliance and helps taxpayers avoid penalties for late filing.

Payment and Deposit Requirements

For the 2011 tax year, all excise tax deposits had to be made electronically using the Electronic Federal Tax Payment System (EFTPS). Understanding when and how to pay is critical for avoiding penalties and ensuring compliance.

EFTPS Enrollment Process

Taxpayers must begin enrollment by visiting the EFTPS website or calling the toll-free number provided by the IRS. This step ensures the account is registered correctly.
During enrollment, the business must provide its Employer Identification Number (EIN) and relevant banking information so payments can be processed.
Once enrolled, the IRS mails a personal identification number (PIN), which typically arrives within 7 to 10 business days and is required to activate the account.
After activation, taxpayers can schedule payments online, submit deposits electronically, and receive immediate confirmation for each transaction.

Deposit Thresholds

Businesses with quarterly excise tax liability of $2,500 or more are required to make semi-monthly deposits instead of paying the full balance with the return.
Businesses with liability of less than $2,500 for the quarter are permitted to pay the entire balance when filing the return, rather than making separate deposits.
Businesses with liability of $100,000 or more during any deposit period must make a payment by the next business day to remain compliant.

Semi-Monthly Deposit Schedule

When liability arises between the 1st and the 15th of a month, the deposit must be submitted to EFTPS by the 29th of the same month.
When liability arises between the 16th and the last day of the month, the deposit must be submitted by the 14th of the following month.
Taxpayers who make timely deposits equal to their net tax liability may qualify for the safe harbor rule, which protects them from penalties even if deposits are not exact.

Required Schedules and Attachments

Form 720 may require several additional schedules or attachments, depending on the type of excise taxes reported. These documents provide the IRS with detailed information, ensuring accurate reporting.

Schedule A: Excise Tax Liability

Schedule A is used to record the semi-monthly liability for excise taxes listed in Part I of Form 720. This helps confirm whether required deposits were made during each period.
Taxpayers must allocate liability between the regular method and the alternative method, and enter amounts for each semi-monthly period within the quarter.

Schedule C: Claims

Schedule C is required when taxpayers claim refunds or credits for excise taxes they previously paid but are no longer liable for.
Common examples include credits for nontaxable use of fuel, exported fuels, or renewable diesel mixture credits that offset excise tax liability.

Schedule T: Two-Party Exchange Information

Schedule T is completed when businesses exchange motor fuel, kerosene, or gasoline within a terminal between two registered parties.
The schedule requires detailed reporting of the type of fuel, the volume exchanged, and the identity of the other registered business involved in the transaction.

Form 6627: Environmental Taxes

Form 6627 is required when reporting environmental taxes, such as the oil spill liability tax or taxes on ozone-depleting chemicals.
The calculations performed on Form 6627 must then be transferred to the corresponding lines of Form 720 to ensure proper reporting.

Submitting the correct schedules and attachments prevents delays in processing and reduces the risk of the IRS returning the excise tax return as incomplete.

Common Mistakes to Avoid

When filing Form 720, even small mistakes can result in additional costs or penalties. Taxpayers should review their returns carefully to avoid these common problems.

Identification Errors

Some taxpayers mistakenly enter a Social Security Number instead of an Employer Identification Number (EIN), which results in processing issues.
Transposing digits in the EIN or continuing to use an outdated number after a business change often leads to IRS notices and delays.

Calculation and Reporting Errors

Errors frequently occur when taxpayers apply the wrong tax rate for items such as motor fuel, communications services, or other goods.
Misclassifying transactions as taxable when they are not, or excluding taxable sales, leads to incorrect liability reporting.
Mistakes in adding totals, dividing liabilities between periods, or carrying amounts onto other schedules can cause mismatched figures.

Filing and Timing Mistakes

Many taxpayers fail to file by the quarterly due date, which triggers an automatic late-filing penalty.
Deposits that fall on weekends or legal holidays are sometimes submitted late because taxpayers forget that payments must be made on the next business day.
Some filers neglect to include schedules such as Schedule A or Form 6627, which makes the return incomplete and can cause delays in processing.

By double-checking information, confirming calculations, and submitting all required schedules, taxpayers can avoid the most common filing mistakes and ensure their excise tax return is accurate and complete.

