Step-by-Step Form 720 2018 Instructions for Businesses

Form 720 is an important form that many businesses must file when they are responsible for paying or collecting certain federal excise taxes. Unlike income tax, which applies to general earnings, excise taxes apply to specific goods, services, and activities subject to special federal rules. This form helps the Internal Revenue Service (IRS) monitor compliance and collect the total amount owed from taxpayers each quarter.

Businesses nationwide use this quarterly federal excise tax return to report liabilities on activities subject to excise tax, such as fuel, environmental taxes, and communications services. Filing the correct IRS form ensures that companies remain compliant with federal law while avoiding costly penalties or interest charges. Every business liable for these taxes must pay close attention to the instructions in Form 720 for 2018 to ensure accuracy.

Understanding which services are subject to tax, how to calculate each liability, and where to report the correct data is crucial for compliance. The process may appear technical, but with proper guidance and accurate calculations, taxpayers can file confidently, meet every due date, and maintain a clean account with the IRS.

Overview of Federal Form 720

Form 720 is the official quarterly federal excise tax return used by businesses and taxpayers liable for various taxes imposed under federal law. It helps the IRS collect excise taxes levied on certain products and services, such as fuel, environmental substances, air transportation, and communications.

Who Must File Form 720

Liable businesses: Any business that produces, sells, or uses goods subject to federal excise tax must file this form each quarter.
Service providers: Companies offering transportation, communications, or environmental services subject to excise taxes must report and pay under applicable sections.
Importers and manufacturers: Businesses that import or manufacture certain products, such as gasoline, diesel, or coal, are responsible for filing because their activities are directly taxed.
Insurance and health service providers: Organizations collecting specific fees for insurance or medical services must include those liabilities in their quarterly filing.

Structure of the Form

Part I: Includes primary excise taxes such as fuel, environmental, air transportation, and communications taxes.
Part II: Covers additional categories like patient-centered outcomes research fees, indoor tanning services, and other special excise taxes.
Part III: Summarizes calculations, total amount due, credits, and overpayments, which help the IRS verify accuracy in liability and payment.

What’s New for 2018 in the Form 720 2018 Instructions

The IRS updated several components of the 2018 federal excise tax filing process. Understanding these changes ensures taxpayers and companies calculate correctly and remain compliant when they file and report quarterly federal excise tax obligations.

Electronic Funds Transfer Requirement

Mandatory payments: All federal excise tax deposits must be made through electronic funds transfer, mainly via the Electronic Federal Tax Payment System (EFTPS).
Process for taxpayers: Each taxpayer must enroll in EFTPS and complete registration before making timely deposits.
Key benefit: Electronic payments improve accuracy and provide immediate confirmation, helping businesses avoid penalties for late or incorrect submissions.
Reminder: Paper checks are no longer acceptable deposits under the new guidance for federal excise tax payments.

Updates to Environmental Taxes

Oil spill liability extension: The crude oil and petroleum products tax was extended beginning March 1, 2018.
Deposit rules: A temporary modified safe harbor for deposits applied during the third quarter to simplify compliance for taxpayers responsible for oil-related liabilities.
Purpose: These changes maintain support for national environmental cleanup and hazard mitigation projects.

Fee Changes for Research and Health Plans

Increased rate: The patient-centered outcomes research fee rose to $2.39 per covered life for plan years ending between October 2017 and October 2018.
Impact: This increase affects self-insured health plans and insurance companies that file excise taxes under Part II of the form.

Other Notable Changes

Medical device tax suspension: The tax on medical devices remained suspended through December 31, 2019, easing costs for manufacturers and producers.
Aircraft management services: Payments for certain private aircraft management services became exempt from air transportation excise taxes.

Step-by-Step Instructions for Filing Form 720 Quarterly Federal Excise Tax Return

Filing the quarterly federal excise tax return requires attention to detail. Each form section corresponds to a specific set of activities and tax categories. Following the correct order ensures accuracy and prevents delays or penalties from the IRS.

Step 1: Prepare Required Information

Gather all records related to activities subject to excise taxes, including sales receipts, quantities sold, and services provided. Ensure the Employer Identification Number and legal business name match IRS records. Preparation before filing ensures accurate calculations, prevents confusion during review, and supports clear reporting of each taxpayer’s liability for the correct quarter.

Step 2: Complete the Header Section

Enter the business name, address, EIN, and the quarter’s ending date as registered with the IRS. Indicate any changes by checking the correct box for address updates or final returns. For foreign addresses, spell out the country name completely. This section ensures the IRS identifies the taxpayer and accurately processes the quarterly federal excise tax return.

Step 3: Fill Out Part I – Primary Excise Taxes

Report all primary excise taxes imposed on businesses that manufacture, sell, or provide taxable products and services. Include liabilities from fuel, communications, air transportation, and environmental taxes. Businesses producing sport fishing equipment or heavy vehicles must also include the total amount calculated under applicable IRS numbers. Accuracy in this section ensures compliance with specific tax categories.

Step 4: Fill Out Part II – Additional Excise Taxes

Record all other excise taxes not included in Part I. Other taxes may include health-related fees, the indoor tanning tax, and fuel use for inland waterway transportation. Each entry must reflect liabilities for the correct period using the latest tax rates. Businesses must carefully review the IRS Form 720 2018 instructions to determine which sections apply before finalizing their entries.

Step 5: Complete Part III – Summary and Payment Information

Add all liabilities from Parts I and II to calculate the due amount. Apply credits or exemptions where allowed and include all deposits made during the quarter. This section determines whether additional payment is required or if an overpayment exists. Carefully review all calculations before filing to prevent delays or adjustments from the IRS during processing.

Step 6: Attach Required Schedules and Forms

Attach supporting schedules, such as Schedule A for liability reporting, Schedule C for credit claims, and Form 6627 for environmental tax calculations. Each attachment must provide complete supporting data for reported amounts. Failing to include these documents can cause processing delays or requests for clarification. Always verify that all schedules match entries on the main form before submission.

Filing and Submission Options for the Federal Excise Tax Return

Businesses filing Form 720 can choose between electronic submission and paper filing. The IRS encourages electronic filing for faster processing, immediate acknowledgment, and reduced chances of calculation or data entry errors.

Electronic Filing (Recommended)

Filing system: Businesses can file electronically through authorized transmitters or electronic return originators participating in the IRS e-file program for excise taxes.
Key advantages: Electronic filing provides faster processing, real-time confirmation, and secure delivery of sensitive financial information directly to the IRS.
Data accuracy: Built-in software validation reduces common filing mistakes and ensures that excise tax calculations meet official IRS requirements.
Processing speed: E-filed returns are typically processed within days, while mailed forms may take several weeks to update in the IRS system.

Paper Filing Instructions

Mailing address: Send the completed form to the Department of the Treasury, Internal Revenue Service, Cincinnati, OH 45999-0009.
Form version: Always use the current revision of the form, specifically the April 2018 version, to prevent rejection or delays.
Completeness check: Review all schedules and ensure signatures, dates, and total amounts are properly filled before mailing the return.
Postal timing: Allow timely mail delivery before the deadline to avoid late-filing penalties or missed quarter reports.

Filing Deadlines

Form 720 must be filed quarterly based on the ending month of each reporting period. Returns covering January through March are due April 30. Returns for April through June are due July 31. Returns for July through September are due October 31, and those covering October through December are due January 31 of the following year. Timely submission prevents penalties and maintains compliance.

Payment Procedures and Schedules

Federal excise taxes require timely payments made through the appropriate channels. The IRS mandates that most businesses use electronic funds transfer for all tax deposits related to excise liability.

Electronic Funds Transfer Requirement

Mandatory system: All deposits must be made through the Electronic Federal Tax Payment System (EFTPS), the official payment platform for federal business taxes.
Setup process: Businesses register online at the EFTPS website, provide account details, and receive a personal identification number for secure access.
Processing time: Enrollment generally takes 7–10 business days, so early registration ensures that the first scheduled payment occurs on time.
Benefits: EFTPS provides secure payment tracking, digital receipts, and flexibility to schedule deposits ahead of IRS deadlines.

Semimonthly Deposit Schedule

Deposit period one: Taxes accrued from the 1st through the 15th day of the month are due by the 29th of the same month.
Deposit period two: Taxes accrued from the 16th through the last day of the month are due by the 14th.
Timeliness requirement: Payments must post by the deadline, even if a weekend or federal holiday falls near the due date.
Recordkeeping: Always keep EFTPS receipts as proof of timely payment for audit or verification purposes.

Using Form 720-V Payment Voucher

Purpose: Use Form 720-V only when submitting a paper return accompanied by a check or money order for the tax payment.
Restrictions: Do not use the voucher for EFTPS, debit, or credit card payments, as those are electronic transactions.
Mailing inclusion: Always attach the payment voucher to the front of Form 720 to ensure proper routing at the IRS payment center.
Check details: Write the Employer Identification Number, the form number, and the applicable tax quarter.

Required Attachments and Supporting Forms

Businesses may need to attach additional schedules or forms to clarify calculations or request credit adjustments. Each supporting document serves a distinct purpose and helps verify accuracy in reported excise tax liabilities.

Schedule A – Excise Tax Liability: Schedule A reports liability amounts for Part I taxes and ensures deposits align with actual tax periods for each type of excise activity.
Schedule C – Claims: Schedule C allows businesses to claim credits or refunds for overpaid excise taxes, provided each claim includes supporting documentation describing the qualifying transaction.
Form 6627 – Environmental Taxes: Form 6627 must be attached when reporting liability for oil spill, ozone-depleting chemical, or imported product environmental taxes assessed under federal law.

Common Errors and How to Avoid Them

Completing Form 720 is crucial to prevent IRS penalties and correction notices. Many businesses face avoidable issues due to incorrect calculations, outdated forms, or missing schedules.

Filing Mistakes

Outdated versions: Using an older version of Form 720 may result in rejection; always use the 2018 revision for this tax year.
Missing signatures: Unsigned forms delay processing and may trigger follow-up requests from the IRS.
Omitted schedules: Failing to include required schedules or attachments prevents a complete review and may cause compliance alerts.
Incorrect identification: An invalid Employer Identification Number can cause processing errors and delay posting of the tax payment.

Calculation Errors

Wrong fuel rates: Applying incorrect rates for gasoline or diesel can misstate total liability, especially when new tax rates apply.
Mathematical issues: Simple addition or rounding errors can distort total amounts reported, leading to penalty assessments.
Unapplied credits: Omitting eligible exemptions or refunds may result in overpayment that remains unclaimed.
Unverified transfers: Errors often occur when total deposits recorded do not match the calculated liability from Parts I and II.

Payment and Deposit Issues

Late payments: Submitting deposits after the due date results in penalties ranging from two to fifteen percent of the amount owed.
Non-EFTPS deposits: Paper payments for mandatory electronic depositors violate IRS rules and trigger a ten percent penalty.
Unrecorded transactions: Failure to verify EFTPS posting confirmation may lead to payment disputes with the IRS.
Misapplied deposits: Entering incorrect tax period dates may cause payments to apply to the wrong quarter or liability.

Zero Activity and Final Return Guidance

Businesses must continue filing even when they have no activity for a quarter unless they submit a final return to close their filing requirement. Maintaining compliance during inactive periods prevents unnecessary notices from the IRS.

Filing With No Activity

Requirement: File Form 720 even if no taxable activity occurred, provided the business remains registered for excise tax purposes.
Entry format: Enter zero on all applicable lines and indicate “None” for the total tax liability for the quarter.
Schedule rule: Do not complete Schedule A for zero-activity quarters, as no liability needs to be allocated.
Compliance purpose: Filing maintains accurate IRS records and prevents the business from being flagged for noncompliance.

Filing a Final Return

Eligibility: Submit a final return when the business permanently ceases operations or no longer engages in taxable activities.
Identification: Check the “Final return” box in the top section of Form 720 to indicate closure of liability.
Record retention: Keep supporting documentation for at least four years from the final return date for future verification.
Closure benefit: Filing a final return formally removes the taxpayer from the excise tax system, preventing further reporting obligations.

Tips for First-Time Filers

Businesses filing Form 720 for the first time must prepare carefully to meet IRS standards. Understanding requirements, setting up electronic payment systems, and maintaining proper documentation improve long-term compliance.

Identifying Applicable Excise Taxes

Review activities: Evaluate all business operations to determine whether specific products or services are subject to excise taxes.
Examples: Excise taxes include selling fuel, providing transportation services, or manufacturing taxable goods like heavy vehicles.
Industry guidance: Consult Publication 510 for details on specific tax types that apply to particular industries or business models.
Clarification support: Contact the IRS Business and Specialty Tax line for help interpreting which activities are subject to federal excise tax.

Setting Up EFTPS

Registration: Begin EFTPS enrollment immediately upon determining excise tax liability to avoid missed payment deadlines.
Information needed: Provide the Employer Identification Number, bank account details, and authorized contact information during setup.
Confirmation process: The IRS mails a personal identification number to confirm enrollment and activate the account.
Testing step: Schedule a test payment before the first due date to ensure the account functions correctly.

Recordkeeping Best Practices

Document retention: Keep all invoices, sales receipts, and proof of payments for at least four years from the due date or payment date.
Organization method: Use digital systems to store transaction histories, liability worksheets, and quarterly tax reports.
Verification benefit: Comprehensive records simplify future audits, refund requests, and corrections to previous filings.
Accuracy safeguard: Regularly reconcile excise tax records with bank deposits and EFTPS payment confirmations.

Conclusion

Filing Form 720 correctly ensures that taxpayers meet their federal excise tax responsibilities. Following the official Form 720 2018 instructions, businesses can calculate liabilities accurately, submit timely payments, and avoid penalties. Proper preparation, electronic payment setup, and attention to detail guarantee smooth quarterly reporting and full compliance with IRS requirements.

Frequently Asked Questions

What is the purpose of Federal Form 720?

Federal Form 720 is used to report and pay federal excise taxes on specific goods, services, and activities subject to taxation. It ensures that businesses correctly calculate their quarterly liabilities and submit timely payments. Filing this form keeps companies compliant with federal tax law and prevents costly interest or penalty assessments from the IRS.

Who must file Form 720?

Any business that produces, sells, or provides goods or services subject to excise taxes must file Form 720. Examples include companies engaged in transportation, fuel distribution, insurance coverage, and communications services. Filing ensures accurate quarterly reporting, accountability for tax liabilities, and adherence to the federal excise tax requirements set forth by the Internal Revenue Service.

What are the filing deadlines for Form 720?

Form 720 must be filed quarterly with deadlines on April 30, July 31, October 31, and January 31. Each deadline corresponds to the quarter immediately preceding it. Filing before the due date ensures timely processing, avoids penalty assessments, and demonstrates compliance with the IRS requirements for federal excise tax reporting and payment obligations.

How can I pay federal excise tax electronically?

Taxpayers must use the Electronic Federal Tax Payment System (EFTPS) to make deposits for federal excise taxes. Businesses must register online, receive a secure personal identification number, and schedule payments electronically. The EFTPS system provides confirmation receipts, tracks transactions, and ensures that payments post promptly within IRS deadlines for each reporting quarter.

What happens if I file Form 720 late?

Late filing results in penalties ranging from two to fifteen percent of the unpaid balance, depending on how long the payment is delayed. Additional interest may accrue until the liability is satisfied. The IRS encourages taxpayers to file promptly to minimize penalties, maintain compliance, and preserve accurate reporting records for quarterly federal excise tax obligations.

What are common errors to avoid when filing?

Common filing errors include using outdated forms, entering incorrect tax rates, omitting required schedules, or misreporting total amounts. Businesses should review every calculation, confirm the Employer Identification Number, and verify deposit records. Careful review of the instructions on Form 720 for 2018 helps prevent delays, rejection, or penalty assessments by the Internal Revenue Service.

Can I file Form 720 if my business had no excise activity?

Yes, businesses registered for excise taxes must file Form 720 even if they have no taxable activity during the quarter. Enter zero on applicable lines and indicate “None” for total tax liability. Filing a zero-activity return maintains compliance, updates IRS records, and prevents unnecessary penalty notices or classification as a non-filer by the IRS.

Frequently Asked Questions

Step-by-Step Form 720 2018 Instructions for Businesses

Form 720 is an important form that many businesses must file when they are responsible for paying or collecting certain federal excise taxes. Unlike income tax, which applies to general earnings, excise taxes apply to specific goods, services, and activities subject to special federal rules. This form helps the Internal Revenue Service (IRS) monitor compliance and collect the total amount owed from taxpayers each quarter.

Businesses nationwide use this quarterly federal excise tax return to report liabilities on activities subject to excise tax, such as fuel, environmental taxes, and communications services. Filing the correct IRS form ensures that companies remain compliant with federal law while avoiding costly penalties or interest charges. Every business liable for these taxes must pay close attention to the instructions in Form 720 for 2018 to ensure accuracy.

Understanding which services are subject to tax, how to calculate each liability, and where to report the correct data is crucial for compliance. The process may appear technical, but with proper guidance and accurate calculations, taxpayers can file confidently, meet every due date, and maintain a clean account with the IRS.

Overview of Federal Form 720

Form 720 is the official quarterly federal excise tax return used by businesses and taxpayers liable for various taxes imposed under federal law. It helps the IRS collect excise taxes levied on certain products and services, such as fuel, environmental substances, air transportation, and communications.

Who Must File Form 720

Liable businesses: Any business that produces, sells, or uses goods subject to federal excise tax must file this form each quarter.
Service providers: Companies offering transportation, communications, or environmental services subject to excise taxes must report and pay under applicable sections.
Importers and manufacturers: Businesses that import or manufacture certain products, such as gasoline, diesel, or coal, are responsible for filing because their activities are directly taxed.
Insurance and health service providers: Organizations collecting specific fees for insurance or medical services must include those liabilities in their quarterly filing.

Structure of the Form

Part I: Includes primary excise taxes such as fuel, environmental, air transportation, and communications taxes.
Part II: Covers additional categories like patient-centered outcomes research fees, indoor tanning services, and other special excise taxes.
Part III: Summarizes calculations, total amount due, credits, and overpayments, which help the IRS verify accuracy in liability and payment.

What’s New for 2018 in the Form 720 2018 Instructions

The IRS updated several components of the 2018 federal excise tax filing process. Understanding these changes ensures taxpayers and companies calculate correctly and remain compliant when they file and report quarterly federal excise tax obligations.

Electronic Funds Transfer Requirement

Mandatory payments: All federal excise tax deposits must be made through electronic funds transfer, mainly via the Electronic Federal Tax Payment System (EFTPS).
Process for taxpayers: Each taxpayer must enroll in EFTPS and complete registration before making timely deposits.
Key benefit: Electronic payments improve accuracy and provide immediate confirmation, helping businesses avoid penalties for late or incorrect submissions.
Reminder: Paper checks are no longer acceptable deposits under the new guidance for federal excise tax payments.

Updates to Environmental Taxes

Oil spill liability extension: The crude oil and petroleum products tax was extended beginning March 1, 2018.
Deposit rules: A temporary modified safe harbor for deposits applied during the third quarter to simplify compliance for taxpayers responsible for oil-related liabilities.
Purpose: These changes maintain support for national environmental cleanup and hazard mitigation projects.

Fee Changes for Research and Health Plans

Increased rate: The patient-centered outcomes research fee rose to $2.39 per covered life for plan years ending between October 2017 and October 2018.
Impact: This increase affects self-insured health plans and insurance companies that file excise taxes under Part II of the form.

Other Notable Changes

Medical device tax suspension: The tax on medical devices remained suspended through December 31, 2019, easing costs for manufacturers and producers.
Aircraft management services: Payments for certain private aircraft management services became exempt from air transportation excise taxes.

Step-by-Step Instructions for Filing Form 720 Quarterly Federal Excise Tax Return

Filing the quarterly federal excise tax return requires attention to detail. Each form section corresponds to a specific set of activities and tax categories. Following the correct order ensures accuracy and prevents delays or penalties from the IRS.

Step 1: Prepare Required Information

Gather all records related to activities subject to excise taxes, including sales receipts, quantities sold, and services provided. Ensure the Employer Identification Number and legal business name match IRS records. Preparation before filing ensures accurate calculations, prevents confusion during review, and supports clear reporting of each taxpayer’s liability for the correct quarter.