Zero Liability and Final Return Guidance

Even when a business has no tax liability, Form 720 may still need to be filed. The IRS requires continued filing until a final return is submitted.

Filing a Zero Return

Businesses must file a zero return if they were previously liable for excise taxes but have not yet filed a final return for those taxes.
A zero return is completed by filling in the header information, entering zero on all applicable tax lines, and writing “None” on Part III, line 3.
Filing by the expected quarterly due date is still required, even if no taxes are owed for that period.

Filing a Final Return

A final return should be filed if the business permanently ceases operations or will no longer be liable for excise taxes listed on Form 720.
Taxpayers must check the “Final return” box above Part I, complete all required sections, and make sure all deposits and payments are up to date.
Records relating to excise tax liability must be kept for at least four years after the final return is filed, in case of IRS review.

Following these steps ensures the business closes out its excise tax responsibilities properly and avoids future filing requirements.

Tips for First-Time Filers

Businesses filing Form 720 for the first time often face uncertainty about the process. Taking a few key steps can make the process smoother and reduce the risk of errors.

Applying for an EIN

A business that does not yet have an Employer Identification Number must obtain one before filing Form 720.
The EIN can be requested online, by phone, or by submitting Form SS-4 through mail or fax.

Identifying Applicable Taxes

First-time filers must carefully review the excise taxes imposed under Parts I and II of Form 720 to determine which apply to their business.
Common examples include motor fuel taxes for distributors, air transportation taxes for airlines, and taxes on sport fishing equipment for manufacturers.

Registration Requirements

Certain business activities require registration with the IRS before filing, such as biodiesel operations, fuel distribution, or chemical manufacturing.
Businesses must confirm whether their activities fall under registration rules to avoid compliance issues.

Recordkeeping Practices

Taxpayers should maintain detailed sales records, invoices, and deposit confirmations from EFTPS for a minimum of four years.
Supporting documents are crucial for verifying the amounts reported on the return and for responding to IRS audits, if necessary.

First-time filers who prepare carefully and maintain accurate records will find the filing process less burdensome and easier to manage.

Frequently Asked Questions

What do the instructions for Form 720 2011 cover?

The Form 720 2011 instructions explain how a taxpayer should complete the excise tax return for the calendar year. They outline which excise taxes imposed must be reported, including motor fuel, tobacco tax, alcohol, sport fishing equipment, and air transportation services. The instructions also detail how to calculate net tax liability, apply credits, claim refunds, and follow special rules related to due dates and extensions.

Who must file a federal excise tax return?

A business must file a federal excise tax return if it is liable for any excise taxes imposed under the Internal Revenue Code. This includes taxes on sales of motor fuel, diesel fuel, communications services, and other goods subject to excise tax. Even if liability for the quarter is low or zero, the IRS requires the taxpayer to file Form 720 to report amounts reflected in the account.

What happens if the due date falls on a legal holiday?

If the due date for Form 720 falls on a Saturday, Sunday, or a legal holiday, the taxpayer may file or pay on the next business day without incurring a penalty. This rule applies to every quarter, regardless of whether it is the first quarter, ending in March, or the last quarter of the year. The IRS includes this process in the instructions to ensure taxes imposed are reported accurately despite date modifications.

How are excise taxes on motor fuel and diesel fuel calculated?

Excise taxes imposed on motor fuel and diesel fuel are calculated by multiplying the number of gallons sold by the tax rate reflected in the law. For example, if a retailer sells 10,000 gallons of diesel fuel, the tax imposed is determined by applying the percentage rate per gallon. These amounts must be reported for the correct period and allocated to the corresponding section of the form.

When should a business file a final return?

A business must file a final return when it no longer has liability for excise taxes listed in Form 720. This occurs if operations have ceased or if sales of taxable goods and services are no longer conducted. The taxpayer must sign and submit the form, check the 'final return' box, and verify that all required deposits have been made. Records must be prepared and retained for a minimum of four years.

Can taxpayers claim credits or refunds on excise taxes imposed?

Yes, taxpayers can use Schedule C to claim refunds or credits for excise taxes imposed on fuel, tobacco, alcohol, or other goods when these amounts were collected in error or later determined to be nontaxable. For example, exported fuel or nontaxable sales of sport fishing equipment may qualify for this exemption. Each claim must be supported by documentation and reported in accordance with the instructions, ensuring the process complies with IRS requirements.

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Frequently Asked Questions

How to File IRS Form 720: 2011 Excise Tax Guide

Filing federal excise taxes is a responsibility many businesses face, but understanding the process can seem daunting without clear guidance. IRS Form 720, also known as the Quarterly Federal Excise Tax Return, is used to report and pay a variety of excise taxes imposed under the Internal Revenue Code. These taxes apply to specific goods and services, such as motor fuel, air transportation, sport fishing equipment, and tobacco. For the 2011 tax year, the Internal Revenue Service released detailed instructions for Form 720-2011 to help taxpayers remain compliant throughout the calendar year.

Businesses liable for excise tax must file this form each quarter, even if liability is minimal or zero. The due date typically falls at the end of the month following each quarter, with adjustments made if the last day is a Saturday, Sunday, or a legal holiday. Filing accurately and on time is crucial because errors, missed deadlines, or incorrect reporting can result in increased costs due to penalties or interest. The process requires careful attention to the taxes listed on the form and an understanding of how liability is determined.

This guide is designed for businesses that require practical assistance in filing their 2011 excise tax return. It explains filing requirements, provides examples to show how the tax imposed should be calculated, and clarifies what taxpayers must submit to the IRS. By following these instructions, businesses can better manage their obligations, avoid mistakes, and maintain compliance with federal requirements.

What Is IRS Form 720?

IRS Form 720, known as the Quarterly Federal Excise Tax Return, is the form used to report and pay federal excise taxes imposed on specific goods and services. Excise taxes are collected under the Internal Revenue Code and apply to industries such as fuel production, airline services, communications, and the sale of items like sporting goods and tobacco products.

Who Must File Form 720?

A business is required to file Form 720 if it meets either of the following conditions:

The business was liable for excise taxes listed in Parts I or II of the form during a previous quarter and has not yet filed a final return.
The business is liable for excise taxes imposed in the current quarter and is responsible for collecting or paying those taxes.

Quarterly Filing Requirements

Form 720 must be filed quarterly throughout the calendar year. The due date for filing is the last day of the month following the end of the quarter. If the due date falls on a Saturday, Sunday, or legal holiday, the taxpayer may file on the next business day.

Filing on time is essential to avoid penalties and additional costs. Form 720 ensures that taxes imposed on specific goods and services are correctly reported. By filing the excise tax return each quarter, businesses remain compliant with IRS requirements and accurately reflect their net tax liability.

Key Changes for Tax Year 2011

The IRS introduced several significant modifications for the 2011 tax year that substantially impacted how businesses filed their excise tax returns. These changes focused on electronic payment methods and compliance procedures.

Major Updates

The IRS mandated that all federal tax deposits, including excise tax deposits, must be made electronically starting January 1, 2011. This meant that businesses could no longer rely on paper deposit coupons such as Forms 8109 and 8109-B.
The Electronic Federal Tax Payment System (EFTPS) became the standard method for submitting payments. EFTPS provided a secure platform that allowed taxpayers to schedule payments, receive confirmation, and maintain a record of all transactions.
Businesses were given the option to have third parties, such as tax professionals, payroll service providers, or financial institutions, make deposits through EFTPS on their behalf. Although convenient, these services often came with additional costs.

These modifications reflected the government’s move toward secure electronic systems. Businesses that failed to adapt to EFTPS could face delays in processing and the possibility of penalties.

Step-by-Step Filing Instructions

Businesses preparing to file Form 720 must follow a structured process to ensure compliance and accuracy.

Pre-Filing Checklist

Businesses should gather all sales records, invoices, and documentation supporting taxable activities before beginning.
The Employer Identification Number (EIN) must be verified since it is required for every excise tax return.
Taxpayers need to determine which excise taxes apply to their operations by reviewing the taxes listed in Parts I and II of the form.
Each business must calculate its liability for the applicable taxes, using the correct percentage or rate for each category.
Basic information such as business name, address, and account details should be confirmed to ensure accuracy when filing.

Completing the Form

Header information should include the legal name of the business, complete address, EIN, and the calendar quarter being reported.
Part I: Environmental and transportation taxes require taxpayers to report excise taxes on motor fuel, air transportation services, communications services, and ozone-depleting chemicals.
Part II: Other excise taxes covers industries such as sport fishing equipment, tobacco products, alcohol, tires, tanning services, and coal.
Part III: Calculations and payments brings together the total net tax liability, applies credits or refunds, and determines the final balance due or any overpayment.