Step 2: Complete the Header Section

Enter the business name, address, EIN, and the quarter’s ending date as registered with the IRS. Indicate any changes by checking the correct box for address updates or final returns. For foreign addresses, spell out the country name completely. This section ensures the IRS identifies the taxpayer and accurately processes the quarterly federal excise tax return.

Step 3: Fill Out Part I – Primary Excise Taxes

Report all primary excise taxes imposed on businesses that manufacture, sell, or provide taxable products and services. Include liabilities from fuel, communications, air transportation, and environmental taxes. Businesses producing sport fishing equipment or heavy vehicles must also include the total amount calculated under applicable IRS numbers. Accuracy in this section ensures compliance with specific tax categories.

Step 4: Fill Out Part II – Additional Excise Taxes

Record all other excise taxes not included in Part I. Other taxes may include health-related fees, the indoor tanning tax, and fuel use for inland waterway transportation. Each entry must reflect liabilities for the correct period using the latest tax rates. Businesses must carefully review the IRS Form 720 2018 instructions to determine which sections apply before finalizing their entries.

Step 5: Complete Part III – Summary and Payment Information

Add all liabilities from Parts I and II to calculate the due amount. Apply credits or exemptions where allowed and include all deposits made during the quarter. This section determines whether additional payment is required or if an overpayment exists. Carefully review all calculations before filing to prevent delays or adjustments from the IRS during processing.

Step 6: Attach Required Schedules and Forms

Attach supporting schedules, such as Schedule A for liability reporting, Schedule C for credit claims, and Form 6627 for environmental tax calculations. Each attachment must provide complete supporting data for reported amounts. Failing to include these documents can cause processing delays or requests for clarification. Always verify that all schedules match entries on the main form before submission.

Filing and Submission Options for the Federal Excise Tax Return

Businesses filing Form 720 can choose between electronic submission and paper filing. The IRS encourages electronic filing for faster processing, immediate acknowledgment, and reduced chances of calculation or data entry errors.

Electronic Filing (Recommended)

Filing system: Businesses can file electronically through authorized transmitters or electronic return originators participating in the IRS e-file program for excise taxes.
Key advantages: Electronic filing provides faster processing, real-time confirmation, and secure delivery of sensitive financial information directly to the IRS.
Data accuracy: Built-in software validation reduces common filing mistakes and ensures that excise tax calculations meet official IRS requirements.
Processing speed: E-filed returns are typically processed within days, while mailed forms may take several weeks to update in the IRS system.

Paper Filing Instructions

Mailing address: Send the completed form to the Department of the Treasury, Internal Revenue Service, Cincinnati, OH 45999-0009.
Form version: Always use the current revision of the form, specifically the April 2018 version, to prevent rejection or delays.
Completeness check: Review all schedules and ensure signatures, dates, and total amounts are properly filled before mailing the return.
Postal timing: Allow timely mail delivery before the deadline to avoid late-filing penalties or missed quarter reports.

Filing Deadlines

Form 720 must be filed quarterly based on the ending month of each reporting period. Returns covering January through March are due April 30. Returns for April through June are due July 31. Returns for July through September are due October 31, and those covering October through December are due January 31 of the following year. Timely submission prevents penalties and maintains compliance.

Payment Procedures and Schedules

Federal excise taxes require timely payments made through the appropriate channels. The IRS mandates that most businesses use electronic funds transfer for all tax deposits related to excise liability.

Electronic Funds Transfer Requirement

Mandatory system: All deposits must be made through the Electronic Federal Tax Payment System (EFTPS), the official payment platform for federal business taxes.
Setup process: Businesses register online at the EFTPS website, provide account details, and receive a personal identification number for secure access.
Processing time: Enrollment generally takes 7–10 business days, so early registration ensures that the first scheduled payment occurs on time.
Benefits: EFTPS provides secure payment tracking, digital receipts, and flexibility to schedule deposits ahead of IRS deadlines.

Semimonthly Deposit Schedule

Deposit period one: Taxes accrued from the 1st through the 15th day of the month are due by the 29th of the same month.
Deposit period two: Taxes accrued from the 16th through the last day of the month are due by the 14th.
Timeliness requirement: Payments must post by the deadline, even if a weekend or federal holiday falls near the due date.
Recordkeeping: Always keep EFTPS receipts as proof of timely payment for audit or verification purposes.

Using Form 720-V Payment Voucher

Purpose: Use Form 720-V only when submitting a paper return accompanied by a check or money order for the tax payment.
Restrictions: Do not use the voucher for EFTPS, debit, or credit card payments, as those are electronic transactions.
Mailing inclusion: Always attach the payment voucher to the front of Form 720 to ensure proper routing at the IRS payment center.
Check details: Write the Employer Identification Number, the form number, and the applicable tax quarter.

Required Attachments and Supporting Forms

Businesses may need to attach additional schedules or forms to clarify calculations or request credit adjustments. Each supporting document serves a distinct purpose and helps verify accuracy in reported excise tax liabilities.

Schedule A – Excise Tax Liability: Schedule A reports liability amounts for Part I taxes and ensures deposits align with actual tax periods for each type of excise activity.
Schedule C – Claims: Schedule C allows businesses to claim credits or refunds for overpaid excise taxes, provided each claim includes supporting documentation describing the qualifying transaction.
Form 6627 – Environmental Taxes: Form 6627 must be attached when reporting liability for oil spill, ozone-depleting chemical, or imported product environmental taxes assessed under federal law.

Common Errors and How to Avoid Them

Completing Form 720 is crucial to prevent IRS penalties and correction notices. Many businesses face avoidable issues due to incorrect calculations, outdated forms, or missing schedules.

Filing Mistakes

Outdated versions: Using an older version of Form 720 may result in rejection; always use the 2018 revision for this tax year.
Missing signatures: Unsigned forms delay processing and may trigger follow-up requests from the IRS.
Omitted schedules: Failing to include required schedules or attachments prevents a complete review and may cause compliance alerts.
Incorrect identification: An invalid Employer Identification Number can cause processing errors and delay posting of the tax payment.

Calculation Errors

Wrong fuel rates: Applying incorrect rates for gasoline or diesel can misstate total liability, especially when new tax rates apply.
Mathematical issues: Simple addition or rounding errors can distort total amounts reported, leading to penalty assessments.
Unapplied credits: Omitting eligible exemptions or refunds may result in overpayment that remains unclaimed.
Unverified transfers: Errors often occur when total deposits recorded do not match the calculated liability from Parts I and II.

Payment and Deposit Issues

Late payments: Submitting deposits after the due date results in penalties ranging from two to fifteen percent of the amount owed.
Non-EFTPS deposits: Paper payments for mandatory electronic depositors violate IRS rules and trigger a ten percent penalty.
Unrecorded transactions: Failure to verify EFTPS posting confirmation may lead to payment disputes with the IRS.
Misapplied deposits: Entering incorrect tax period dates may cause payments to apply to the wrong quarter or liability.

Zero Activity and Final Return Guidance

Businesses must continue filing even when they have no activity for a quarter unless they submit a final return to close their filing requirement. Maintaining compliance during inactive periods prevents unnecessary notices from the IRS.

Filing With No Activity

Requirement: File Form 720 even if no taxable activity occurred, provided the business remains registered for excise tax purposes.
Entry format: Enter zero on all applicable lines and indicate “None” for the total tax liability for the quarter.
Schedule rule: Do not complete Schedule A for zero-activity quarters, as no liability needs to be allocated.
Compliance purpose: Filing maintains accurate IRS records and prevents the business from being flagged for noncompliance.

Filing a Final Return

Eligibility: Submit a final return when the business permanently ceases operations or no longer engages in taxable activities.
Identification: Check the “Final return” box in the top section of Form 720 to indicate closure of liability.
Record retention: Keep supporting documentation for at least four years from the final return date for future verification.
Closure benefit: Filing a final return formally removes the taxpayer from the excise tax system, preventing further reporting obligations.

Tips for First-Time Filers

Businesses filing Form 720 for the first time must prepare carefully to meet IRS standards. Understanding requirements, setting up electronic payment systems, and maintaining proper documentation improve long-term compliance.

Identifying Applicable Excise Taxes

Review activities: Evaluate all business operations to determine whether specific products or services are subject to excise taxes.
Examples: Excise taxes include selling fuel, providing transportation services, or manufacturing taxable goods like heavy vehicles.
Industry guidance: Consult Publication 510 for details on specific tax types that apply to particular industries or business models.
Clarification support: Contact the IRS Business and Specialty Tax line for help interpreting which activities are subject to federal excise tax.

Setting Up EFTPS

Registration: Begin EFTPS enrollment immediately upon determining excise tax liability to avoid missed payment deadlines.
Information needed: Provide the Employer Identification Number, bank account details, and authorized contact information during setup.
Confirmation process: The IRS mails a personal identification number to confirm enrollment and activate the account.
Testing step: Schedule a test payment before the first due date to ensure the account functions correctly.

Recordkeeping Best Practices

Document retention: Keep all invoices, sales receipts, and proof of payments for at least four years from the due date or payment date.
Organization method: Use digital systems to store transaction histories, liability worksheets, and quarterly tax reports.
Verification benefit: Comprehensive records simplify future audits, refund requests, and corrections to previous filings.
Accuracy safeguard: Regularly reconcile excise tax records with bank deposits and EFTPS payment confirmations.

Conclusion

Filing Form 720 correctly ensures that taxpayers meet their federal excise tax responsibilities. Following the official Form 720 2018 instructions, businesses can calculate liabilities accurately, submit timely payments, and avoid penalties. Proper preparation, electronic payment setup, and attention to detail guarantee smooth quarterly reporting and full compliance with IRS requirements.

Frequently Asked Questions

What is the purpose of Federal Form 720?

Federal Form 720 is used to report and pay federal excise taxes on specific goods, services, and activities subject to taxation. It ensures that businesses correctly calculate their quarterly liabilities and submit timely payments. Filing this form keeps companies compliant with federal tax law and prevents costly interest or penalty assessments from the IRS.

Who must file Form 720?

Any business that produces, sells, or provides goods or services subject to excise taxes must file Form 720. Examples include companies engaged in transportation, fuel distribution, insurance coverage, and communications services. Filing ensures accurate quarterly reporting, accountability for tax liabilities, and adherence to the federal excise tax requirements set forth by the Internal Revenue Service.

What are the filing deadlines for Form 720?

Form 720 must be filed quarterly with deadlines on April 30, July 31, October 31, and January 31. Each deadline corresponds to the quarter immediately preceding it. Filing before the due date ensures timely processing, avoids penalty assessments, and demonstrates compliance with the IRS requirements for federal excise tax reporting and payment obligations.

How can I pay federal excise tax electronically?

Taxpayers must use the Electronic Federal Tax Payment System (EFTPS) to make deposits for federal excise taxes. Businesses must register online, receive a secure personal identification number, and schedule payments electronically. The EFTPS system provides confirmation receipts, tracks transactions, and ensures that payments post promptly within IRS deadlines for each reporting quarter.

What happens if I file Form 720 late?

Late filing results in penalties ranging from two to fifteen percent of the unpaid balance, depending on how long the payment is delayed. Additional interest may accrue until the liability is satisfied. The IRS encourages taxpayers to file promptly to minimize penalties, maintain compliance, and preserve accurate reporting records for quarterly federal excise tax obligations.

What are common errors to avoid when filing?

Common filing errors include using outdated forms, entering incorrect tax rates, omitting required schedules, or misreporting total amounts. Businesses should review every calculation, confirm the Employer Identification Number, and verify deposit records. Careful review of the instructions on Form 720 for 2018 helps prevent delays, rejection, or penalty assessments by the Internal Revenue Service.

Can I file Form 720 if my business had no excise activity?

Yes, businesses registered for excise taxes must file Form 720 even if they have no taxable activity during the quarter. Enter zero on applicable lines and indicate “None” for total tax liability. Filing a zero-activity return maintains compliance, updates IRS records, and prevents unnecessary penalty notices or classification as a non-filer by the IRS.

Frequently Asked Questions

Step-by-Step Form 720 2018 Instructions for Businesses

Form 720 is an important form that many businesses must file when they are responsible for paying or collecting certain federal excise taxes. Unlike income tax, which applies to general earnings, excise taxes apply to specific goods, services, and activities subject to special federal rules. This form helps the Internal Revenue Service (IRS) monitor compliance and collect the total amount owed from taxpayers each quarter.

Businesses nationwide use this quarterly federal excise tax return to report liabilities on activities subject to excise tax, such as fuel, environmental taxes, and communications services. Filing the correct IRS form ensures that companies remain compliant with federal law while avoiding costly penalties or interest charges. Every business liable for these taxes must pay close attention to the instructions in Form 720 for 2018 to ensure accuracy.

Understanding which services are subject to tax, how to calculate each liability, and where to report the correct data is crucial for compliance. The process may appear technical, but with proper guidance and accurate calculations, taxpayers can file confidently, meet every due date, and maintain a clean account with the IRS.

Overview of Federal Form 720

Form 720 is the official quarterly federal excise tax return used by businesses and taxpayers liable for various taxes imposed under federal law. It helps the IRS collect excise taxes levied on certain products and services, such as fuel, environmental substances, air transportation, and communications.

Who Must File Form 720

Liable businesses: Any business that produces, sells, or uses goods subject to federal excise tax must file this form each quarter.
Service providers: Companies offering transportation, communications, or environmental services subject to excise taxes must report and pay under applicable sections.
Importers and manufacturers: Businesses that import or manufacture certain products, such as gasoline, diesel, or coal, are responsible for filing because their activities are directly taxed.
Insurance and health service providers: Organizations collecting specific fees for insurance or medical services must include those liabilities in their quarterly filing.

Structure of the Form

Part I: Includes primary excise taxes such as fuel, environmental, air transportation, and communications taxes.
Part II: Covers additional categories like patient-centered outcomes research fees, indoor tanning services, and other special excise taxes.
Part III: Summarizes calculations, total amount due, credits, and overpayments, which help the IRS verify accuracy in liability and payment.

What’s New for 2018 in the Form 720 2018 Instructions

The IRS updated several components of the 2018 federal excise tax filing process. Understanding these changes ensures taxpayers and companies calculate correctly and remain compliant when they file and report quarterly federal excise tax obligations.

Electronic Funds Transfer Requirement

Mandatory payments: All federal excise tax deposits must be made through electronic funds transfer, mainly via the Electronic Federal Tax Payment System (EFTPS).
Process for taxpayers: Each taxpayer must enroll in EFTPS and complete registration before making timely deposits.
Key benefit: Electronic payments improve accuracy and provide immediate confirmation, helping businesses avoid penalties for late or incorrect submissions.
Reminder: Paper checks are no longer acceptable deposits under the new guidance for federal excise tax payments.

Updates to Environmental Taxes

Oil spill liability extension: The crude oil and petroleum products tax was extended beginning March 1, 2018.
Deposit rules: A temporary modified safe harbor for deposits applied during the third quarter to simplify compliance for taxpayers responsible for oil-related liabilities.
Purpose: These changes maintain support for national environmental cleanup and hazard mitigation projects.

Fee Changes for Research and Health Plans

Increased rate: The patient-centered outcomes research fee rose to $2.39 per covered life for plan years ending between October 2017 and October 2018.
Impact: This increase affects self-insured health plans and insurance companies that file excise taxes under Part II of the form.

Other Notable Changes

Medical device tax suspension: The tax on medical devices remained suspended through December 31, 2019, easing costs for manufacturers and producers.
Aircraft management services: Payments for certain private aircraft management services became exempt from air transportation excise taxes.

Step-by-Step Instructions for Filing Form 720 Quarterly Federal Excise Tax Return

Filing the quarterly federal excise tax return requires attention to detail. Each form section corresponds to a specific set of activities and tax categories. Following the correct order ensures accuracy and prevents delays or penalties from the IRS.

Step 1: Prepare Required Information

Gather all records related to activities subject to excise taxes, including sales receipts, quantities sold, and services provided. Ensure the Employer Identification Number and legal business name match IRS records. Preparation before filing ensures accurate calculations, prevents confusion during review, and supports clear reporting of each taxpayer’s liability for the correct quarter.

Step 2: Complete the Header Section

Enter the business name, address, EIN, and the quarter’s ending date as registered with the IRS. Indicate any changes by checking the correct box for address updates or final returns. For foreign addresses, spell out the country name completely. This section ensures the IRS identifies the taxpayer and accurately processes the quarterly federal excise tax return.

Step 3: Fill Out Part I – Primary Excise Taxes

Report all primary excise taxes imposed on businesses that manufacture, sell, or provide taxable products and services. Include liabilities from fuel, communications, air transportation, and environmental taxes. Businesses producing sport fishing equipment or heavy vehicles must also include the total amount calculated under applicable IRS numbers. Accuracy in this section ensures compliance with specific tax categories.

Step 4: Fill Out Part II – Additional Excise Taxes

Record all other excise taxes not included in Part I. Other taxes may include health-related fees, the indoor tanning tax, and fuel use for inland waterway transportation. Each entry must reflect liabilities for the correct period using the latest tax rates. Businesses must carefully review the IRS Form 720 2018 instructions to determine which sections apply before finalizing their entries.

Step 5: Complete Part III – Summary and Payment Information

Add all liabilities from Parts I and II to calculate the due amount. Apply credits or exemptions where allowed and include all deposits made during the quarter. This section determines whether additional payment is required or if an overpayment exists. Carefully review all calculations before filing to prevent delays or adjustments from the IRS during processing.

Step 6: Attach Required Schedules and Forms

Attach supporting schedules, such as Schedule A for liability reporting, Schedule C for credit claims, and Form 6627 for environmental tax calculations. Each attachment must provide complete supporting data for reported amounts. Failing to include these documents can cause processing delays or requests for clarification. Always verify that all schedules match entries on the main form before submission.

Filing and Submission Options for the Federal Excise Tax Return

Businesses filing Form 720 can choose between electronic submission and paper filing. The IRS encourages electronic filing for faster processing, immediate acknowledgment, and reduced chances of calculation or data entry errors.

Electronic Filing (Recommended)

Filing system: Businesses can file electronically through authorized transmitters or electronic return originators participating in the IRS e-file program for excise taxes.
Key advantages: Electronic filing provides faster processing, real-time confirmation, and secure delivery of sensitive financial information directly to the IRS.
Data accuracy: Built-in software validation reduces common filing mistakes and ensures that excise tax calculations meet official IRS requirements.
Processing speed: E-filed returns are typically processed within days, while mailed forms may take several weeks to update in the IRS system.

Paper Filing Instructions

Mailing address: Send the completed form to the Department of the Treasury, Internal Revenue Service, Cincinnati, OH 45999-0009.
Form version: Always use the current revision of the form, specifically the April 2018 version, to prevent rejection or delays.
Completeness check: Review all schedules and ensure signatures, dates, and total amounts are properly filled before mailing the return.
Postal timing: Allow timely mail delivery before the deadline to avoid late-filing penalties or missed quarter reports.

Filing Deadlines

Form 720 must be filed quarterly based on the ending month of each reporting period. Returns covering January through March are due April 30. Returns for April through June are due July 31. Returns for July through September are due October 31, and those covering October through December are due January 31 of the following year. Timely submission prevents penalties and maintains compliance.

Payment Procedures and Schedules

Federal excise taxes require timely payments made through the appropriate channels. The IRS mandates that most businesses use electronic funds transfer for all tax deposits related to excise liability.

Electronic Funds Transfer Requirement

Mandatory system: All deposits must be made through the Electronic Federal Tax Payment System (EFTPS), the official payment platform for federal business taxes.
Setup process: Businesses register online at the EFTPS website, provide account details, and receive a personal identification number for secure access.
Processing time: Enrollment generally takes 7–10 business days, so early registration ensures that the first scheduled payment occurs on time.
Benefits: EFTPS provides secure payment tracking, digital receipts, and flexibility to schedule deposits ahead of IRS deadlines.

Semimonthly Deposit Schedule

Deposit period one: Taxes accrued from the 1st through the 15th day of the month are due by the 29th of the same month.
Deposit period two: Taxes accrued from the 16th through the last day of the month are due by the 14th.
Timeliness requirement: Payments must post by the deadline, even if a weekend or federal holiday falls near the due date.
Recordkeeping: Always keep EFTPS receipts as proof of timely payment for audit or verification purposes.