Example Calculations

A fuel distributor selling 10,000 gallons of diesel fuel would multiply the gallons sold by the tax rate of $0.244 per gallon, resulting in a liability of $2,440.
A manufacturer producing fishing rods would calculate liability by applying the excise tax percentage imposed on each sale, capped at the maximum tax per item.
An airline passenger paying $265.40 for a ticket with a stopover would have liability divided between a percentage tax on the fare and a flat amount per segment.

By carefully following the instructions and examples, taxpayers can reduce the risk of errors and ensure that their excise tax return is completed correctly.

How to File Form 720?

Taxpayers may submit Form 720 either electronically or on paper, depending on their preference and the available filing method.

Electronic Filing (E-File)

The taxpayer must work with an authorized Electronic Return Originator (ERO) to file their tax return electronically.
All required documentation, including supporting schedules, should be submitted to the ERO for preparation and review.
The taxpayer must review the completed return to confirm accuracy before authorizing submission.
Once transmitted through the IRS e-file system, the taxpayer receives confirmation that the filing has been accepted.

Paper Filing

The taxpayer must complete Form 720 using the official 2011 instructions and include all required attachments.
The completed form should be mailed to the IRS processing center in Cincinnati, Ohio, by the due date.
If using an approved private delivery service such as FedEx or UPS, the taxpayer must ensure the package is addressed to the designated street address, since these carriers cannot deliver to P.O. boxes.

Whether filed electronically or on paper, Form 720 must be submitted on or before the required due date. Meeting deadlines ensures compliance and helps taxpayers avoid penalties for late filing.

Payment and Deposit Requirements

For the 2011 tax year, all excise tax deposits had to be made electronically using the Electronic Federal Tax Payment System (EFTPS). Understanding when and how to pay is critical for avoiding penalties and ensuring compliance.

EFTPS Enrollment Process

Taxpayers must begin enrollment by visiting the EFTPS website or calling the toll-free number provided by the IRS. This step ensures the account is registered correctly.
During enrollment, the business must provide its Employer Identification Number (EIN) and relevant banking information so payments can be processed.
Once enrolled, the IRS mails a personal identification number (PIN), which typically arrives within 7 to 10 business days and is required to activate the account.
After activation, taxpayers can schedule payments online, submit deposits electronically, and receive immediate confirmation for each transaction.

Deposit Thresholds

Businesses with quarterly excise tax liability of $2,500 or more are required to make semi-monthly deposits instead of paying the full balance with the return.
Businesses with liability of less than $2,500 for the quarter are permitted to pay the entire balance when filing the return, rather than making separate deposits.
Businesses with liability of $100,000 or more during any deposit period must make a payment by the next business day to remain compliant.

Semi-Monthly Deposit Schedule

When liability arises between the 1st and the 15th of a month, the deposit must be submitted to EFTPS by the 29th of the same month.
When liability arises between the 16th and the last day of the month, the deposit must be submitted by the 14th of the following month.
Taxpayers who make timely deposits equal to their net tax liability may qualify for the safe harbor rule, which protects them from penalties even if deposits are not exact.

Required Schedules and Attachments

Form 720 may require several additional schedules or attachments, depending on the type of excise taxes reported. These documents provide the IRS with detailed information, ensuring accurate reporting.

Schedule A: Excise Tax Liability

Schedule A is used to record the semi-monthly liability for excise taxes listed in Part I of Form 720. This helps confirm whether required deposits were made during each period.
Taxpayers must allocate liability between the regular method and the alternative method, and enter amounts for each semi-monthly period within the quarter.

Schedule C: Claims

Schedule C is required when taxpayers claim refunds or credits for excise taxes they previously paid but are no longer liable for.
Common examples include credits for nontaxable use of fuel, exported fuels, or renewable diesel mixture credits that offset excise tax liability.

Schedule T: Two-Party Exchange Information

Schedule T is completed when businesses exchange motor fuel, kerosene, or gasoline within a terminal between two registered parties.
The schedule requires detailed reporting of the type of fuel, the volume exchanged, and the identity of the other registered business involved in the transaction.