Using Form 720-V Payment Voucher

Purpose: Use Form 720-V only when submitting a paper return accompanied by a check or money order for the tax payment.
Restrictions: Do not use the voucher for EFTPS, debit, or credit card payments, as those are electronic transactions.
Mailing inclusion: Always attach the payment voucher to the front of Form 720 to ensure proper routing at the IRS payment center.
Check details: Write the Employer Identification Number, the form number, and the applicable tax quarter.

Required Attachments and Supporting Forms

Businesses may need to attach additional schedules or forms to clarify calculations or request credit adjustments. Each supporting document serves a distinct purpose and helps verify accuracy in reported excise tax liabilities.

Schedule A – Excise Tax Liability: Schedule A reports liability amounts for Part I taxes and ensures deposits align with actual tax periods for each type of excise activity.
Schedule C – Claims: Schedule C allows businesses to claim credits or refunds for overpaid excise taxes, provided each claim includes supporting documentation describing the qualifying transaction.
Form 6627 – Environmental Taxes: Form 6627 must be attached when reporting liability for oil spill, ozone-depleting chemical, or imported product environmental taxes assessed under federal law.

Common Errors and How to Avoid Them

Completing Form 720 is crucial to prevent IRS penalties and correction notices. Many businesses face avoidable issues due to incorrect calculations, outdated forms, or missing schedules.

Filing Mistakes

Outdated versions: Using an older version of Form 720 may result in rejection; always use the 2018 revision for this tax year.
Missing signatures: Unsigned forms delay processing and may trigger follow-up requests from the IRS.
Omitted schedules: Failing to include required schedules or attachments prevents a complete review and may cause compliance alerts.
Incorrect identification: An invalid Employer Identification Number can cause processing errors and delay posting of the tax payment.

Calculation Errors

Wrong fuel rates: Applying incorrect rates for gasoline or diesel can misstate total liability, especially when new tax rates apply.
Mathematical issues: Simple addition or rounding errors can distort total amounts reported, leading to penalty assessments.
Unapplied credits: Omitting eligible exemptions or refunds may result in overpayment that remains unclaimed.
Unverified transfers: Errors often occur when total deposits recorded do not match the calculated liability from Parts I and II.

Payment and Deposit Issues

Late payments: Submitting deposits after the due date results in penalties ranging from two to fifteen percent of the amount owed.
Non-EFTPS deposits: Paper payments for mandatory electronic depositors violate IRS rules and trigger a ten percent penalty.
Unrecorded transactions: Failure to verify EFTPS posting confirmation may lead to payment disputes with the IRS.
Misapplied deposits: Entering incorrect tax period dates may cause payments to apply to the wrong quarter or liability.

Zero Activity and Final Return Guidance

Businesses must continue filing even when they have no activity for a quarter unless they submit a final return to close their filing requirement. Maintaining compliance during inactive periods prevents unnecessary notices from the IRS.

Filing With No Activity

Requirement: File Form 720 even if no taxable activity occurred, provided the business remains registered for excise tax purposes.
Entry format: Enter zero on all applicable lines and indicate “None” for the total tax liability for the quarter.
Schedule rule: Do not complete Schedule A for zero-activity quarters, as no liability needs to be allocated.
Compliance purpose: Filing maintains accurate IRS records and prevents the business from being flagged for noncompliance.

Filing a Final Return

Eligibility: Submit a final return when the business permanently ceases operations or no longer engages in taxable activities.
Identification: Check the “Final return” box in the top section of Form 720 to indicate closure of liability.
Record retention: Keep supporting documentation for at least four years from the final return date for future verification.
Closure benefit: Filing a final return formally removes the taxpayer from the excise tax system, preventing further reporting obligations.

Tips for First-Time Filers

Businesses filing Form 720 for the first time must prepare carefully to meet IRS standards. Understanding requirements, setting up electronic payment systems, and maintaining proper documentation improve long-term compliance.

Identifying Applicable Excise Taxes

Review activities: Evaluate all business operations to determine whether specific products or services are subject to excise taxes.
Examples: Excise taxes include selling fuel, providing transportation services, or manufacturing taxable goods like heavy vehicles.
Industry guidance: Consult Publication 510 for details on specific tax types that apply to particular industries or business models.
Clarification support: Contact the IRS Business and Specialty Tax line for help interpreting which activities are subject to federal excise tax.

Setting Up EFTPS

Registration: Begin EFTPS enrollment immediately upon determining excise tax liability to avoid missed payment deadlines.
Information needed: Provide the Employer Identification Number, bank account details, and authorized contact information during setup.
Confirmation process: The IRS mails a personal identification number to confirm enrollment and activate the account.
Testing step: Schedule a test payment before the first due date to ensure the account functions correctly.

Recordkeeping Best Practices

Document retention: Keep all invoices, sales receipts, and proof of payments for at least four years from the due date or payment date.
Organization method: Use digital systems to store transaction histories, liability worksheets, and quarterly tax reports.
Verification benefit: Comprehensive records simplify future audits, refund requests, and corrections to previous filings.
Accuracy safeguard: Regularly reconcile excise tax records with bank deposits and EFTPS payment confirmations.

Conclusion

Filing Form 720 correctly ensures that taxpayers meet their federal excise tax responsibilities. Following the official Form 720 2018 instructions, businesses can calculate liabilities accurately, submit timely payments, and avoid penalties. Proper preparation, electronic payment setup, and attention to detail guarantee smooth quarterly reporting and full compliance with IRS requirements.

Frequently Asked Questions

What is the purpose of Federal Form 720?

Federal Form 720 is used to report and pay federal excise taxes on specific goods, services, and activities subject to taxation. It ensures that businesses correctly calculate their quarterly liabilities and submit timely payments. Filing this form keeps companies compliant with federal tax law and prevents costly interest or penalty assessments from the IRS.

Who must file Form 720?

Any business that produces, sells, or provides goods or services subject to excise taxes must file Form 720. Examples include companies engaged in transportation, fuel distribution, insurance coverage, and communications services. Filing ensures accurate quarterly reporting, accountability for tax liabilities, and adherence to the federal excise tax requirements set forth by the Internal Revenue Service.

What are the filing deadlines for Form 720?

Form 720 must be filed quarterly with deadlines on April 30, July 31, October 31, and January 31. Each deadline corresponds to the quarter immediately preceding it. Filing before the due date ensures timely processing, avoids penalty assessments, and demonstrates compliance with the IRS requirements for federal excise tax reporting and payment obligations.

How can I pay federal excise tax electronically?

Taxpayers must use the Electronic Federal Tax Payment System (EFTPS) to make deposits for federal excise taxes. Businesses must register online, receive a secure personal identification number, and schedule payments electronically. The EFTPS system provides confirmation receipts, tracks transactions, and ensures that payments post promptly within IRS deadlines for each reporting quarter.

What happens if I file Form 720 late?

Late filing results in penalties ranging from two to fifteen percent of the unpaid balance, depending on how long the payment is delayed. Additional interest may accrue until the liability is satisfied. The IRS encourages taxpayers to file promptly to minimize penalties, maintain compliance, and preserve accurate reporting records for quarterly federal excise tax obligations.

What are common errors to avoid when filing?

Common filing errors include using outdated forms, entering incorrect tax rates, omitting required schedules, or misreporting total amounts. Businesses should review every calculation, confirm the Employer Identification Number, and verify deposit records. Careful review of the instructions on Form 720 for 2018 helps prevent delays, rejection, or penalty assessments by the Internal Revenue Service.

Can I file Form 720 if my business had no excise activity?

Yes, businesses registered for excise taxes must file Form 720 even if they have no taxable activity during the quarter. Enter zero on applicable lines and indicate “None” for total tax liability. Filing a zero-activity return maintains compliance, updates IRS records, and prevents unnecessary penalty notices or classification as a non-filer by the IRS.

Frequently Asked Questions

Step-by-Step Form 720 2018 Instructions for Businesses

Form 720 is an important form that many businesses must file when they are responsible for paying or collecting certain federal excise taxes. Unlike income tax, which applies to general earnings, excise taxes apply to specific goods, services, and activities subject to special federal rules. This form helps the Internal Revenue Service (IRS) monitor compliance and collect the total amount owed from taxpayers each quarter.

Businesses nationwide use this quarterly federal excise tax return to report liabilities on activities subject to excise tax, such as fuel, environmental taxes, and communications services. Filing the correct IRS form ensures that companies remain compliant with federal law while avoiding costly penalties or interest charges. Every business liable for these taxes must pay close attention to the instructions in Form 720 for 2018 to ensure accuracy.

Understanding which services are subject to tax, how to calculate each liability, and where to report the correct data is crucial for compliance. The process may appear technical, but with proper guidance and accurate calculations, taxpayers can file confidently, meet every due date, and maintain a clean account with the IRS.

Overview of Federal Form 720

Form 720 is the official quarterly federal excise tax return used by businesses and taxpayers liable for various taxes imposed under federal law. It helps the IRS collect excise taxes levied on certain products and services, such as fuel, environmental substances, air transportation, and communications.

Who Must File Form 720

Liable businesses: Any business that produces, sells, or uses goods subject to federal excise tax must file this form each quarter.
Service providers: Companies offering transportation, communications, or environmental services subject to excise taxes must report and pay under applicable sections.
Importers and manufacturers: Businesses that import or manufacture certain products, such as gasoline, diesel, or coal, are responsible for filing because their activities are directly taxed.
Insurance and health service providers: Organizations collecting specific fees for insurance or medical services must include those liabilities in their quarterly filing.

Structure of the Form

Part I: Includes primary excise taxes such as fuel, environmental, air transportation, and communications taxes.
Part II: Covers additional categories like patient-centered outcomes research fees, indoor tanning services, and other special excise taxes.
Part III: Summarizes calculations, total amount due, credits, and overpayments, which help the IRS verify accuracy in liability and payment.

What’s New for 2018 in the Form 720 2018 Instructions

The IRS updated several components of the 2018 federal excise tax filing process. Understanding these changes ensures taxpayers and companies calculate correctly and remain compliant when they file and report quarterly federal excise tax obligations.

Electronic Funds Transfer Requirement

Mandatory payments: All federal excise tax deposits must be made through electronic funds transfer, mainly via the Electronic Federal Tax Payment System (EFTPS).
Process for taxpayers: Each taxpayer must enroll in EFTPS and complete registration before making timely deposits.
Key benefit: Electronic payments improve accuracy and provide immediate confirmation, helping businesses avoid penalties for late or incorrect submissions.
Reminder: Paper checks are no longer acceptable deposits under the new guidance for federal excise tax payments.

Updates to Environmental Taxes

Oil spill liability extension: The crude oil and petroleum products tax was extended beginning March 1, 2018.
Deposit rules: A temporary modified safe harbor for deposits applied during the third quarter to simplify compliance for taxpayers responsible for oil-related liabilities.
Purpose: These changes maintain support for national environmental cleanup and hazard mitigation projects.

Fee Changes for Research and Health Plans

Increased rate: The patient-centered outcomes research fee rose to $2.39 per covered life for plan years ending between October 2017 and October 2018.
Impact: This increase affects self-insured health plans and insurance companies that file excise taxes under Part II of the form.

Other Notable Changes

Medical device tax suspension: The tax on medical devices remained suspended through December 31, 2019, easing costs for manufacturers and producers.
Aircraft management services: Payments for certain private aircraft management services became exempt from air transportation excise taxes.

Step-by-Step Instructions for Filing Form 720 Quarterly Federal Excise Tax Return

Filing the quarterly federal excise tax return requires attention to detail. Each form section corresponds to a specific set of activities and tax categories. Following the correct order ensures accuracy and prevents delays or penalties from the IRS.

Step 1: Prepare Required Information

Gather all records related to activities subject to excise taxes, including sales receipts, quantities sold, and services provided. Ensure the Employer Identification Number and legal business name match IRS records. Preparation before filing ensures accurate calculations, prevents confusion during review, and supports clear reporting of each taxpayer’s liability for the correct quarter.

Step 2: Complete the Header Section

Enter the business name, address, EIN, and the quarter’s ending date as registered with the IRS. Indicate any changes by checking the correct box for address updates or final returns. For foreign addresses, spell out the country name completely. This section ensures the IRS identifies the taxpayer and accurately processes the quarterly federal excise tax return.

Step 3: Fill Out Part I – Primary Excise Taxes

Report all primary excise taxes imposed on businesses that manufacture, sell, or provide taxable products and services. Include liabilities from fuel, communications, air transportation, and environmental taxes. Businesses producing sport fishing equipment or heavy vehicles must also include the total amount calculated under applicable IRS numbers. Accuracy in this section ensures compliance with specific tax categories.

Step 4: Fill Out Part II – Additional Excise Taxes

Record all other excise taxes not included in Part I. Other taxes may include health-related fees, the indoor tanning tax, and fuel use for inland waterway transportation. Each entry must reflect liabilities for the correct period using the latest tax rates. Businesses must carefully review the IRS Form 720 2018 instructions to determine which sections apply before finalizing their entries.

Step 5: Complete Part III – Summary and Payment Information

Add all liabilities from Parts I and II to calculate the due amount. Apply credits or exemptions where allowed and include all deposits made during the quarter. This section determines whether additional payment is required or if an overpayment exists. Carefully review all calculations before filing to prevent delays or adjustments from the IRS during processing.

Step 6: Attach Required Schedules and Forms

Attach supporting schedules, such as Schedule A for liability reporting, Schedule C for credit claims, and Form 6627 for environmental tax calculations. Each attachment must provide complete supporting data for reported amounts. Failing to include these documents can cause processing delays or requests for clarification. Always verify that all schedules match entries on the main form before submission.

Filing and Submission Options for the Federal Excise Tax Return

Businesses filing Form 720 can choose between electronic submission and paper filing. The IRS encourages electronic filing for faster processing, immediate acknowledgment, and reduced chances of calculation or data entry errors.

Electronic Filing (Recommended)

Filing system: Businesses can file electronically through authorized transmitters or electronic return originators participating in the IRS e-file program for excise taxes.
Key advantages: Electronic filing provides faster processing, real-time confirmation, and secure delivery of sensitive financial information directly to the IRS.
Data accuracy: Built-in software validation reduces common filing mistakes and ensures that excise tax calculations meet official IRS requirements.
Processing speed: E-filed returns are typically processed within days, while mailed forms may take several weeks to update in the IRS system.

Paper Filing Instructions

Mailing address: Send the completed form to the Department of the Treasury, Internal Revenue Service, Cincinnati, OH 45999-0009.
Form version: Always use the current revision of the form, specifically the April 2018 version, to prevent rejection or delays.
Completeness check: Review all schedules and ensure signatures, dates, and total amounts are properly filled before mailing the return.
Postal timing: Allow timely mail delivery before the deadline to avoid late-filing penalties or missed quarter reports.

Filing Deadlines

Form 720 must be filed quarterly based on the ending month of each reporting period. Returns covering January through March are due April 30. Returns for April through June are due July 31. Returns for July through September are due October 31, and those covering October through December are due January 31 of the following year. Timely submission prevents penalties and maintains compliance.

Payment Procedures and Schedules

Federal excise taxes require timely payments made through the appropriate channels. The IRS mandates that most businesses use electronic funds transfer for all tax deposits related to excise liability.

Electronic Funds Transfer Requirement

Mandatory system: All deposits must be made through the Electronic Federal Tax Payment System (EFTPS), the official payment platform for federal business taxes.
Setup process: Businesses register online at the EFTPS website, provide account details, and receive a personal identification number for secure access.
Processing time: Enrollment generally takes 7–10 business days, so early registration ensures that the first scheduled payment occurs on time.
Benefits: EFTPS provides secure payment tracking, digital receipts, and flexibility to schedule deposits ahead of IRS deadlines.

Semimonthly Deposit Schedule

Deposit period one: Taxes accrued from the 1st through the 15th day of the month are due by the 29th of the same month.
Deposit period two: Taxes accrued from the 16th through the last day of the month are due by the 14th.
Timeliness requirement: Payments must post by the deadline, even if a weekend or federal holiday falls near the due date.
Recordkeeping: Always keep EFTPS receipts as proof of timely payment for audit or verification purposes.

Using Form 720-V Payment Voucher

Purpose: Use Form 720-V only when submitting a paper return accompanied by a check or money order for the tax payment.
Restrictions: Do not use the voucher for EFTPS, debit, or credit card payments, as those are electronic transactions.
Mailing inclusion: Always attach the payment voucher to the front of Form 720 to ensure proper routing at the IRS payment center.
Check details: Write the Employer Identification Number, the form number, and the applicable tax quarter.

Required Attachments and Supporting Forms

Businesses may need to attach additional schedules or forms to clarify calculations or request credit adjustments. Each supporting document serves a distinct purpose and helps verify accuracy in reported excise tax liabilities.

Schedule A – Excise Tax Liability: Schedule A reports liability amounts for Part I taxes and ensures deposits align with actual tax periods for each type of excise activity.
Schedule C – Claims: Schedule C allows businesses to claim credits or refunds for overpaid excise taxes, provided each claim includes supporting documentation describing the qualifying transaction.
Form 6627 – Environmental Taxes: Form 6627 must be attached when reporting liability for oil spill, ozone-depleting chemical, or imported product environmental taxes assessed under federal law.

Common Errors and How to Avoid Them

Completing Form 720 is crucial to prevent IRS penalties and correction notices. Many businesses face avoidable issues due to incorrect calculations, outdated forms, or missing schedules.

Filing Mistakes

Outdated versions: Using an older version of Form 720 may result in rejection; always use the 2018 revision for this tax year.
Missing signatures: Unsigned forms delay processing and may trigger follow-up requests from the IRS.
Omitted schedules: Failing to include required schedules or attachments prevents a complete review and may cause compliance alerts.
Incorrect identification: An invalid Employer Identification Number can cause processing errors and delay posting of the tax payment.

Calculation Errors

Wrong fuel rates: Applying incorrect rates for gasoline or diesel can misstate total liability, especially when new tax rates apply.
Mathematical issues: Simple addition or rounding errors can distort total amounts reported, leading to penalty assessments.
Unapplied credits: Omitting eligible exemptions or refunds may result in overpayment that remains unclaimed.
Unverified transfers: Errors often occur when total deposits recorded do not match the calculated liability from Parts I and II.

Payment and Deposit Issues

Late payments: Submitting deposits after the due date results in penalties ranging from two to fifteen percent of the amount owed.
Non-EFTPS deposits: Paper payments for mandatory electronic depositors violate IRS rules and trigger a ten percent penalty.
Unrecorded transactions: Failure to verify EFTPS posting confirmation may lead to payment disputes with the IRS.
Misapplied deposits: Entering incorrect tax period dates may cause payments to apply to the wrong quarter or liability.

Zero Activity and Final Return Guidance

Businesses must continue filing even when they have no activity for a quarter unless they submit a final return to close their filing requirement. Maintaining compliance during inactive periods prevents unnecessary notices from the IRS.

Filing With No Activity

Requirement: File Form 720 even if no taxable activity occurred, provided the business remains registered for excise tax purposes.
Entry format: Enter zero on all applicable lines and indicate “None” for the total tax liability for the quarter.
Schedule rule: Do not complete Schedule A for zero-activity quarters, as no liability needs to be allocated.
Compliance purpose: Filing maintains accurate IRS records and prevents the business from being flagged for noncompliance.

Filing a Final Return

Eligibility: Submit a final return when the business permanently ceases operations or no longer engages in taxable activities.
Identification: Check the “Final return” box in the top section of Form 720 to indicate closure of liability.
Record retention: Keep supporting documentation for at least four years from the final return date for future verification.
Closure benefit: Filing a final return formally removes the taxpayer from the excise tax system, preventing further reporting obligations.

Tips for First-Time Filers

Businesses filing Form 720 for the first time must prepare carefully to meet IRS standards. Understanding requirements, setting up electronic payment systems, and maintaining proper documentation improve long-term compliance.