Form 6627: Environmental Taxes

Form 6627 is required when reporting environmental taxes, such as the oil spill liability tax or taxes on ozone-depleting chemicals.
The calculations performed on Form 6627 must then be transferred to the corresponding lines of Form 720 to ensure proper reporting.

Submitting the correct schedules and attachments prevents delays in processing and reduces the risk of the IRS returning the excise tax return as incomplete.

Common Mistakes to Avoid

When filing Form 720, even small mistakes can result in additional costs or penalties. Taxpayers should review their returns carefully to avoid these common problems.

Identification Errors

Some taxpayers mistakenly enter a Social Security Number instead of an Employer Identification Number (EIN), which results in processing issues.
Transposing digits in the EIN or continuing to use an outdated number after a business change often leads to IRS notices and delays.

Calculation and Reporting Errors

Errors frequently occur when taxpayers apply the wrong tax rate for items such as motor fuel, communications services, or other goods.
Misclassifying transactions as taxable when they are not, or excluding taxable sales, leads to incorrect liability reporting.
Mistakes in adding totals, dividing liabilities between periods, or carrying amounts onto other schedules can cause mismatched figures.

Filing and Timing Mistakes

Many taxpayers fail to file by the quarterly due date, which triggers an automatic late-filing penalty.
Deposits that fall on weekends or legal holidays are sometimes submitted late because taxpayers forget that payments must be made on the next business day.
Some filers neglect to include schedules such as Schedule A or Form 6627, which makes the return incomplete and can cause delays in processing.

By double-checking information, confirming calculations, and submitting all required schedules, taxpayers can avoid the most common filing mistakes and ensure their excise tax return is accurate and complete.

Zero Liability and Final Return Guidance

Even when a business has no tax liability, Form 720 may still need to be filed. The IRS requires continued filing until a final return is submitted.

Filing a Zero Return

Businesses must file a zero return if they were previously liable for excise taxes but have not yet filed a final return for those taxes.
A zero return is completed by filling in the header information, entering zero on all applicable tax lines, and writing “None” on Part III, line 3.
Filing by the expected quarterly due date is still required, even if no taxes are owed for that period.

Filing a Final Return

A final return should be filed if the business permanently ceases operations or will no longer be liable for excise taxes listed on Form 720.
Taxpayers must check the “Final return” box above Part I, complete all required sections, and make sure all deposits and payments are up to date.
Records relating to excise tax liability must be kept for at least four years after the final return is filed, in case of IRS review.

Following these steps ensures the business closes out its excise tax responsibilities properly and avoids future filing requirements.

Tips for First-Time Filers

Businesses filing Form 720 for the first time often face uncertainty about the process. Taking a few key steps can make the process smoother and reduce the risk of errors.

Applying for an EIN

A business that does not yet have an Employer Identification Number must obtain one before filing Form 720.
The EIN can be requested online, by phone, or by submitting Form SS-4 through mail or fax.

Identifying Applicable Taxes

First-time filers must carefully review the excise taxes imposed under Parts I and II of Form 720 to determine which apply to their business.
Common examples include motor fuel taxes for distributors, air transportation taxes for airlines, and taxes on sport fishing equipment for manufacturers.

Registration Requirements

Certain business activities require registration with the IRS before filing, such as biodiesel operations, fuel distribution, or chemical manufacturing.
Businesses must confirm whether their activities fall under registration rules to avoid compliance issues.

Recordkeeping Practices

Taxpayers should maintain detailed sales records, invoices, and deposit confirmations from EFTPS for a minimum of four years.
Supporting documents are crucial for verifying the amounts reported on the return and for responding to IRS audits, if necessary.

First-time filers who prepare carefully and maintain accurate records will find the filing process less burdensome and easier to manage.

Frequently Asked Questions

What do the instructions for Form 720 2011 cover?

The Form 720 2011 instructions explain how a taxpayer should complete the excise tax return for the calendar year. They outline which excise taxes imposed must be reported, including motor fuel, tobacco tax, alcohol, sport fishing equipment, and air transportation services. The instructions also detail how to calculate net tax liability, apply credits, claim refunds, and follow special rules related to due dates and extensions.

Who must file a federal excise tax return?

A business must file a federal excise tax return if it is liable for any excise taxes imposed under the Internal Revenue Code. This includes taxes on sales of motor fuel, diesel fuel, communications services, and other goods subject to excise tax. Even if liability for the quarter is low or zero, the IRS requires the taxpayer to file Form 720 to report amounts reflected in the account.

What happens if the due date falls on a legal holiday?

If the due date for Form 720 falls on a Saturday, Sunday, or a legal holiday, the taxpayer may file or pay on the next business day without incurring a penalty. This rule applies to every quarter, regardless of whether it is the first quarter, ending in March, or the last quarter of the year. The IRS includes this process in the instructions to ensure taxes imposed are reported accurately despite date modifications.

How are excise taxes on motor fuel and diesel fuel calculated?

Excise taxes imposed on motor fuel and diesel fuel are calculated by multiplying the number of gallons sold by the tax rate reflected in the law. For example, if a retailer sells 10,000 gallons of diesel fuel, the tax imposed is determined by applying the percentage rate per gallon. These amounts must be reported for the correct period and allocated to the corresponding section of the form.

When should a business file a final return?

A business must file a final return when it no longer has liability for excise taxes listed in Form 720. This occurs if operations have ceased or if sales of taxable goods and services are no longer conducted. The taxpayer must sign and submit the form, check the 'final return' box, and verify that all required deposits have been made. Records must be prepared and retained for a minimum of four years.

Can taxpayers claim credits or refunds on excise taxes imposed?

Yes, taxpayers can use Schedule C to claim refunds or credits for excise taxes imposed on fuel, tobacco, alcohol, or other goods when these amounts were collected in error or later determined to be nontaxable. For example, exported fuel or nontaxable sales of sport fishing equipment may qualify for this exemption. Each claim must be supported by documentation and reported in accordance with the instructions, ensuring the process complies with IRS requirements.

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How to File IRS Form 720: 2011 Excise Tax Guide

What Is IRS Form 720?

Who Must File Form 720?

Quarterly Filing Requirements

Key Changes for Tax Year 2011

Major Updates

Pre-Filing Checklist

Completing the Form

Example Calculations

How to File Form 720?

Electronic Filing (E-File)

Paper Filing

Payment and Deposit Requirements

EFTPS Enrollment Process

Deposit Thresholds

Semi-Monthly Deposit Schedule

Required Schedules and Attachments

Schedule A: Excise Tax Liability

Schedule C: Claims

Schedule T: Two-Party Exchange Information

Form 6627: Environmental Taxes

Common Mistakes to Avoid

Identification Errors

Calculation and Reporting Errors

Filing and Timing Mistakes

Zero Liability and Final Return Guidance

Filing a Zero Return

Filing a Final Return

Tips for First-Time Filers

Applying for an EIN

Identifying Applicable Taxes

Registration Requirements

Recordkeeping Practices

Frequently Asked Questions

What do the instructions for Form 720 2011 cover?

Who must file a federal excise tax return?

What happens if the due date falls on a legal holiday?

How are excise taxes on motor fuel and diesel fuel calculated?

When should a business file a final return?

Can taxpayers claim credits or refunds on excise taxes imposed?

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Frequently Asked Questions

Related Articles

How to File IRS Form 720: 2011 Excise Tax Guide

What Is IRS Form 720?

Who Must File Form 720?

Quarterly Filing Requirements

Key Changes for Tax Year 2011

Major Updates

Pre-Filing Checklist

Completing the Form

Example Calculations

How to File Form 720?

Electronic Filing (E-File)

Paper Filing

Payment and Deposit Requirements

EFTPS Enrollment Process

Deposit Thresholds

Semi-Monthly Deposit Schedule

Required Schedules and Attachments

Schedule A: Excise Tax Liability

Schedule C: Claims

Schedule T: Two-Party Exchange Information

Form 6627: Environmental Taxes

Common Mistakes to Avoid

Identification Errors

Calculation and Reporting Errors

Filing and Timing Mistakes

Zero Liability and Final Return Guidance

Filing a Zero Return

Filing a Final Return

Tips for First-Time Filers

Applying for an EIN

Identifying Applicable Taxes

Registration Requirements

Recordkeeping Practices

Frequently Asked Questions

What do the instructions for Form 720 2011 cover?

Who must file a federal excise tax return?

What happens if the due date falls on a legal holiday?