Identifying Applicable Excise Taxes

Review activities: Evaluate all business operations to determine whether specific products or services are subject to excise taxes.
Examples: Excise taxes include selling fuel, providing transportation services, or manufacturing taxable goods like heavy vehicles.
Industry guidance: Consult Publication 510 for details on specific tax types that apply to particular industries or business models.
Clarification support: Contact the IRS Business and Specialty Tax line for help interpreting which activities are subject to federal excise tax.

Setting Up EFTPS

Registration: Begin EFTPS enrollment immediately upon determining excise tax liability to avoid missed payment deadlines.
Information needed: Provide the Employer Identification Number, bank account details, and authorized contact information during setup.
Confirmation process: The IRS mails a personal identification number to confirm enrollment and activate the account.
Testing step: Schedule a test payment before the first due date to ensure the account functions correctly.

Recordkeeping Best Practices

Document retention: Keep all invoices, sales receipts, and proof of payments for at least four years from the due date or payment date.
Organization method: Use digital systems to store transaction histories, liability worksheets, and quarterly tax reports.
Verification benefit: Comprehensive records simplify future audits, refund requests, and corrections to previous filings.
Accuracy safeguard: Regularly reconcile excise tax records with bank deposits and EFTPS payment confirmations.

Conclusion

Filing Form 720 correctly ensures that taxpayers meet their federal excise tax responsibilities. Following the official Form 720 2018 instructions, businesses can calculate liabilities accurately, submit timely payments, and avoid penalties. Proper preparation, electronic payment setup, and attention to detail guarantee smooth quarterly reporting and full compliance with IRS requirements.

Frequently Asked Questions

What is the purpose of Federal Form 720?

Federal Form 720 is used to report and pay federal excise taxes on specific goods, services, and activities subject to taxation. It ensures that businesses correctly calculate their quarterly liabilities and submit timely payments. Filing this form keeps companies compliant with federal tax law and prevents costly interest or penalty assessments from the IRS.

Who must file Form 720?

Any business that produces, sells, or provides goods or services subject to excise taxes must file Form 720. Examples include companies engaged in transportation, fuel distribution, insurance coverage, and communications services. Filing ensures accurate quarterly reporting, accountability for tax liabilities, and adherence to the federal excise tax requirements set forth by the Internal Revenue Service.

What are the filing deadlines for Form 720?

Form 720 must be filed quarterly with deadlines on April 30, July 31, October 31, and January 31. Each deadline corresponds to the quarter immediately preceding it. Filing before the due date ensures timely processing, avoids penalty assessments, and demonstrates compliance with the IRS requirements for federal excise tax reporting and payment obligations.

How can I pay federal excise tax electronically?

Taxpayers must use the Electronic Federal Tax Payment System (EFTPS) to make deposits for federal excise taxes. Businesses must register online, receive a secure personal identification number, and schedule payments electronically. The EFTPS system provides confirmation receipts, tracks transactions, and ensures that payments post promptly within IRS deadlines for each reporting quarter.

What happens if I file Form 720 late?

Late filing results in penalties ranging from two to fifteen percent of the unpaid balance, depending on how long the payment is delayed. Additional interest may accrue until the liability is satisfied. The IRS encourages taxpayers to file promptly to minimize penalties, maintain compliance, and preserve accurate reporting records for quarterly federal excise tax obligations.

What are common errors to avoid when filing?

Common filing errors include using outdated forms, entering incorrect tax rates, omitting required schedules, or misreporting total amounts. Businesses should review every calculation, confirm the Employer Identification Number, and verify deposit records. Careful review of the instructions on Form 720 for 2018 helps prevent delays, rejection, or penalty assessments by the Internal Revenue Service.

Can I file Form 720 if my business had no excise activity?

Yes, businesses registered for excise taxes must file Form 720 even if they have no taxable activity during the quarter. Enter zero on applicable lines and indicate “None” for total tax liability. Filing a zero-activity return maintains compliance, updates IRS records, and prevents unnecessary penalty notices or classification as a non-filer by the IRS.

Frequently Asked Questions

Step-by-Step Form 720 2018 Instructions for Businesses

Form 720 is an important form that many businesses must file when they are responsible for paying or collecting certain federal excise taxes. Unlike income tax, which applies to general earnings, excise taxes apply to specific goods, services, and activities subject to special federal rules. This form helps the Internal Revenue Service (IRS) monitor compliance and collect the total amount owed from taxpayers each quarter.

Businesses nationwide use this quarterly federal excise tax return to report liabilities on activities subject to excise tax, such as fuel, environmental taxes, and communications services. Filing the correct IRS form ensures that companies remain compliant with federal law while avoiding costly penalties or interest charges. Every business liable for these taxes must pay close attention to the instructions in Form 720 for 2018 to ensure accuracy.

Understanding which services are subject to tax, how to calculate each liability, and where to report the correct data is crucial for compliance. The process may appear technical, but with proper guidance and accurate calculations, taxpayers can file confidently, meet every due date, and maintain a clean account with the IRS.

Overview of Federal Form 720

Form 720 is the official quarterly federal excise tax return used by businesses and taxpayers liable for various taxes imposed under federal law. It helps the IRS collect excise taxes levied on certain products and services, such as fuel, environmental substances, air transportation, and communications.

Who Must File Form 720

Liable businesses: Any business that produces, sells, or uses goods subject to federal excise tax must file this form each quarter.
Service providers: Companies offering transportation, communications, or environmental services subject to excise taxes must report and pay under applicable sections.
Importers and manufacturers: Businesses that import or manufacture certain products, such as gasoline, diesel, or coal, are responsible for filing because their activities are directly taxed.
Insurance and health service providers: Organizations collecting specific fees for insurance or medical services must include those liabilities in their quarterly filing.

Structure of the Form

Part I: Includes primary excise taxes such as fuel, environmental, air transportation, and communications taxes.
Part II: Covers additional categories like patient-centered outcomes research fees, indoor tanning services, and other special excise taxes.
Part III: Summarizes calculations, total amount due, credits, and overpayments, which help the IRS verify accuracy in liability and payment.

What’s New for 2018 in the Form 720 2018 Instructions

The IRS updated several components of the 2018 federal excise tax filing process. Understanding these changes ensures taxpayers and companies calculate correctly and remain compliant when they file and report quarterly federal excise tax obligations.

Electronic Funds Transfer Requirement

Mandatory payments: All federal excise tax deposits must be made through electronic funds transfer, mainly via the Electronic Federal Tax Payment System (EFTPS).
Process for taxpayers: Each taxpayer must enroll in EFTPS and complete registration before making timely deposits.
Key benefit: Electronic payments improve accuracy and provide immediate confirmation, helping businesses avoid penalties for late or incorrect submissions.
Reminder: Paper checks are no longer acceptable deposits under the new guidance for federal excise tax payments.

Updates to Environmental Taxes

Oil spill liability extension: The crude oil and petroleum products tax was extended beginning March 1, 2018.
Deposit rules: A temporary modified safe harbor for deposits applied during the third quarter to simplify compliance for taxpayers responsible for oil-related liabilities.
Purpose: These changes maintain support for national environmental cleanup and hazard mitigation projects.

Fee Changes for Research and Health Plans

Increased rate: The patient-centered outcomes research fee rose to $2.39 per covered life for plan years ending between October 2017 and October 2018.
Impact: This increase affects self-insured health plans and insurance companies that file excise taxes under Part II of the form.

Other Notable Changes

Medical device tax suspension: The tax on medical devices remained suspended through December 31, 2019, easing costs for manufacturers and producers.
Aircraft management services: Payments for certain private aircraft management services became exempt from air transportation excise taxes.

Step-by-Step Instructions for Filing Form 720 Quarterly Federal Excise Tax Return

Filing the quarterly federal excise tax return requires attention to detail. Each form section corresponds to a specific set of activities and tax categories. Following the correct order ensures accuracy and prevents delays or penalties from the IRS.

Step 1: Prepare Required Information

Gather all records related to activities subject to excise taxes, including sales receipts, quantities sold, and services provided. Ensure the Employer Identification Number and legal business name match IRS records. Preparation before filing ensures accurate calculations, prevents confusion during review, and supports clear reporting of each taxpayer’s liability for the correct quarter.

Step 2: Complete the Header Section

Enter the business name, address, EIN, and the quarter’s ending date as registered with the IRS. Indicate any changes by checking the correct box for address updates or final returns. For foreign addresses, spell out the country name completely. This section ensures the IRS identifies the taxpayer and accurately processes the quarterly federal excise tax return.

Step 3: Fill Out Part I – Primary Excise Taxes

Report all primary excise taxes imposed on businesses that manufacture, sell, or provide taxable products and services. Include liabilities from fuel, communications, air transportation, and environmental taxes. Businesses producing sport fishing equipment or heavy vehicles must also include the total amount calculated under applicable IRS numbers. Accuracy in this section ensures compliance with specific tax categories.

Step 4: Fill Out Part II – Additional Excise Taxes

Record all other excise taxes not included in Part I. Other taxes may include health-related fees, the indoor tanning tax, and fuel use for inland waterway transportation. Each entry must reflect liabilities for the correct period using the latest tax rates. Businesses must carefully review the IRS Form 720 2018 instructions to determine which sections apply before finalizing their entries.

Step 5: Complete Part III – Summary and Payment Information

Add all liabilities from Parts I and II to calculate the due amount. Apply credits or exemptions where allowed and include all deposits made during the quarter. This section determines whether additional payment is required or if an overpayment exists. Carefully review all calculations before filing to prevent delays or adjustments from the IRS during processing.

Step 6: Attach Required Schedules and Forms

Attach supporting schedules, such as Schedule A for liability reporting, Schedule C for credit claims, and Form 6627 for environmental tax calculations. Each attachment must provide complete supporting data for reported amounts. Failing to include these documents can cause processing delays or requests for clarification. Always verify that all schedules match entries on the main form before submission.

Filing and Submission Options for the Federal Excise Tax Return

Businesses filing Form 720 can choose between electronic submission and paper filing. The IRS encourages electronic filing for faster processing, immediate acknowledgment, and reduced chances of calculation or data entry errors.

Electronic Filing (Recommended)

Filing system: Businesses can file electronically through authorized transmitters or electronic return originators participating in the IRS e-file program for excise taxes.
Key advantages: Electronic filing provides faster processing, real-time confirmation, and secure delivery of sensitive financial information directly to the IRS.
Data accuracy: Built-in software validation reduces common filing mistakes and ensures that excise tax calculations meet official IRS requirements.
Processing speed: E-filed returns are typically processed within days, while mailed forms may take several weeks to update in the IRS system.

Paper Filing Instructions

Mailing address: Send the completed form to the Department of the Treasury, Internal Revenue Service, Cincinnati, OH 45999-0009.
Form version: Always use the current revision of the form, specifically the April 2018 version, to prevent rejection or delays.
Completeness check: Review all schedules and ensure signatures, dates, and total amounts are properly filled before mailing the return.
Postal timing: Allow timely mail delivery before the deadline to avoid late-filing penalties or missed quarter reports.

Filing Deadlines

Form 720 must be filed quarterly based on the ending month of each reporting period. Returns covering January through March are due April 30. Returns for April through June are due July 31. Returns for July through September are due October 31, and those covering October through December are due January 31 of the following year. Timely submission prevents penalties and maintains compliance.

Payment Procedures and Schedules

Federal excise taxes require timely payments made through the appropriate channels. The IRS mandates that most businesses use electronic funds transfer for all tax deposits related to excise liability.

Electronic Funds Transfer Requirement

Mandatory system: All deposits must be made through the Electronic Federal Tax Payment System (EFTPS), the official payment platform for federal business taxes.
Setup process: Businesses register online at the EFTPS website, provide account details, and receive a personal identification number for secure access.
Processing time: Enrollment generally takes 7–10 business days, so early registration ensures that the first scheduled payment occurs on time.
Benefits: EFTPS provides secure payment tracking, digital receipts, and flexibility to schedule deposits ahead of IRS deadlines.

Semimonthly Deposit Schedule

Deposit period one: Taxes accrued from the 1st through the 15th day of the month are due by the 29th of the same month.
Deposit period two: Taxes accrued from the 16th through the last day of the month are due by the 14th.
Timeliness requirement: Payments must post by the deadline, even if a weekend or federal holiday falls near the due date.
Recordkeeping: Always keep EFTPS receipts as proof of timely payment for audit or verification purposes.

Using Form 720-V Payment Voucher

Purpose: Use Form 720-V only when submitting a paper return accompanied by a check or money order for the tax payment.
Restrictions: Do not use the voucher for EFTPS, debit, or credit card payments, as those are electronic transactions.
Mailing inclusion: Always attach the payment voucher to the front of Form 720 to ensure proper routing at the IRS payment center.
Check details: Write the Employer Identification Number, the form number, and the applicable tax quarter.

Required Attachments and Supporting Forms

Businesses may need to attach additional schedules or forms to clarify calculations or request credit adjustments. Each supporting document serves a distinct purpose and helps verify accuracy in reported excise tax liabilities.

Schedule A – Excise Tax Liability: Schedule A reports liability amounts for Part I taxes and ensures deposits align with actual tax periods for each type of excise activity.
Schedule C – Claims: Schedule C allows businesses to claim credits or refunds for overpaid excise taxes, provided each claim includes supporting documentation describing the qualifying transaction.
Form 6627 – Environmental Taxes: Form 6627 must be attached when reporting liability for oil spill, ozone-depleting chemical, or imported product environmental taxes assessed under federal law.

Common Errors and How to Avoid Them

Completing Form 720 is crucial to prevent IRS penalties and correction notices. Many businesses face avoidable issues due to incorrect calculations, outdated forms, or missing schedules.

Filing Mistakes

Outdated versions: Using an older version of Form 720 may result in rejection; always use the 2018 revision for this tax year.
Missing signatures: Unsigned forms delay processing and may trigger follow-up requests from the IRS.
Omitted schedules: Failing to include required schedules or attachments prevents a complete review and may cause compliance alerts.
Incorrect identification: An invalid Employer Identification Number can cause processing errors and delay posting of the tax payment.

Calculation Errors

Wrong fuel rates: Applying incorrect rates for gasoline or diesel can misstate total liability, especially when new tax rates apply.
Mathematical issues: Simple addition or rounding errors can distort total amounts reported, leading to penalty assessments.
Unapplied credits: Omitting eligible exemptions or refunds may result in overpayment that remains unclaimed.
Unverified transfers: Errors often occur when total deposits recorded do not match the calculated liability from Parts I and II.

Payment and Deposit Issues

Late payments: Submitting deposits after the due date results in penalties ranging from two to fifteen percent of the amount owed.
Non-EFTPS deposits: Paper payments for mandatory electronic depositors violate IRS rules and trigger a ten percent penalty.
Unrecorded transactions: Failure to verify EFTPS posting confirmation may lead to payment disputes with the IRS.
Misapplied deposits: Entering incorrect tax period dates may cause payments to apply to the wrong quarter or liability.

Zero Activity and Final Return Guidance

Businesses must continue filing even when they have no activity for a quarter unless they submit a final return to close their filing requirement. Maintaining compliance during inactive periods prevents unnecessary notices from the IRS.

Filing With No Activity

Requirement: File Form 720 even if no taxable activity occurred, provided the business remains registered for excise tax purposes.
Entry format: Enter zero on all applicable lines and indicate “None” for the total tax liability for the quarter.
Schedule rule: Do not complete Schedule A for zero-activity quarters, as no liability needs to be allocated.
Compliance purpose: Filing maintains accurate IRS records and prevents the business from being flagged for noncompliance.

Filing a Final Return

Eligibility: Submit a final return when the business permanently ceases operations or no longer engages in taxable activities.
Identification: Check the “Final return” box in the top section of Form 720 to indicate closure of liability.
Record retention: Keep supporting documentation for at least four years from the final return date for future verification.
Closure benefit: Filing a final return formally removes the taxpayer from the excise tax system, preventing further reporting obligations.

Tips for First-Time Filers

Businesses filing Form 720 for the first time must prepare carefully to meet IRS standards. Understanding requirements, setting up electronic payment systems, and maintaining proper documentation improve long-term compliance.

Identifying Applicable Excise Taxes

Review activities: Evaluate all business operations to determine whether specific products or services are subject to excise taxes.
Examples: Excise taxes include selling fuel, providing transportation services, or manufacturing taxable goods like heavy vehicles.
Industry guidance: Consult Publication 510 for details on specific tax types that apply to particular industries or business models.
Clarification support: Contact the IRS Business and Specialty Tax line for help interpreting which activities are subject to federal excise tax.

Setting Up EFTPS

Registration: Begin EFTPS enrollment immediately upon determining excise tax liability to avoid missed payment deadlines.
Information needed: Provide the Employer Identification Number, bank account details, and authorized contact information during setup.
Confirmation process: The IRS mails a personal identification number to confirm enrollment and activate the account.
Testing step: Schedule a test payment before the first due date to ensure the account functions correctly.

Recordkeeping Best Practices

Document retention: Keep all invoices, sales receipts, and proof of payments for at least four years from the due date or payment date.
Organization method: Use digital systems to store transaction histories, liability worksheets, and quarterly tax reports.
Verification benefit: Comprehensive records simplify future audits, refund requests, and corrections to previous filings.
Accuracy safeguard: Regularly reconcile excise tax records with bank deposits and EFTPS payment confirmations.

Conclusion

Filing Form 720 correctly ensures that taxpayers meet their federal excise tax responsibilities. Following the official Form 720 2018 instructions, businesses can calculate liabilities accurately, submit timely payments, and avoid penalties. Proper preparation, electronic payment setup, and attention to detail guarantee smooth quarterly reporting and full compliance with IRS requirements.

Frequently Asked Questions

What is the purpose of Federal Form 720?

Federal Form 720 is used to report and pay federal excise taxes on specific goods, services, and activities subject to taxation. It ensures that businesses correctly calculate their quarterly liabilities and submit timely payments. Filing this form keeps companies compliant with federal tax law and prevents costly interest or penalty assessments from the IRS.

Who must file Form 720?

Any business that produces, sells, or provides goods or services subject to excise taxes must file Form 720. Examples include companies engaged in transportation, fuel distribution, insurance coverage, and communications services. Filing ensures accurate quarterly reporting, accountability for tax liabilities, and adherence to the federal excise tax requirements set forth by the Internal Revenue Service.

What are the filing deadlines for Form 720?

Form 720 must be filed quarterly with deadlines on April 30, July 31, October 31, and January 31. Each deadline corresponds to the quarter immediately preceding it. Filing before the due date ensures timely processing, avoids penalty assessments, and demonstrates compliance with the IRS requirements for federal excise tax reporting and payment obligations.

How can I pay federal excise tax electronically?

Taxpayers must use the Electronic Federal Tax Payment System (EFTPS) to make deposits for federal excise taxes. Businesses must register online, receive a secure personal identification number, and schedule payments electronically. The EFTPS system provides confirmation receipts, tracks transactions, and ensures that payments post promptly within IRS deadlines for each reporting quarter.

What happens if I file Form 720 late?

Late filing results in penalties ranging from two to fifteen percent of the unpaid balance, depending on how long the payment is delayed. Additional interest may accrue until the liability is satisfied. The IRS encourages taxpayers to file promptly to minimize penalties, maintain compliance, and preserve accurate reporting records for quarterly federal excise tax obligations.

What are common errors to avoid when filing?

Common filing errors include using outdated forms, entering incorrect tax rates, omitting required schedules, or misreporting total amounts. Businesses should review every calculation, confirm the Employer Identification Number, and verify deposit records. Careful review of the instructions on Form 720 for 2018 helps prevent delays, rejection, or penalty assessments by the Internal Revenue Service.

Can I file Form 720 if my business had no excise activity?

Yes, businesses registered for excise taxes must file Form 720 even if they have no taxable activity during the quarter. Enter zero on applicable lines and indicate “None” for total tax liability. Filing a zero-activity return maintains compliance, updates IRS records, and prevents unnecessary penalty notices or classification as a non-filer by the IRS.

Frequently Asked Questions

Step-by-Step Form 720 2018 Instructions for Businesses

Form 720 is an important form that many businesses must file when they are responsible for paying or collecting certain federal excise taxes. Unlike income tax, which applies to general earnings, excise taxes apply to specific goods, services, and activities subject to special federal rules. This form helps the Internal Revenue Service (IRS) monitor compliance and collect the total amount owed from taxpayers each quarter.

Businesses nationwide use this quarterly federal excise tax return to report liabilities on activities subject to excise tax, such as fuel, environmental taxes, and communications services. Filing the correct IRS form ensures that companies remain compliant with federal law while avoiding costly penalties or interest charges. Every business liable for these taxes must pay close attention to the instructions in Form 720 for 2018 to ensure accuracy.

Understanding which services are subject to tax, how to calculate each liability, and where to report the correct data is crucial for compliance. The process may appear technical, but with proper guidance and accurate calculations, taxpayers can file confidently, meet every due date, and maintain a clean account with the IRS.

Overview of Federal Form 720

Form 720 is the official quarterly federal excise tax return used by businesses and taxpayers liable for various taxes imposed under federal law. It helps the IRS collect excise taxes levied on certain products and services, such as fuel, environmental substances, air transportation, and communications.

Who Must File Form 720

Liable businesses: Any business that produces, sells, or uses goods subject to federal excise tax must file this form each quarter.
Service providers: Companies offering transportation, communications, or environmental services subject to excise taxes must report and pay under applicable sections.
Importers and manufacturers: Businesses that import or manufacture certain products, such as gasoline, diesel, or coal, are responsible for filing because their activities are directly taxed.
Insurance and health service providers: Organizations collecting specific fees for insurance or medical services must include those liabilities in their quarterly filing.

Structure of the Form

Part I: Includes primary excise taxes such as fuel, environmental, air transportation, and communications taxes.
Part II: Covers additional categories like patient-centered outcomes research fees, indoor tanning services, and other special excise taxes.
Part III: Summarizes calculations, total amount due, credits, and overpayments, which help the IRS verify accuracy in liability and payment.

What’s New for 2018 in the Form 720 2018 Instructions

The IRS updated several components of the 2018 federal excise tax filing process. Understanding these changes ensures taxpayers and companies calculate correctly and remain compliant when they file and report quarterly federal excise tax obligations.

Electronic Funds Transfer Requirement

Mandatory payments: All federal excise tax deposits must be made through electronic funds transfer, mainly via the Electronic Federal Tax Payment System (EFTPS).
Process for taxpayers: Each taxpayer must enroll in EFTPS and complete registration before making timely deposits.
Key benefit: Electronic payments improve accuracy and provide immediate confirmation, helping businesses avoid penalties for late or incorrect submissions.
Reminder: Paper checks are no longer acceptable deposits under the new guidance for federal excise tax payments.

Updates to Environmental Taxes

Oil spill liability extension: The crude oil and petroleum products tax was extended beginning March 1, 2018.
Deposit rules: A temporary modified safe harbor for deposits applied during the third quarter to simplify compliance for taxpayers responsible for oil-related liabilities.
Purpose: These changes maintain support for national environmental cleanup and hazard mitigation projects.

Fee Changes for Research and Health Plans

Increased rate: The patient-centered outcomes research fee rose to $2.39 per covered life for plan years ending between October 2017 and October 2018.
Impact: This increase affects self-insured health plans and insurance companies that file excise taxes under Part II of the form.

Other Notable Changes

Medical device tax suspension: The tax on medical devices remained suspended through December 31, 2019, easing costs for manufacturers and producers.
Aircraft management services: Payments for certain private aircraft management services became exempt from air transportation excise taxes.

Step-by-Step Instructions for Filing Form 720 Quarterly Federal Excise Tax Return

Filing the quarterly federal excise tax return requires attention to detail. Each form section corresponds to a specific set of activities and tax categories. Following the correct order ensures accuracy and prevents delays or penalties from the IRS.

Step 1: Prepare Required Information

Gather all records related to activities subject to excise taxes, including sales receipts, quantities sold, and services provided. Ensure the Employer Identification Number and legal business name match IRS records. Preparation before filing ensures accurate calculations, prevents confusion during review, and supports clear reporting of each taxpayer’s liability for the correct quarter.

Step 2: Complete the Header Section

Enter the business name, address, EIN, and the quarter’s ending date as registered with the IRS. Indicate any changes by checking the correct box for address updates or final returns. For foreign addresses, spell out the country name completely. This section ensures the IRS identifies the taxpayer and accurately processes the quarterly federal excise tax return.

Step 3: Fill Out Part I – Primary Excise Taxes

Report all primary excise taxes imposed on businesses that manufacture, sell, or provide taxable products and services. Include liabilities from fuel, communications, air transportation, and environmental taxes. Businesses producing sport fishing equipment or heavy vehicles must also include the total amount calculated under applicable IRS numbers. Accuracy in this section ensures compliance with specific tax categories.

Step 4: Fill Out Part II – Additional Excise Taxes

Record all other excise taxes not included in Part I. Other taxes may include health-related fees, the indoor tanning tax, and fuel use for inland waterway transportation. Each entry must reflect liabilities for the correct period using the latest tax rates. Businesses must carefully review the IRS Form 720 2018 instructions to determine which sections apply before finalizing their entries.

Step 5: Complete Part III – Summary and Payment Information

Add all liabilities from Parts I and II to calculate the due amount. Apply credits or exemptions where allowed and include all deposits made during the quarter. This section determines whether additional payment is required or if an overpayment exists. Carefully review all calculations before filing to prevent delays or adjustments from the IRS during processing.

Step 6: Attach Required Schedules and Forms

Attach supporting schedules, such as Schedule A for liability reporting, Schedule C for credit claims, and Form 6627 for environmental tax calculations. Each attachment must provide complete supporting data for reported amounts. Failing to include these documents can cause processing delays or requests for clarification. Always verify that all schedules match entries on the main form before submission.

Filing and Submission Options for the Federal Excise Tax Return

Businesses filing Form 720 can choose between electronic submission and paper filing. The IRS encourages electronic filing for faster processing, immediate acknowledgment, and reduced chances of calculation or data entry errors.

Electronic Filing (Recommended)

Filing system: Businesses can file electronically through authorized transmitters or electronic return originators participating in the IRS e-file program for excise taxes.
Key advantages: Electronic filing provides faster processing, real-time confirmation, and secure delivery of sensitive financial information directly to the IRS.
Data accuracy: Built-in software validation reduces common filing mistakes and ensures that excise tax calculations meet official IRS requirements.
Processing speed: E-filed returns are typically processed within days, while mailed forms may take several weeks to update in the IRS system.

Paper Filing Instructions

Mailing address: Send the completed form to the Department of the Treasury, Internal Revenue Service, Cincinnati, OH 45999-0009.
Form version: Always use the current revision of the form, specifically the April 2018 version, to prevent rejection or delays.
Completeness check: Review all schedules and ensure signatures, dates, and total amounts are properly filled before mailing the return.
Postal timing: Allow timely mail delivery before the deadline to avoid late-filing penalties or missed quarter reports.

Filing Deadlines

Form 720 must be filed quarterly based on the ending month of each reporting period. Returns covering January through March are due April 30. Returns for April through June are due July 31. Returns for July through September are due October 31, and those covering October through December are due January 31 of the following year. Timely submission prevents penalties and maintains compliance.

Payment Procedures and Schedules

Federal excise taxes require timely payments made through the appropriate channels. The IRS mandates that most businesses use electronic funds transfer for all tax deposits related to excise liability.

Electronic Funds Transfer Requirement

Mandatory system: All deposits must be made through the Electronic Federal Tax Payment System (EFTPS), the official payment platform for federal business taxes.
Setup process: Businesses register online at the EFTPS website, provide account details, and receive a personal identification number for secure access.
Processing time: Enrollment generally takes 7–10 business days, so early registration ensures that the first scheduled payment occurs on time.
Benefits: EFTPS provides secure payment tracking, digital receipts, and flexibility to schedule deposits ahead of IRS deadlines.

Semimonthly Deposit Schedule

Deposit period one: Taxes accrued from the 1st through the 15th day of the month are due by the 29th of the same month.
Deposit period two: Taxes accrued from the 16th through the last day of the month are due by the 14th.
Timeliness requirement: Payments must post by the deadline, even if a weekend or federal holiday falls near the due date.
Recordkeeping: Always keep EFTPS receipts as proof of timely payment for audit or verification purposes.

Using Form 720-V Payment Voucher

Purpose: Use Form 720-V only when submitting a paper return accompanied by a check or money order for the tax payment.
Restrictions: Do not use the voucher for EFTPS, debit, or credit card payments, as those are electronic transactions.
Mailing inclusion: Always attach the payment voucher to the front of Form 720 to ensure proper routing at the IRS payment center.
Check details: Write the Employer Identification Number, the form number, and the applicable tax quarter.

Required Attachments and Supporting Forms

Businesses may need to attach additional schedules or forms to clarify calculations or request credit adjustments. Each supporting document serves a distinct purpose and helps verify accuracy in reported excise tax liabilities.

Schedule A – Excise Tax Liability: Schedule A reports liability amounts for Part I taxes and ensures deposits align with actual tax periods for each type of excise activity.
Schedule C – Claims: Schedule C allows businesses to claim credits or refunds for overpaid excise taxes, provided each claim includes supporting documentation describing the qualifying transaction.
Form 6627 – Environmental Taxes: Form 6627 must be attached when reporting liability for oil spill, ozone-depleting chemical, or imported product environmental taxes assessed under federal law.

Common Errors and How to Avoid Them

Completing Form 720 is crucial to prevent IRS penalties and correction notices. Many businesses face avoidable issues due to incorrect calculations, outdated forms, or missing schedules.

Filing Mistakes

Outdated versions: Using an older version of Form 720 may result in rejection; always use the 2018 revision for this tax year.
Missing signatures: Unsigned forms delay processing and may trigger follow-up requests from the IRS.
Omitted schedules: Failing to include required schedules or attachments prevents a complete review and may cause compliance alerts.
Incorrect identification: An invalid Employer Identification Number can cause processing errors and delay posting of the tax payment.

Calculation Errors

Wrong fuel rates: Applying incorrect rates for gasoline or diesel can misstate total liability, especially when new tax rates apply.
Mathematical issues: Simple addition or rounding errors can distort total amounts reported, leading to penalty assessments.
Unapplied credits: Omitting eligible exemptions or refunds may result in overpayment that remains unclaimed.
Unverified transfers: Errors often occur when total deposits recorded do not match the calculated liability from Parts I and II.

Payment and Deposit Issues

Late payments: Submitting deposits after the due date results in penalties ranging from two to fifteen percent of the amount owed.
Non-EFTPS deposits: Paper payments for mandatory electronic depositors violate IRS rules and trigger a ten percent penalty.
Unrecorded transactions: Failure to verify EFTPS posting confirmation may lead to payment disputes with the IRS.
Misapplied deposits: Entering incorrect tax period dates may cause payments to apply to the wrong quarter or liability.

Zero Activity and Final Return Guidance

Businesses must continue filing even when they have no activity for a quarter unless they submit a final return to close their filing requirement. Maintaining compliance during inactive periods prevents unnecessary notices from the IRS.

Filing With No Activity

Requirement: File Form 720 even if no taxable activity occurred, provided the business remains registered for excise tax purposes.
Entry format: Enter zero on all applicable lines and indicate “None” for the total tax liability for the quarter.
Schedule rule: Do not complete Schedule A for zero-activity quarters, as no liability needs to be allocated.
Compliance purpose: Filing maintains accurate IRS records and prevents the business from being flagged for noncompliance.

Filing a Final Return

Eligibility: Submit a final return when the business permanently ceases operations or no longer engages in taxable activities.
Identification: Check the “Final return” box in the top section of Form 720 to indicate closure of liability.
Record retention: Keep supporting documentation for at least four years from the final return date for future verification.
Closure benefit: Filing a final return formally removes the taxpayer from the excise tax system, preventing further reporting obligations.

Tips for First-Time Filers

Businesses filing Form 720 for the first time must prepare carefully to meet IRS standards. Understanding requirements, setting up electronic payment systems, and maintaining proper documentation improve long-term compliance.

Identifying Applicable Excise Taxes

Review activities: Evaluate all business operations to determine whether specific products or services are subject to excise taxes.
Examples: Excise taxes include selling fuel, providing transportation services, or manufacturing taxable goods like heavy vehicles.
Industry guidance: Consult Publication 510 for details on specific tax types that apply to particular industries or business models.
Clarification support: Contact the IRS Business and Specialty Tax line for help interpreting which activities are subject to federal excise tax.

Setting Up EFTPS

Registration: Begin EFTPS enrollment immediately upon determining excise tax liability to avoid missed payment deadlines.
Information needed: Provide the Employer Identification Number, bank account details, and authorized contact information during setup.
Confirmation process: The IRS mails a personal identification number to confirm enrollment and activate the account.
Testing step: Schedule a test payment before the first due date to ensure the account functions correctly.

Recordkeeping Best Practices

Document retention: Keep all invoices, sales receipts, and proof of payments for at least four years from the due date or payment date.
Organization method: Use digital systems to store transaction histories, liability worksheets, and quarterly tax reports.
Verification benefit: Comprehensive records simplify future audits, refund requests, and corrections to previous filings.
Accuracy safeguard: Regularly reconcile excise tax records with bank deposits and EFTPS payment confirmations.

Conclusion

Filing Form 720 correctly ensures that taxpayers meet their federal excise tax responsibilities. Following the official Form 720 2018 instructions, businesses can calculate liabilities accurately, submit timely payments, and avoid penalties. Proper preparation, electronic payment setup, and attention to detail guarantee smooth quarterly reporting and full compliance with IRS requirements.

Frequently Asked Questions

What is the purpose of Federal Form 720?

Federal Form 720 is used to report and pay federal excise taxes on specific goods, services, and activities subject to taxation. It ensures that businesses correctly calculate their quarterly liabilities and submit timely payments. Filing this form keeps companies compliant with federal tax law and prevents costly interest or penalty assessments from the IRS.

Who must file Form 720?

Any business that produces, sells, or provides goods or services subject to excise taxes must file Form 720. Examples include companies engaged in transportation, fuel distribution, insurance coverage, and communications services. Filing ensures accurate quarterly reporting, accountability for tax liabilities, and adherence to the federal excise tax requirements set forth by the Internal Revenue Service.

What are the filing deadlines for Form 720?

Form 720 must be filed quarterly with deadlines on April 30, July 31, October 31, and January 31. Each deadline corresponds to the quarter immediately preceding it. Filing before the due date ensures timely processing, avoids penalty assessments, and demonstrates compliance with the IRS requirements for federal excise tax reporting and payment obligations.

How can I pay federal excise tax electronically?

Taxpayers must use the Electronic Federal Tax Payment System (EFTPS) to make deposits for federal excise taxes. Businesses must register online, receive a secure personal identification number, and schedule payments electronically. The EFTPS system provides confirmation receipts, tracks transactions, and ensures that payments post promptly within IRS deadlines for each reporting quarter.

What happens if I file Form 720 late?

Late filing results in penalties ranging from two to fifteen percent of the unpaid balance, depending on how long the payment is delayed. Additional interest may accrue until the liability is satisfied. The IRS encourages taxpayers to file promptly to minimize penalties, maintain compliance, and preserve accurate reporting records for quarterly federal excise tax obligations.

What are common errors to avoid when filing?

Common filing errors include using outdated forms, entering incorrect tax rates, omitting required schedules, or misreporting total amounts. Businesses should review every calculation, confirm the Employer Identification Number, and verify deposit records. Careful review of the instructions on Form 720 for 2018 helps prevent delays, rejection, or penalty assessments by the Internal Revenue Service.

Can I file Form 720 if my business had no excise activity?

Yes, businesses registered for excise taxes must file Form 720 even if they have no taxable activity during the quarter. Enter zero on applicable lines and indicate “None” for total tax liability. Filing a zero-activity return maintains compliance, updates IRS records, and prevents unnecessary penalty notices or classification as a non-filer by the IRS.

Frequently Asked Questions

Step-by-Step Form 720 2018 Instructions for Businesses

Form 720 is an important form that many businesses must file when they are responsible for paying or collecting certain federal excise taxes. Unlike income tax, which applies to general earnings, excise taxes apply to specific goods, services, and activities subject to special federal rules. This form helps the Internal Revenue Service (IRS) monitor compliance and collect the total amount owed from taxpayers each quarter.

Businesses nationwide use this quarterly federal excise tax return to report liabilities on activities subject to excise tax, such as fuel, environmental taxes, and communications services. Filing the correct IRS form ensures that companies remain compliant with federal law while avoiding costly penalties or interest charges. Every business liable for these taxes must pay close attention to the instructions in Form 720 for 2018 to ensure accuracy.

Understanding which services are subject to tax, how to calculate each liability, and where to report the correct data is crucial for compliance. The process may appear technical, but with proper guidance and accurate calculations, taxpayers can file confidently, meet every due date, and maintain a clean account with the IRS.

Overview of Federal Form 720

Form 720 is the official quarterly federal excise tax return used by businesses and taxpayers liable for various taxes imposed under federal law. It helps the IRS collect excise taxes levied on certain products and services, such as fuel, environmental substances, air transportation, and communications.

Who Must File Form 720

Liable businesses: Any business that produces, sells, or uses goods subject to federal excise tax must file this form each quarter.
Service providers: Companies offering transportation, communications, or environmental services subject to excise taxes must report and pay under applicable sections.
Importers and manufacturers: Businesses that import or manufacture certain products, such as gasoline, diesel, or coal, are responsible for filing because their activities are directly taxed.
Insurance and health service providers: Organizations collecting specific fees for insurance or medical services must include those liabilities in their quarterly filing.

Structure of the Form

Part I: Includes primary excise taxes such as fuel, environmental, air transportation, and communications taxes.
Part II: Covers additional categories like patient-centered outcomes research fees, indoor tanning services, and other special excise taxes.
Part III: Summarizes calculations, total amount due, credits, and overpayments, which help the IRS verify accuracy in liability and payment.

What’s New for 2018 in the Form 720 2018 Instructions

The IRS updated several components of the 2018 federal excise tax filing process. Understanding these changes ensures taxpayers and companies calculate correctly and remain compliant when they file and report quarterly federal excise tax obligations.

Electronic Funds Transfer Requirement

Mandatory payments: All federal excise tax deposits must be made through electronic funds transfer, mainly via the Electronic Federal Tax Payment System (EFTPS).
Process for taxpayers: Each taxpayer must enroll in EFTPS and complete registration before making timely deposits.
Key benefit: Electronic payments improve accuracy and provide immediate confirmation, helping businesses avoid penalties for late or incorrect submissions.
Reminder: Paper checks are no longer acceptable deposits under the new guidance for federal excise tax payments.

Updates to Environmental Taxes

Oil spill liability extension: The crude oil and petroleum products tax was extended beginning March 1, 2018.
Deposit rules: A temporary modified safe harbor for deposits applied during the third quarter to simplify compliance for taxpayers responsible for oil-related liabilities.
Purpose: These changes maintain support for national environmental cleanup and hazard mitigation projects.

Fee Changes for Research and Health Plans

Increased rate: The patient-centered outcomes research fee rose to $2.39 per covered life for plan years ending between October 2017 and October 2018.
Impact: This increase affects self-insured health plans and insurance companies that file excise taxes under Part II of the form.

Other Notable Changes

Medical device tax suspension: The tax on medical devices remained suspended through December 31, 2019, easing costs for manufacturers and producers.
Aircraft management services: Payments for certain private aircraft management services became exempt from air transportation excise taxes.

Step-by-Step Instructions for Filing Form 720 Quarterly Federal Excise Tax Return

Filing the quarterly federal excise tax return requires attention to detail. Each form section corresponds to a specific set of activities and tax categories. Following the correct order ensures accuracy and prevents delays or penalties from the IRS.

Step 1: Prepare Required Information

Gather all records related to activities subject to excise taxes, including sales receipts, quantities sold, and services provided. Ensure the Employer Identification Number and legal business name match IRS records. Preparation before filing ensures accurate calculations, prevents confusion during review, and supports clear reporting of each taxpayer’s liability for the correct quarter.

Step 2: Complete the Header Section

Enter the business name, address, EIN, and the quarter’s ending date as registered with the IRS. Indicate any changes by checking the correct box for address updates or final returns. For foreign addresses, spell out the country name completely. This section ensures the IRS identifies the taxpayer and accurately processes the quarterly federal excise tax return.

Step 3: Fill Out Part I – Primary Excise Taxes

Report all primary excise taxes imposed on businesses that manufacture, sell, or provide taxable products and services. Include liabilities from fuel, communications, air transportation, and environmental taxes. Businesses producing sport fishing equipment or heavy vehicles must also include the total amount calculated under applicable IRS numbers. Accuracy in this section ensures compliance with specific tax categories.

Step 4: Fill Out Part II – Additional Excise Taxes

Record all other excise taxes not included in Part I. Other taxes may include health-related fees, the indoor tanning tax, and fuel use for inland waterway transportation. Each entry must reflect liabilities for the correct period using the latest tax rates. Businesses must carefully review the IRS Form 720 2018 instructions to determine which sections apply before finalizing their entries.

Step 5: Complete Part III – Summary and Payment Information

Add all liabilities from Parts I and II to calculate the due amount. Apply credits or exemptions where allowed and include all deposits made during the quarter. This section determines whether additional payment is required or if an overpayment exists. Carefully review all calculations before filing to prevent delays or adjustments from the IRS during processing.

Step 6: Attach Required Schedules and Forms

Attach supporting schedules, such as Schedule A for liability reporting, Schedule C for credit claims, and Form 6627 for environmental tax calculations. Each attachment must provide complete supporting data for reported amounts. Failing to include these documents can cause processing delays or requests for clarification. Always verify that all schedules match entries on the main form before submission.

Filing and Submission Options for the Federal Excise Tax Return

Businesses filing Form 720 can choose between electronic submission and paper filing. The IRS encourages electronic filing for faster processing, immediate acknowledgment, and reduced chances of calculation or data entry errors.

Electronic Filing (Recommended)

Filing system: Businesses can file electronically through authorized transmitters or electronic return originators participating in the IRS e-file program for excise taxes.
Key advantages: Electronic filing provides faster processing, real-time confirmation, and secure delivery of sensitive financial information directly to the IRS.
Data accuracy: Built-in software validation reduces common filing mistakes and ensures that excise tax calculations meet official IRS requirements.
Processing speed: E-filed returns are typically processed within days, while mailed forms may take several weeks to update in the IRS system.

Paper Filing Instructions

Mailing address: Send the completed form to the Department of the Treasury, Internal Revenue Service, Cincinnati, OH 45999-0009.
Form version: Always use the current revision of the form, specifically the April 2018 version, to prevent rejection or delays.
Completeness check: Review all schedules and ensure signatures, dates, and total amounts are properly filled before mailing the return.
Postal timing: Allow timely mail delivery before the deadline to avoid late-filing penalties or missed quarter reports.

Filing Deadlines

Form 720 must be filed quarterly based on the ending month of each reporting period. Returns covering January through March are due April 30. Returns for April through June are due July 31. Returns for July through September are due October 31, and those covering October through December are due January 31 of the following year. Timely submission prevents penalties and maintains compliance.

Payment Procedures and Schedules

Federal excise taxes require timely payments made through the appropriate channels. The IRS mandates that most businesses use electronic funds transfer for all tax deposits related to excise liability.

Electronic Funds Transfer Requirement

Mandatory system: All deposits must be made through the Electronic Federal Tax Payment System (EFTPS), the official payment platform for federal business taxes.
Setup process: Businesses register online at the EFTPS website, provide account details, and receive a personal identification number for secure access.
Processing time: Enrollment generally takes 7–10 business days, so early registration ensures that the first scheduled payment occurs on time.
Benefits: EFTPS provides secure payment tracking, digital receipts, and flexibility to schedule deposits ahead of IRS deadlines.

Semimonthly Deposit Schedule

Deposit period one: Taxes accrued from the 1st through the 15th day of the month are due by the 29th of the same month.
Deposit period two: Taxes accrued from the 16th through the last day of the month are due by the 14th.
Timeliness requirement: Payments must post by the deadline, even if a weekend or federal holiday falls near the due date.
Recordkeeping: Always keep EFTPS receipts as proof of timely payment for audit or verification purposes.

Using Form 720-V Payment Voucher

Purpose: Use Form 720-V only when submitting a paper return accompanied by a check or money order for the tax payment.
Restrictions: Do not use the voucher for EFTPS, debit, or credit card payments, as those are electronic transactions.
Mailing inclusion: Always attach the payment voucher to the front of Form 720 to ensure proper routing at the IRS payment center.
Check details: Write the Employer Identification Number, the form number, and the applicable tax quarter.

Required Attachments and Supporting Forms

Businesses may need to attach additional schedules or forms to clarify calculations or request credit adjustments. Each supporting document serves a distinct purpose and helps verify accuracy in reported excise tax liabilities.

Schedule A – Excise Tax Liability: Schedule A reports liability amounts for Part I taxes and ensures deposits align with actual tax periods for each type of excise activity.
Schedule C – Claims: Schedule C allows businesses to claim credits or refunds for overpaid excise taxes, provided each claim includes supporting documentation describing the qualifying transaction.
Form 6627 – Environmental Taxes: Form 6627 must be attached when reporting liability for oil spill, ozone-depleting chemical, or imported product environmental taxes assessed under federal law.

Common Errors and How to Avoid Them

Completing Form 720 is crucial to prevent IRS penalties and correction notices. Many businesses face avoidable issues due to incorrect calculations, outdated forms, or missing schedules.

Filing Mistakes

Outdated versions: Using an older version of Form 720 may result in rejection; always use the 2018 revision for this tax year.
Missing signatures: Unsigned forms delay processing and may trigger follow-up requests from the IRS.
Omitted schedules: Failing to include required schedules or attachments prevents a complete review and may cause compliance alerts.
Incorrect identification: An invalid Employer Identification Number can cause processing errors and delay posting of the tax payment.

Calculation Errors

Wrong fuel rates: Applying incorrect rates for gasoline or diesel can misstate total liability, especially when new tax rates apply.
Mathematical issues: Simple addition or rounding errors can distort total amounts reported, leading to penalty assessments.
Unapplied credits: Omitting eligible exemptions or refunds may result in overpayment that remains unclaimed.
Unverified transfers: Errors often occur when total deposits recorded do not match the calculated liability from Parts I and II.

Payment and Deposit Issues

Late payments: Submitting deposits after the due date results in penalties ranging from two to fifteen percent of the amount owed.
Non-EFTPS deposits: Paper payments for mandatory electronic depositors violate IRS rules and trigger a ten percent penalty.
Unrecorded transactions: Failure to verify EFTPS posting confirmation may lead to payment disputes with the IRS.
Misapplied deposits: Entering incorrect tax period dates may cause payments to apply to the wrong quarter or liability.

Zero Activity and Final Return Guidance

Businesses must continue filing even when they have no activity for a quarter unless they submit a final return to close their filing requirement. Maintaining compliance during inactive periods prevents unnecessary notices from the IRS.

Filing With No Activity

Requirement: File Form 720 even if no taxable activity occurred, provided the business remains registered for excise tax purposes.
Entry format: Enter zero on all applicable lines and indicate “None” for the total tax liability for the quarter.
Schedule rule: Do not complete Schedule A for zero-activity quarters, as no liability needs to be allocated.
Compliance purpose: Filing maintains accurate IRS records and prevents the business from being flagged for noncompliance.

Filing a Final Return

Eligibility: Submit a final return when the business permanently ceases operations or no longer engages in taxable activities.
Identification: Check the “Final return” box in the top section of Form 720 to indicate closure of liability.
Record retention: Keep supporting documentation for at least four years from the final return date for future verification.
Closure benefit: Filing a final return formally removes the taxpayer from the excise tax system, preventing further reporting obligations.

Tips for First-Time Filers

Businesses filing Form 720 for the first time must prepare carefully to meet IRS standards. Understanding requirements, setting up electronic payment systems, and maintaining proper documentation improve long-term compliance.

Identifying Applicable Excise Taxes

Review activities: Evaluate all business operations to determine whether specific products or services are subject to excise taxes.
Examples: Excise taxes include selling fuel, providing transportation services, or manufacturing taxable goods like heavy vehicles.
Industry guidance: Consult Publication 510 for details on specific tax types that apply to particular industries or business models.
Clarification support: Contact the IRS Business and Specialty Tax line for help interpreting which activities are subject to federal excise tax.

Setting Up EFTPS

Registration: Begin EFTPS enrollment immediately upon determining excise tax liability to avoid missed payment deadlines.
Information needed: Provide the Employer Identification Number, bank account details, and authorized contact information during setup.
Confirmation process: The IRS mails a personal identification number to confirm enrollment and activate the account.
Testing step: Schedule a test payment before the first due date to ensure the account functions correctly.

Recordkeeping Best Practices

Document retention: Keep all invoices, sales receipts, and proof of payments for at least four years from the due date or payment date.
Organization method: Use digital systems to store transaction histories, liability worksheets, and quarterly tax reports.
Verification benefit: Comprehensive records simplify future audits, refund requests, and corrections to previous filings.
Accuracy safeguard: Regularly reconcile excise tax records with bank deposits and EFTPS payment confirmations.

Conclusion

Filing Form 720 correctly ensures that taxpayers meet their federal excise tax responsibilities. Following the official Form 720 2018 instructions, businesses can calculate liabilities accurately, submit timely payments, and avoid penalties. Proper preparation, electronic payment setup, and attention to detail guarantee smooth quarterly reporting and full compliance with IRS requirements.

Frequently Asked Questions

What is the purpose of Federal Form 720?

Federal Form 720 is used to report and pay federal excise taxes on specific goods, services, and activities subject to taxation. It ensures that businesses correctly calculate their quarterly liabilities and submit timely payments. Filing this form keeps companies compliant with federal tax law and prevents costly interest or penalty assessments from the IRS.

Who must file Form 720?

Any business that produces, sells, or provides goods or services subject to excise taxes must file Form 720. Examples include companies engaged in transportation, fuel distribution, insurance coverage, and communications services. Filing ensures accurate quarterly reporting, accountability for tax liabilities, and adherence to the federal excise tax requirements set forth by the Internal Revenue Service.

What are the filing deadlines for Form 720?

Form 720 must be filed quarterly with deadlines on April 30, July 31, October 31, and January 31. Each deadline corresponds to the quarter immediately preceding it. Filing before the due date ensures timely processing, avoids penalty assessments, and demonstrates compliance with the IRS requirements for federal excise tax reporting and payment obligations.

How can I pay federal excise tax electronically?

Taxpayers must use the Electronic Federal Tax Payment System (EFTPS) to make deposits for federal excise taxes. Businesses must register online, receive a secure personal identification number, and schedule payments electronically. The EFTPS system provides confirmation receipts, tracks transactions, and ensures that payments post promptly within IRS deadlines for each reporting quarter.

What happens if I file Form 720 late?

Late filing results in penalties ranging from two to fifteen percent of the unpaid balance, depending on how long the payment is delayed. Additional interest may accrue until the liability is satisfied. The IRS encourages taxpayers to file promptly to minimize penalties, maintain compliance, and preserve accurate reporting records for quarterly federal excise tax obligations.

What are common errors to avoid when filing?

Common filing errors include using outdated forms, entering incorrect tax rates, omitting required schedules, or misreporting total amounts. Businesses should review every calculation, confirm the Employer Identification Number, and verify deposit records. Careful review of the instructions on Form 720 for 2018 helps prevent delays, rejection, or penalty assessments by the Internal Revenue Service.

Can I file Form 720 if my business had no excise activity?

Yes, businesses registered for excise taxes must file Form 720 even if they have no taxable activity during the quarter. Enter zero on applicable lines and indicate “None” for total tax liability. Filing a zero-activity return maintains compliance, updates IRS records, and prevents unnecessary penalty notices or classification as a non-filer by the IRS.

Frequently Asked Questions

Step-by-Step Form 720 2018 Instructions for Businesses

Form 720 is an important form that many businesses must file when they are responsible for paying or collecting certain federal excise taxes. Unlike income tax, which applies to general earnings, excise taxes apply to specific goods, services, and activities subject to special federal rules. This form helps the Internal Revenue Service (IRS) monitor compliance and collect the total amount owed from taxpayers each quarter.

Businesses nationwide use this quarterly federal excise tax return to report liabilities on activities subject to excise tax, such as fuel, environmental taxes, and communications services. Filing the correct IRS form ensures that companies remain compliant with federal law while avoiding costly penalties or interest charges. Every business liable for these taxes must pay close attention to the instructions in Form 720 for 2018 to ensure accuracy.

Understanding which services are subject to tax, how to calculate each liability, and where to report the correct data is crucial for compliance. The process may appear technical, but with proper guidance and accurate calculations, taxpayers can file confidently, meet every due date, and maintain a clean account with the IRS.

Overview of Federal Form 720

Form 720 is the official quarterly federal excise tax return used by businesses and taxpayers liable for various taxes imposed under federal law. It helps the IRS collect excise taxes levied on certain products and services, such as fuel, environmental substances, air transportation, and communications.

Who Must File Form 720

Liable businesses: Any business that produces, sells, or uses goods subject to federal excise tax must file this form each quarter.
Service providers: Companies offering transportation, communications, or environmental services subject to excise taxes must report and pay under applicable sections.
Importers and manufacturers: Businesses that import or manufacture certain products, such as gasoline, diesel, or coal, are responsible for filing because their activities are directly taxed.
Insurance and health service providers: Organizations collecting specific fees for insurance or medical services must include those liabilities in their quarterly filing.

Structure of the Form

Part I: Includes primary excise taxes such as fuel, environmental, air transportation, and communications taxes.
Part II: Covers additional categories like patient-centered outcomes research fees, indoor tanning services, and other special excise taxes.
Part III: Summarizes calculations, total amount due, credits, and overpayments, which help the IRS verify accuracy in liability and payment.

What’s New for 2018 in the Form 720 2018 Instructions

The IRS updated several components of the 2018 federal excise tax filing process. Understanding these changes ensures taxpayers and companies calculate correctly and remain compliant when they file and report quarterly federal excise tax obligations.

Electronic Funds Transfer Requirement

Mandatory payments: All federal excise tax deposits must be made through electronic funds transfer, mainly via the Electronic Federal Tax Payment System (EFTPS).
Process for taxpayers: Each taxpayer must enroll in EFTPS and complete registration before making timely deposits.
Key benefit: Electronic payments improve accuracy and provide immediate confirmation, helping businesses avoid penalties for late or incorrect submissions.
Reminder: Paper checks are no longer acceptable deposits under the new guidance for federal excise tax payments.

Updates to Environmental Taxes

Oil spill liability extension: The crude oil and petroleum products tax was extended beginning March 1, 2018.
Deposit rules: A temporary modified safe harbor for deposits applied during the third quarter to simplify compliance for taxpayers responsible for oil-related liabilities.
Purpose: These changes maintain support for national environmental cleanup and hazard mitigation projects.

Fee Changes for Research and Health Plans

Increased rate: The patient-centered outcomes research fee rose to $2.39 per covered life for plan years ending between October 2017 and October 2018.
Impact: This increase affects self-insured health plans and insurance companies that file excise taxes under Part II of the form.

Other Notable Changes

Medical device tax suspension: The tax on medical devices remained suspended through December 31, 2019, easing costs for manufacturers and producers.
Aircraft management services: Payments for certain private aircraft management services became exempt from air transportation excise taxes.

Step-by-Step Instructions for Filing Form 720 Quarterly Federal Excise Tax Return

Filing the quarterly federal excise tax return requires attention to detail. Each form section corresponds to a specific set of activities and tax categories. Following the correct order ensures accuracy and prevents delays or penalties from the IRS.

Step 1: Prepare Required Information

Gather all records related to activities subject to excise taxes, including sales receipts, quantities sold, and services provided. Ensure the Employer Identification Number and legal business name match IRS records. Preparation before filing ensures accurate calculations, prevents confusion during review, and supports clear reporting of each taxpayer’s liability for the correct quarter.

Step 2: Complete the Header Section

Enter the business name, address, EIN, and the quarter’s ending date as registered with the IRS. Indicate any changes by checking the correct box for address updates or final returns. For foreign addresses, spell out the country name completely. This section ensures the IRS identifies the taxpayer and accurately processes the quarterly federal excise tax return.

Step 3: Fill Out Part I – Primary Excise Taxes

Report all primary excise taxes imposed on businesses that manufacture, sell, or provide taxable products and services. Include liabilities from fuel, communications, air transportation, and environmental taxes. Businesses producing sport fishing equipment or heavy vehicles must also include the total amount calculated under applicable IRS numbers. Accuracy in this section ensures compliance with specific tax categories.

Step 4: Fill Out Part II – Additional Excise Taxes

Record all other excise taxes not included in Part I. Other taxes may include health-related fees, the indoor tanning tax, and fuel use for inland waterway transportation. Each entry must reflect liabilities for the correct period using the latest tax rates. Businesses must carefully review the IRS Form 720 2018 instructions to determine which sections apply before finalizing their entries.

Step 5: Complete Part III – Summary and Payment Information

Add all liabilities from Parts I and II to calculate the due amount. Apply credits or exemptions where allowed and include all deposits made during the quarter. This section determines whether additional payment is required or if an overpayment exists. Carefully review all calculations before filing to prevent delays or adjustments from the IRS during processing.

Step 6: Attach Required Schedules and Forms

Attach supporting schedules, such as Schedule A for liability reporting, Schedule C for credit claims, and Form 6627 for environmental tax calculations. Each attachment must provide complete supporting data for reported amounts. Failing to include these documents can cause processing delays or requests for clarification. Always verify that all schedules match entries on the main form before submission.

Filing and Submission Options for the Federal Excise Tax Return

Businesses filing Form 720 can choose between electronic submission and paper filing. The IRS encourages electronic filing for faster processing, immediate acknowledgment, and reduced chances of calculation or data entry errors.

Electronic Filing (Recommended)

Filing system: Businesses can file electronically through authorized transmitters or electronic return originators participating in the IRS e-file program for excise taxes.
Key advantages: Electronic filing provides faster processing, real-time confirmation, and secure delivery of sensitive financial information directly to the IRS.
Data accuracy: Built-in software validation reduces common filing mistakes and ensures that excise tax calculations meet official IRS requirements.
Processing speed: E-filed returns are typically processed within days, while mailed forms may take several weeks to update in the IRS system.

Paper Filing Instructions

Mailing address: Send the completed form to the Department of the Treasury, Internal Revenue Service, Cincinnati, OH 45999-0009.
Form version: Always use the current revision of the form, specifically the April 2018 version, to prevent rejection or delays.
Completeness check: Review all schedules and ensure signatures, dates, and total amounts are properly filled before mailing the return.
Postal timing: Allow timely mail delivery before the deadline to avoid late-filing penalties or missed quarter reports.

Filing Deadlines

Form 720 must be filed quarterly based on the ending month of each reporting period. Returns covering January through March are due April 30. Returns for April through June are due July 31. Returns for July through September are due October 31, and those covering October through December are due January 31 of the following year. Timely submission prevents penalties and maintains compliance.

Payment Procedures and Schedules

Federal excise taxes require timely payments made through the appropriate channels. The IRS mandates that most businesses use electronic funds transfer for all tax deposits related to excise liability.

Electronic Funds Transfer Requirement

Mandatory system: All deposits must be made through the Electronic Federal Tax Payment System (EFTPS), the official payment platform for federal business taxes.
Setup process: Businesses register online at the EFTPS website, provide account details, and receive a personal identification number for secure access.
Processing time: Enrollment generally takes 7–10 business days, so early registration ensures that the first scheduled payment occurs on time.
Benefits: EFTPS provides secure payment tracking, digital receipts, and flexibility to schedule deposits ahead of IRS deadlines.

Semimonthly Deposit Schedule

Deposit period one: Taxes accrued from the 1st through the 15th day of the month are due by the 29th of the same month.
Deposit period two: Taxes accrued from the 16th through the last day of the month are due by the 14th.
Timeliness requirement: Payments must post by the deadline, even if a weekend or federal holiday falls near the due date.
Recordkeeping: Always keep EFTPS receipts as proof of timely payment for audit or verification purposes.

Using Form 720-V Payment Voucher

Purpose: Use Form 720-V only when submitting a paper return accompanied by a check or money order for the tax payment.
Restrictions: Do not use the voucher for EFTPS, debit, or credit card payments, as those are electronic transactions.
Mailing inclusion: Always attach the payment voucher to the front of Form 720 to ensure proper routing at the IRS payment center.
Check details: Write the Employer Identification Number, the form number, and the applicable tax quarter.

Required Attachments and Supporting Forms

Businesses may need to attach additional schedules or forms to clarify calculations or request credit adjustments. Each supporting document serves a distinct purpose and helps verify accuracy in reported excise tax liabilities.

Schedule A – Excise Tax Liability: Schedule A reports liability amounts for Part I taxes and ensures deposits align with actual tax periods for each type of excise activity.
Schedule C – Claims: Schedule C allows businesses to claim credits or refunds for overpaid excise taxes, provided each claim includes supporting documentation describing the qualifying transaction.
Form 6627 – Environmental Taxes: Form 6627 must be attached when reporting liability for oil spill, ozone-depleting chemical, or imported product environmental taxes assessed under federal law.

Common Errors and How to Avoid Them

Completing Form 720 is crucial to prevent IRS penalties and correction notices. Many businesses face avoidable issues due to incorrect calculations, outdated forms, or missing schedules.

Filing Mistakes

Outdated versions: Using an older version of Form 720 may result in rejection; always use the 2018 revision for this tax year.
Missing signatures: Unsigned forms delay processing and may trigger follow-up requests from the IRS.
Omitted schedules: Failing to include required schedules or attachments prevents a complete review and may cause compliance alerts.
Incorrect identification: An invalid Employer Identification Number can cause processing errors and delay posting of the tax payment.

Calculation Errors

Wrong fuel rates: Applying incorrect rates for gasoline or diesel can misstate total liability, especially when new tax rates apply.
Mathematical issues: Simple addition or rounding errors can distort total amounts reported, leading to penalty assessments.
Unapplied credits: Omitting eligible exemptions or refunds may result in overpayment that remains unclaimed.
Unverified transfers: Errors often occur when total deposits recorded do not match the calculated liability from Parts I and II.

Payment and Deposit Issues

Late payments: Submitting deposits after the due date results in penalties ranging from two to fifteen percent of the amount owed.
Non-EFTPS deposits: Paper payments for mandatory electronic depositors violate IRS rules and trigger a ten percent penalty.
Unrecorded transactions: Failure to verify EFTPS posting confirmation may lead to payment disputes with the IRS.
Misapplied deposits: Entering incorrect tax period dates may cause payments to apply to the wrong quarter or liability.

Zero Activity and Final Return Guidance

Businesses must continue filing even when they have no activity for a quarter unless they submit a final return to close their filing requirement. Maintaining compliance during inactive periods prevents unnecessary notices from the IRS.

Filing With No Activity

Requirement: File Form 720 even if no taxable activity occurred, provided the business remains registered for excise tax purposes.
Entry format: Enter zero on all applicable lines and indicate “None” for the total tax liability for the quarter.
Schedule rule: Do not complete Schedule A for zero-activity quarters, as no liability needs to be allocated.
Compliance purpose: Filing maintains accurate IRS records and prevents the business from being flagged for noncompliance.

Filing a Final Return

Eligibility: Submit a final return when the business permanently ceases operations or no longer engages in taxable activities.
Identification: Check the “Final return” box in the top section of Form 720 to indicate closure of liability.
Record retention: Keep supporting documentation for at least four years from the final return date for future verification.
Closure benefit: Filing a final return formally removes the taxpayer from the excise tax system, preventing further reporting obligations.

Tips for First-Time Filers

Businesses filing Form 720 for the first time must prepare carefully to meet IRS standards. Understanding requirements, setting up electronic payment systems, and maintaining proper documentation improve long-term compliance.

Identifying Applicable Excise Taxes

Review activities: Evaluate all business operations to determine whether specific products or services are subject to excise taxes.
Examples: Excise taxes include selling fuel, providing transportation services, or manufacturing taxable goods like heavy vehicles.
Industry guidance: Consult Publication 510 for details on specific tax types that apply to particular industries or business models.
Clarification support: Contact the IRS Business and Specialty Tax line for help interpreting which activities are subject to federal excise tax.

Setting Up EFTPS

Registration: Begin EFTPS enrollment immediately upon determining excise tax liability to avoid missed payment deadlines.
Information needed: Provide the Employer Identification Number, bank account details, and authorized contact information during setup.
Confirmation process: The IRS mails a personal identification number to confirm enrollment and activate the account.
Testing step: Schedule a test payment before the first due date to ensure the account functions correctly.

Recordkeeping Best Practices

Document retention: Keep all invoices, sales receipts, and proof of payments for at least four years from the due date or payment date.
Organization method: Use digital systems to store transaction histories, liability worksheets, and quarterly tax reports.
Verification benefit: Comprehensive records simplify future audits, refund requests, and corrections to previous filings.
Accuracy safeguard: Regularly reconcile excise tax records with bank deposits and EFTPS payment confirmations.

Conclusion

Filing Form 720 correctly ensures that taxpayers meet their federal excise tax responsibilities. Following the official Form 720 2018 instructions, businesses can calculate liabilities accurately, submit timely payments, and avoid penalties. Proper preparation, electronic payment setup, and attention to detail guarantee smooth quarterly reporting and full compliance with IRS requirements.

Frequently Asked Questions

What is the purpose of Federal Form 720?

Federal Form 720 is used to report and pay federal excise taxes on specific goods, services, and activities subject to taxation. It ensures that businesses correctly calculate their quarterly liabilities and submit timely payments. Filing this form keeps companies compliant with federal tax law and prevents costly interest or penalty assessments from the IRS.

Who must file Form 720?

Any business that produces, sells, or provides goods or services subject to excise taxes must file Form 720. Examples include companies engaged in transportation, fuel distribution, insurance coverage, and communications services. Filing ensures accurate quarterly reporting, accountability for tax liabilities, and adherence to the federal excise tax requirements set forth by the Internal Revenue Service.

What are the filing deadlines for Form 720?

Form 720 must be filed quarterly with deadlines on April 30, July 31, October 31, and January 31. Each deadline corresponds to the quarter immediately preceding it. Filing before the due date ensures timely processing, avoids penalty assessments, and demonstrates compliance with the IRS requirements for federal excise tax reporting and payment obligations.

How can I pay federal excise tax electronically?

Taxpayers must use the Electronic Federal Tax Payment System (EFTPS) to make deposits for federal excise taxes. Businesses must register online, receive a secure personal identification number, and schedule payments electronically. The EFTPS system provides confirmation receipts, tracks transactions, and ensures that payments post promptly within IRS deadlines for each reporting quarter.

What happens if I file Form 720 late?

Late filing results in penalties ranging from two to fifteen percent of the unpaid balance, depending on how long the payment is delayed. Additional interest may accrue until the liability is satisfied. The IRS encourages taxpayers to file promptly to minimize penalties, maintain compliance, and preserve accurate reporting records for quarterly federal excise tax obligations.

What are common errors to avoid when filing?

Common filing errors include using outdated forms, entering incorrect tax rates, omitting required schedules, or misreporting total amounts. Businesses should review every calculation, confirm the Employer Identification Number, and verify deposit records. Careful review of the instructions on Form 720 for 2018 helps prevent delays, rejection, or penalty assessments by the Internal Revenue Service.

Can I file Form 720 if my business had no excise activity?

Yes, businesses registered for excise taxes must file Form 720 even if they have no taxable activity during the quarter. Enter zero on applicable lines and indicate “None” for total tax liability. Filing a zero-activity return maintains compliance, updates IRS records, and prevents unnecessary penalty notices or classification as a non-filer by the IRS.

Frequently Asked Questions

Step-by-Step Form 720 2018 Instructions for Businesses

Form 720 is an important form that many businesses must file when they are responsible for paying or collecting certain federal excise taxes. Unlike income tax, which applies to general earnings, excise taxes apply to specific goods, services, and activities subject to special federal rules. This form helps the Internal Revenue Service (IRS) monitor compliance and collect the total amount owed from taxpayers each quarter.

Businesses nationwide use this quarterly federal excise tax return to report liabilities on activities subject to excise tax, such as fuel, environmental taxes, and communications services. Filing the correct IRS form ensures that companies remain compliant with federal law while avoiding costly penalties or interest charges. Every business liable for these taxes must pay close attention to the instructions in Form 720 for 2018 to ensure accuracy.

Understanding which services are subject to tax, how to calculate each liability, and where to report the correct data is crucial for compliance. The process may appear technical, but with proper guidance and accurate calculations, taxpayers can file confidently, meet every due date, and maintain a clean account with the IRS.

Overview of Federal Form 720

Form 720 is the official quarterly federal excise tax return used by businesses and taxpayers liable for various taxes imposed under federal law. It helps the IRS collect excise taxes levied on certain products and services, such as fuel, environmental substances, air transportation, and communications.

Who Must File Form 720

Liable businesses: Any business that produces, sells, or uses goods subject to federal excise tax must file this form each quarter.
Service providers: Companies offering transportation, communications, or environmental services subject to excise taxes must report and pay under applicable sections.
Importers and manufacturers: Businesses that import or manufacture certain products, such as gasoline, diesel, or coal, are responsible for filing because their activities are directly taxed.
Insurance and health service providers: Organizations collecting specific fees for insurance or medical services must include those liabilities in their quarterly filing.

Structure of the Form

Part I: Includes primary excise taxes such as fuel, environmental, air transportation, and communications taxes.
Part II: Covers additional categories like patient-centered outcomes research fees, indoor tanning services, and other special excise taxes.
Part III: Summarizes calculations, total amount due, credits, and overpayments, which help the IRS verify accuracy in liability and payment.

What’s New for 2018 in the Form 720 2018 Instructions

The IRS updated several components of the 2018 federal excise tax filing process. Understanding these changes ensures taxpayers and companies calculate correctly and remain compliant when they file and report quarterly federal excise tax obligations.

Electronic Funds Transfer Requirement

Mandatory payments: All federal excise tax deposits must be made through electronic funds transfer, mainly via the Electronic Federal Tax Payment System (EFTPS).
Process for taxpayers: Each taxpayer must enroll in EFTPS and complete registration before making timely deposits.
Key benefit: Electronic payments improve accuracy and provide immediate confirmation, helping businesses avoid penalties for late or incorrect submissions.
Reminder: Paper checks are no longer acceptable deposits under the new guidance for federal excise tax payments.

Updates to Environmental Taxes

Oil spill liability extension: The crude oil and petroleum products tax was extended beginning March 1, 2018.
Deposit rules: A temporary modified safe harbor for deposits applied during the third quarter to simplify compliance for taxpayers responsible for oil-related liabilities.
Purpose: These changes maintain support for national environmental cleanup and hazard mitigation projects.

Fee Changes for Research and Health Plans

Increased rate: The patient-centered outcomes research fee rose to $2.39 per covered life for plan years ending between October 2017 and October 2018.
Impact: This increase affects self-insured health plans and insurance companies that file excise taxes under Part II of the form.

Other Notable Changes

Medical device tax suspension: The tax on medical devices remained suspended through December 31, 2019, easing costs for manufacturers and producers.
Aircraft management services: Payments for certain private aircraft management services became exempt from air transportation excise taxes.

Step-by-Step Instructions for Filing Form 720 Quarterly Federal Excise Tax Return

Filing the quarterly federal excise tax return requires attention to detail. Each form section corresponds to a specific set of activities and tax categories. Following the correct order ensures accuracy and prevents delays or penalties from the IRS.

Step 1: Prepare Required Information

Gather all records related to activities subject to excise taxes, including sales receipts, quantities sold, and services provided. Ensure the Employer Identification Number and legal business name match IRS records. Preparation before filing ensures accurate calculations, prevents confusion during review, and supports clear reporting of each taxpayer’s liability for the correct quarter.

Step 2: Complete the Header Section

Enter the business name, address, EIN, and the quarter’s ending date as registered with the IRS. Indicate any changes by checking the correct box for address updates or final returns. For foreign addresses, spell out the country name completely. This section ensures the IRS identifies the taxpayer and accurately processes the quarterly federal excise tax return.

Step 3: Fill Out Part I – Primary Excise Taxes

Report all primary excise taxes imposed on businesses that manufacture, sell, or provide taxable products and services. Include liabilities from fuel, communications, air transportation, and environmental taxes. Businesses producing sport fishing equipment or heavy vehicles must also include the total amount calculated under applicable IRS numbers. Accuracy in this section ensures compliance with specific tax categories.

Step 4: Fill Out Part II – Additional Excise Taxes

Record all other excise taxes not included in Part I. Other taxes may include health-related fees, the indoor tanning tax, and fuel use for inland waterway transportation. Each entry must reflect liabilities for the correct period using the latest tax rates. Businesses must carefully review the IRS Form 720 2018 instructions to determine which sections apply before finalizing their entries.

Step 5: Complete Part III – Summary and Payment Information

Add all liabilities from Parts I and II to calculate the due amount. Apply credits or exemptions where allowed and include all deposits made during the quarter. This section determines whether additional payment is required or if an overpayment exists. Carefully review all calculations before filing to prevent delays or adjustments from the IRS during processing.

Step 6: Attach Required Schedules and Forms

Attach supporting schedules, such as Schedule A for liability reporting, Schedule C for credit claims, and Form 6627 for environmental tax calculations. Each attachment must provide complete supporting data for reported amounts. Failing to include these documents can cause processing delays or requests for clarification. Always verify that all schedules match entries on the main form before submission.

Filing and Submission Options for the Federal Excise Tax Return

Businesses filing Form 720 can choose between electronic submission and paper filing. The IRS encourages electronic filing for faster processing, immediate acknowledgment, and reduced chances of calculation or data entry errors.

Electronic Filing (Recommended)

Filing system: Businesses can file electronically through authorized transmitters or electronic return originators participating in the IRS e-file program for excise taxes.
Key advantages: Electronic filing provides faster processing, real-time confirmation, and secure delivery of sensitive financial information directly to the IRS.
Data accuracy: Built-in software validation reduces common filing mistakes and ensures that excise tax calculations meet official IRS requirements.
Processing speed: E-filed returns are typically processed within days, while mailed forms may take several weeks to update in the IRS system.

Paper Filing Instructions

Mailing address: Send the completed form to the Department of the Treasury, Internal Revenue Service, Cincinnati, OH 45999-0009.
Form version: Always use the current revision of the form, specifically the April 2018 version, to prevent rejection or delays.
Completeness check: Review all schedules and ensure signatures, dates, and total amounts are properly filled before mailing the return.
Postal timing: Allow timely mail delivery before the deadline to avoid late-filing penalties or missed quarter reports.

Filing Deadlines

Form 720 must be filed quarterly based on the ending month of each reporting period. Returns covering January through March are due April 30. Returns for April through June are due July 31. Returns for July through September are due October 31, and those covering October through December are due January 31 of the following year. Timely submission prevents penalties and maintains compliance.

Payment Procedures and Schedules

Federal excise taxes require timely payments made through the appropriate channels. The IRS mandates that most businesses use electronic funds transfer for all tax deposits related to excise liability.

Electronic Funds Transfer Requirement

Mandatory system: All deposits must be made through the Electronic Federal Tax Payment System (EFTPS), the official payment platform for federal business taxes.
Setup process: Businesses register online at the EFTPS website, provide account details, and receive a personal identification number for secure access.
Processing time: Enrollment generally takes 7–10 business days, so early registration ensures that the first scheduled payment occurs on time.
Benefits: EFTPS provides secure payment tracking, digital receipts, and flexibility to schedule deposits ahead of IRS deadlines.

Semimonthly Deposit Schedule

Deposit period one: Taxes accrued from the 1st through the 15th day of the month are due by the 29th of the same month.
Deposit period two: Taxes accrued from the 16th through the last day of the month are due by the 14th.
Timeliness requirement: Payments must post by the deadline, even if a weekend or federal holiday falls near the due date.
Recordkeeping: Always keep EFTPS receipts as proof of timely payment for audit or verification purposes.

Using Form 720-V Payment Voucher

Purpose: Use Form 720-V only when submitting a paper return accompanied by a check or money order for the tax payment.
Restrictions: Do not use the voucher for EFTPS, debit, or credit card payments, as those are electronic transactions.
Mailing inclusion: Always attach the payment voucher to the front of Form 720 to ensure proper routing at the IRS payment center.
Check details: Write the Employer Identification Number, the form number, and the applicable tax quarter.

Required Attachments and Supporting Forms

Businesses may need to attach additional schedules or forms to clarify calculations or request credit adjustments. Each supporting document serves a distinct purpose and helps verify accuracy in reported excise tax liabilities.

Schedule A – Excise Tax Liability: Schedule A reports liability amounts for Part I taxes and ensures deposits align with actual tax periods for each type of excise activity.
Schedule C – Claims: Schedule C allows businesses to claim credits or refunds for overpaid excise taxes, provided each claim includes supporting documentation describing the qualifying transaction.
Form 6627 – Environmental Taxes: Form 6627 must be attached when reporting liability for oil spill, ozone-depleting chemical, or imported product environmental taxes assessed under federal law.

Common Errors and How to Avoid Them

Completing Form 720 is crucial to prevent IRS penalties and correction notices. Many businesses face avoidable issues due to incorrect calculations, outdated forms, or missing schedules.

Filing Mistakes

Outdated versions: Using an older version of Form 720 may result in rejection; always use the 2018 revision for this tax year.
Missing signatures: Unsigned forms delay processing and may trigger follow-up requests from the IRS.
Omitted schedules: Failing to include required schedules or attachments prevents a complete review and may cause compliance alerts.
Incorrect identification: An invalid Employer Identification Number can cause processing errors and delay posting of the tax payment.

Calculation Errors

Wrong fuel rates: Applying incorrect rates for gasoline or diesel can misstate total liability, especially when new tax rates apply.
Mathematical issues: Simple addition or rounding errors can distort total amounts reported, leading to penalty assessments.
Unapplied credits: Omitting eligible exemptions or refunds may result in overpayment that remains unclaimed.
Unverified transfers: Errors often occur when total deposits recorded do not match the calculated liability from Parts I and II.

Payment and Deposit Issues

Late payments: Submitting deposits after the due date results in penalties ranging from two to fifteen percent of the amount owed.
Non-EFTPS deposits: Paper payments for mandatory electronic depositors violate IRS rules and trigger a ten percent penalty.
Unrecorded transactions: Failure to verify EFTPS posting confirmation may lead to payment disputes with the IRS.
Misapplied deposits: Entering incorrect tax period dates may cause payments to apply to the wrong quarter or liability.

Zero Activity and Final Return Guidance

Businesses must continue filing even when they have no activity for a quarter unless they submit a final return to close their filing requirement. Maintaining compliance during inactive periods prevents unnecessary notices from the IRS.

Filing With No Activity

Requirement: File Form 720 even if no taxable activity occurred, provided the business remains registered for excise tax purposes.
Entry format: Enter zero on all applicable lines and indicate “None” for the total tax liability for the quarter.
Schedule rule: Do not complete Schedule A for zero-activity quarters, as no liability needs to be allocated.
Compliance purpose: Filing maintains accurate IRS records and prevents the business from being flagged for noncompliance.

Filing a Final Return

Eligibility: Submit a final return when the business permanently ceases operations or no longer engages in taxable activities.
Identification: Check the “Final return” box in the top section of Form 720 to indicate closure of liability.
Record retention: Keep supporting documentation for at least four years from the final return date for future verification.
Closure benefit: Filing a final return formally removes the taxpayer from the excise tax system, preventing further reporting obligations.

Tips for First-Time Filers

Businesses filing Form 720 for the first time must prepare carefully to meet IRS standards. Understanding requirements, setting up electronic payment systems, and maintaining proper documentation improve long-term compliance.

Identifying Applicable Excise Taxes

Review activities: Evaluate all business operations to determine whether specific products or services are subject to excise taxes.
Examples: Excise taxes include selling fuel, providing transportation services, or manufacturing taxable goods like heavy vehicles.
Industry guidance: Consult Publication 510 for details on specific tax types that apply to particular industries or business models.
Clarification support: Contact the IRS Business and Specialty Tax line for help interpreting which activities are subject to federal excise tax.

Setting Up EFTPS

Registration: Begin EFTPS enrollment immediately upon determining excise tax liability to avoid missed payment deadlines.
Information needed: Provide the Employer Identification Number, bank account details, and authorized contact information during setup.
Confirmation process: The IRS mails a personal identification number to confirm enrollment and activate the account.
Testing step: Schedule a test payment before the first due date to ensure the account functions correctly.

Recordkeeping Best Practices

Document retention: Keep all invoices, sales receipts, and proof of payments for at least four years from the due date or payment date.
Organization method: Use digital systems to store transaction histories, liability worksheets, and quarterly tax reports.
Verification benefit: Comprehensive records simplify future audits, refund requests, and corrections to previous filings.
Accuracy safeguard: Regularly reconcile excise tax records with bank deposits and EFTPS payment confirmations.

Conclusion

Filing Form 720 correctly ensures that taxpayers meet their federal excise tax responsibilities. Following the official Form 720 2018 instructions, businesses can calculate liabilities accurately, submit timely payments, and avoid penalties. Proper preparation, electronic payment setup, and attention to detail guarantee smooth quarterly reporting and full compliance with IRS requirements.

Frequently Asked Questions

What is the purpose of Federal Form 720?

Federal Form 720 is used to report and pay federal excise taxes on specific goods, services, and activities subject to taxation. It ensures that businesses correctly calculate their quarterly liabilities and submit timely payments. Filing this form keeps companies compliant with federal tax law and prevents costly interest or penalty assessments from the IRS.

Who must file Form 720?

Any business that produces, sells, or provides goods or services subject to excise taxes must file Form 720. Examples include companies engaged in transportation, fuel distribution, insurance coverage, and communications services. Filing ensures accurate quarterly reporting, accountability for tax liabilities, and adherence to the federal excise tax requirements set forth by the Internal Revenue Service.

What are the filing deadlines for Form 720?

Form 720 must be filed quarterly with deadlines on April 30, July 31, October 31, and January 31. Each deadline corresponds to the quarter immediately preceding it. Filing before the due date ensures timely processing, avoids penalty assessments, and demonstrates compliance with the IRS requirements for federal excise tax reporting and payment obligations.

How can I pay federal excise tax electronically?

Taxpayers must use the Electronic Federal Tax Payment System (EFTPS) to make deposits for federal excise taxes. Businesses must register online, receive a secure personal identification number, and schedule payments electronically. The EFTPS system provides confirmation receipts, tracks transactions, and ensures that payments post promptly within IRS deadlines for each reporting quarter.

What happens if I file Form 720 late?

Late filing results in penalties ranging from two to fifteen percent of the unpaid balance, depending on how long the payment is delayed. Additional interest may accrue until the liability is satisfied. The IRS encourages taxpayers to file promptly to minimize penalties, maintain compliance, and preserve accurate reporting records for quarterly federal excise tax obligations.

What are common errors to avoid when filing?

Common filing errors include using outdated forms, entering incorrect tax rates, omitting required schedules, or misreporting total amounts. Businesses should review every calculation, confirm the Employer Identification Number, and verify deposit records. Careful review of the instructions on Form 720 for 2018 helps prevent delays, rejection, or penalty assessments by the Internal Revenue Service.

Can I file Form 720 if my business had no excise activity?

Yes, businesses registered for excise taxes must file Form 720 even if they have no taxable activity during the quarter. Enter zero on applicable lines and indicate “None” for total tax liability. Filing a zero-activity return maintains compliance, updates IRS records, and prevents unnecessary penalty notices or classification as a non-filer by the IRS.

Frequently Asked Questions

Step-by-Step Form 720 2018 Instructions for Businesses

Form 720 is an important form that many businesses must file when they are responsible for paying or collecting certain federal excise taxes. Unlike income tax, which applies to general earnings, excise taxes apply to specific goods, services, and activities subject to special federal rules. This form helps the Internal Revenue Service (IRS) monitor compliance and collect the total amount owed from taxpayers each quarter.

Businesses nationwide use this quarterly federal excise tax return to report liabilities on activities subject to excise tax, such as fuel, environmental taxes, and communications services. Filing the correct IRS form ensures that companies remain compliant with federal law while avoiding costly penalties or interest charges. Every business liable for these taxes must pay close attention to the instructions in Form 720 for 2018 to ensure accuracy.

Understanding which services are subject to tax, how to calculate each liability, and where to report the correct data is crucial for compliance. The process may appear technical, but with proper guidance and accurate calculations, taxpayers can file confidently, meet every due date, and maintain a clean account with the IRS.

Overview of Federal Form 720

Form 720 is the official quarterly federal excise tax return used by businesses and taxpayers liable for various taxes imposed under federal law. It helps the IRS collect excise taxes levied on certain products and services, such as fuel, environmental substances, air transportation, and communications.

Who Must File Form 720

Liable businesses: Any business that produces, sells, or uses goods subject to federal excise tax must file this form each quarter.
Service providers: Companies offering transportation, communications, or environmental services subject to excise taxes must report and pay under applicable sections.
Importers and manufacturers: Businesses that import or manufacture certain products, such as gasoline, diesel, or coal, are responsible for filing because their activities are directly taxed.
Insurance and health service providers: Organizations collecting specific fees for insurance or medical services must include those liabilities in their quarterly filing.

Structure of the Form

Part I: Includes primary excise taxes such as fuel, environmental, air transportation, and communications taxes.
Part II: Covers additional categories like patient-centered outcomes research fees, indoor tanning services, and other special excise taxes.
Part III: Summarizes calculations, total amount due, credits, and overpayments, which help the IRS verify accuracy in liability and payment.

What’s New for 2018 in the Form 720 2018 Instructions

The IRS updated several components of the 2018 federal excise tax filing process. Understanding these changes ensures taxpayers and companies calculate correctly and remain compliant when they file and report quarterly federal excise tax obligations.

Electronic Funds Transfer Requirement

Mandatory payments: All federal excise tax deposits must be made through electronic funds transfer, mainly via the Electronic Federal Tax Payment System (EFTPS).
Process for taxpayers: Each taxpayer must enroll in EFTPS and complete registration before making timely deposits.
Key benefit: Electronic payments improve accuracy and provide immediate confirmation, helping businesses avoid penalties for late or incorrect submissions.
Reminder: Paper checks are no longer acceptable deposits under the new guidance for federal excise tax payments.

Updates to Environmental Taxes

Oil spill liability extension: The crude oil and petroleum products tax was extended beginning March 1, 2018.
Deposit rules: A temporary modified safe harbor for deposits applied during the third quarter to simplify compliance for taxpayers responsible for oil-related liabilities.
Purpose: These changes maintain support for national environmental cleanup and hazard mitigation projects.

Fee Changes for Research and Health Plans

Increased rate: The patient-centered outcomes research fee rose to $2.39 per covered life for plan years ending between October 2017 and October 2018.
Impact: This increase affects self-insured health plans and insurance companies that file excise taxes under Part II of the form.

Other Notable Changes

Medical device tax suspension: The tax on medical devices remained suspended through December 31, 2019, easing costs for manufacturers and producers.
Aircraft management services: Payments for certain private aircraft management services became exempt from air transportation excise taxes.

Step-by-Step Instructions for Filing Form 720 Quarterly Federal Excise Tax Return

Filing the quarterly federal excise tax return requires attention to detail. Each form section corresponds to a specific set of activities and tax categories. Following the correct order ensures accuracy and prevents delays or penalties from the IRS.

Step 1: Prepare Required Information

Gather all records related to activities subject to excise taxes, including sales receipts, quantities sold, and services provided. Ensure the Employer Identification Number and legal business name match IRS records. Preparation before filing ensures accurate calculations, prevents confusion during review, and supports clear reporting of each taxpayer’s liability for the correct quarter.

Step 2: Complete the Header Section

Enter the business name, address, EIN, and the quarter’s ending date as registered with the IRS. Indicate any changes by checking the correct box for address updates or final returns. For foreign addresses, spell out the country name completely. This section ensures the IRS identifies the taxpayer and accurately processes the quarterly federal excise tax return.

Step 3: Fill Out Part I – Primary Excise Taxes

Report all primary excise taxes imposed on businesses that manufacture, sell, or provide taxable products and services. Include liabilities from fuel, communications, air transportation, and environmental taxes. Businesses producing sport fishing equipment or heavy vehicles must also include the total amount calculated under applicable IRS numbers. Accuracy in this section ensures compliance with specific tax categories.

Step 4: Fill Out Part II – Additional Excise Taxes

Record all other excise taxes not included in Part I. Other taxes may include health-related fees, the indoor tanning tax, and fuel use for inland waterway transportation. Each entry must reflect liabilities for the correct period using the latest tax rates. Businesses must carefully review the IRS Form 720 2018 instructions to determine which sections apply before finalizing their entries.

Step 5: Complete Part III – Summary and Payment Information

Add all liabilities from Parts I and II to calculate the due amount. Apply credits or exemptions where allowed and include all deposits made during the quarter. This section determines whether additional payment is required or if an overpayment exists. Carefully review all calculations before filing to prevent delays or adjustments from the IRS during processing.

Step 6: Attach Required Schedules and Forms

Attach supporting schedules, such as Schedule A for liability reporting, Schedule C for credit claims, and Form 6627 for environmental tax calculations. Each attachment must provide complete supporting data for reported amounts. Failing to include these documents can cause processing delays or requests for clarification. Always verify that all schedules match entries on the main form before submission.

Filing and Submission Options for the Federal Excise Tax Return

Businesses filing Form 720 can choose between electronic submission and paper filing. The IRS encourages electronic filing for faster processing, immediate acknowledgment, and reduced chances of calculation or data entry errors.

Electronic Filing (Recommended)

Filing system: Businesses can file electronically through authorized transmitters or electronic return originators participating in the IRS e-file program for excise taxes.
Key advantages: Electronic filing provides faster processing, real-time confirmation, and secure delivery of sensitive financial information directly to the IRS.
Data accuracy: Built-in software validation reduces common filing mistakes and ensures that excise tax calculations meet official IRS requirements.
Processing speed: E-filed returns are typically processed within days, while mailed forms may take several weeks to update in the IRS system.

Paper Filing Instructions

Mailing address: Send the completed form to the Department of the Treasury, Internal Revenue Service, Cincinnati, OH 45999-0009.
Form version: Always use the current revision of the form, specifically the April 2018 version, to prevent rejection or delays.
Completeness check: Review all schedules and ensure signatures, dates, and total amounts are properly filled before mailing the return.
Postal timing: Allow timely mail delivery before the deadline to avoid late-filing penalties or missed quarter reports.

Filing Deadlines

Form 720 must be filed quarterly based on the ending month of each reporting period. Returns covering January through March are due April 30. Returns for April through June are due July 31. Returns for July through September are due October 31, and those covering October through December are due January 31 of the following year. Timely submission prevents penalties and maintains compliance.

Payment Procedures and Schedules

Federal excise taxes require timely payments made through the appropriate channels. The IRS mandates that most businesses use electronic funds transfer for all tax deposits related to excise liability.

Electronic Funds Transfer Requirement

Mandatory system: All deposits must be made through the Electronic Federal Tax Payment System (EFTPS), the official payment platform for federal business taxes.
Setup process: Businesses register online at the EFTPS website, provide account details, and receive a personal identification number for secure access.
Processing time: Enrollment generally takes 7–10 business days, so early registration ensures that the first scheduled payment occurs on time.
Benefits: EFTPS provides secure payment tracking, digital receipts, and flexibility to schedule deposits ahead of IRS deadlines.

Semimonthly Deposit Schedule

Deposit period one: Taxes accrued from the 1st through the 15th day of the month are due by the 29th of the same month.
Deposit period two: Taxes accrued from the 16th through the last day of the month are due by the 14th.
Timeliness requirement: Payments must post by the deadline, even if a weekend or federal holiday falls near the due date.
Recordkeeping: Always keep EFTPS receipts as proof of timely payment for audit or verification purposes.

Using Form 720-V Payment Voucher

Purpose: Use Form 720-V only when submitting a paper return accompanied by a check or money order for the tax payment.
Restrictions: Do not use the voucher for EFTPS, debit, or credit card payments, as those are electronic transactions.
Mailing inclusion: Always attach the payment voucher to the front of Form 720 to ensure proper routing at the IRS payment center.
Check details: Write the Employer Identification Number, the form number, and the applicable tax quarter.

Required Attachments and Supporting Forms

Businesses may need to attach additional schedules or forms to clarify calculations or request credit adjustments. Each supporting document serves a distinct purpose and helps verify accuracy in reported excise tax liabilities.

Schedule A – Excise Tax Liability: Schedule A reports liability amounts for Part I taxes and ensures deposits align with actual tax periods for each type of excise activity.
Schedule C – Claims: Schedule C allows businesses to claim credits or refunds for overpaid excise taxes, provided each claim includes supporting documentation describing the qualifying transaction.
Form 6627 – Environmental Taxes: Form 6627 must be attached when reporting liability for oil spill, ozone-depleting chemical, or imported product environmental taxes assessed under federal law.

Common Errors and How to Avoid Them

Completing Form 720 is crucial to prevent IRS penalties and correction notices. Many businesses face avoidable issues due to incorrect calculations, outdated forms, or missing schedules.

Filing Mistakes

Outdated versions: Using an older version of Form 720 may result in rejection; always use the 2018 revision for this tax year.
Missing signatures: Unsigned forms delay processing and may trigger follow-up requests from the IRS.
Omitted schedules: Failing to include required schedules or attachments prevents a complete review and may cause compliance alerts.
Incorrect identification: An invalid Employer Identification Number can cause processing errors and delay posting of the tax payment.

Calculation Errors

Wrong fuel rates: Applying incorrect rates for gasoline or diesel can misstate total liability, especially when new tax rates apply.
Mathematical issues: Simple addition or rounding errors can distort total amounts reported, leading to penalty assessments.
Unapplied credits: Omitting eligible exemptions or refunds may result in overpayment that remains unclaimed.
Unverified transfers: Errors often occur when total deposits recorded do not match the calculated liability from Parts I and II.

Payment and Deposit Issues

Late payments: Submitting deposits after the due date results in penalties ranging from two to fifteen percent of the amount owed.
Non-EFTPS deposits: Paper payments for mandatory electronic depositors violate IRS rules and trigger a ten percent penalty.
Unrecorded transactions: Failure to verify EFTPS posting confirmation may lead to payment disputes with the IRS.
Misapplied deposits: Entering incorrect tax period dates may cause payments to apply to the wrong quarter or liability.

Zero Activity and Final Return Guidance

Businesses must continue filing even when they have no activity for a quarter unless they submit a final return to close their filing requirement. Maintaining compliance during inactive periods prevents unnecessary notices from the IRS.

Filing With No Activity

Requirement: File Form 720 even if no taxable activity occurred, provided the business remains registered for excise tax purposes.
Entry format: Enter zero on all applicable lines and indicate “None” for the total tax liability for the quarter.
Schedule rule: Do not complete Schedule A for zero-activity quarters, as no liability needs to be allocated.
Compliance purpose: Filing maintains accurate IRS records and prevents the business from being flagged for noncompliance.

Filing a Final Return

Eligibility: Submit a final return when the business permanently ceases operations or no longer engages in taxable activities.
Identification: Check the “Final return” box in the top section of Form 720 to indicate closure of liability.
Record retention: Keep supporting documentation for at least four years from the final return date for future verification.
Closure benefit: Filing a final return formally removes the taxpayer from the excise tax system, preventing further reporting obligations.

Tips for First-Time Filers

Businesses filing Form 720 for the first time must prepare carefully to meet IRS standards. Understanding requirements, setting up electronic payment systems, and maintaining proper documentation improve long-term compliance.

Identifying Applicable Excise Taxes

Review activities: Evaluate all business operations to determine whether specific products or services are subject to excise taxes.
Examples: Excise taxes include selling fuel, providing transportation services, or manufacturing taxable goods like heavy vehicles.
Industry guidance: Consult Publication 510 for details on specific tax types that apply to particular industries or business models.
Clarification support: Contact the IRS Business and Specialty Tax line for help interpreting which activities are subject to federal excise tax.

Setting Up EFTPS

Registration: Begin EFTPS enrollment immediately upon determining excise tax liability to avoid missed payment deadlines.
Information needed: Provide the Employer Identification Number, bank account details, and authorized contact information during setup.
Confirmation process: The IRS mails a personal identification number to confirm enrollment and activate the account.
Testing step: Schedule a test payment before the first due date to ensure the account functions correctly.

Recordkeeping Best Practices

Document retention: Keep all invoices, sales receipts, and proof of payments for at least four years from the due date or payment date.
Organization method: Use digital systems to store transaction histories, liability worksheets, and quarterly tax reports.
Verification benefit: Comprehensive records simplify future audits, refund requests, and corrections to previous filings.
Accuracy safeguard: Regularly reconcile excise tax records with bank deposits and EFTPS payment confirmations.

Conclusion

Filing Form 720 correctly ensures that taxpayers meet their federal excise tax responsibilities. Following the official Form 720 2018 instructions, businesses can calculate liabilities accurately, submit timely payments, and avoid penalties. Proper preparation, electronic payment setup, and attention to detail guarantee smooth quarterly reporting and full compliance with IRS requirements.

Frequently Asked Questions

What is the purpose of Federal Form 720?

Federal Form 720 is used to report and pay federal excise taxes on specific goods, services, and activities subject to taxation. It ensures that businesses correctly calculate their quarterly liabilities and submit timely payments. Filing this form keeps companies compliant with federal tax law and prevents costly interest or penalty assessments from the IRS.

Who must file Form 720?

Any business that produces, sells, or provides goods or services subject to excise taxes must file Form 720. Examples include companies engaged in transportation, fuel distribution, insurance coverage, and communications services. Filing ensures accurate quarterly reporting, accountability for tax liabilities, and adherence to the federal excise tax requirements set forth by the Internal Revenue Service.

What are the filing deadlines for Form 720?

Form 720 must be filed quarterly with deadlines on April 30, July 31, October 31, and January 31. Each deadline corresponds to the quarter immediately preceding it. Filing before the due date ensures timely processing, avoids penalty assessments, and demonstrates compliance with the IRS requirements for federal excise tax reporting and payment obligations.

How can I pay federal excise tax electronically?

Taxpayers must use the Electronic Federal Tax Payment System (EFTPS) to make deposits for federal excise taxes. Businesses must register online, receive a secure personal identification number, and schedule payments electronically. The EFTPS system provides confirmation receipts, tracks transactions, and ensures that payments post promptly within IRS deadlines for each reporting quarter.

What happens if I file Form 720 late?

Late filing results in penalties ranging from two to fifteen percent of the unpaid balance, depending on how long the payment is delayed. Additional interest may accrue until the liability is satisfied. The IRS encourages taxpayers to file promptly to minimize penalties, maintain compliance, and preserve accurate reporting records for quarterly federal excise tax obligations.

What are common errors to avoid when filing?

Common filing errors include using outdated forms, entering incorrect tax rates, omitting required schedules, or misreporting total amounts. Businesses should review every calculation, confirm the Employer Identification Number, and verify deposit records. Careful review of the instructions on Form 720 for 2018 helps prevent delays, rejection, or penalty assessments by the Internal Revenue Service.

Can I file Form 720 if my business had no excise activity?

Yes, businesses registered for excise taxes must file Form 720 even if they have no taxable activity during the quarter. Enter zero on applicable lines and indicate “None” for total tax liability. Filing a zero-activity return maintains compliance, updates IRS records, and prevents unnecessary penalty notices or classification as a non-filer by the IRS.

Step-by-Step Form 720 2018 Instructions for Businesses

Overview of Federal Form 720

Who Must File Form 720

Structure of the Form

What’s New for 2018 in the Form 720 2018 Instructions

Electronic Funds Transfer Requirement

Updates to Environmental Taxes

Fee Changes for Research and Health Plans

Other Notable Changes

Step-by-Step Instructions for Filing Form 720 Quarterly Federal Excise Tax Return

Step 1: Prepare Required Information

Step 2: Complete the Header Section

Step 3: Fill Out Part I – Primary Excise Taxes

Step 4: Fill Out Part II – Additional Excise Taxes

Step 5: Complete Part III – Summary and Payment Information

Step 6: Attach Required Schedules and Forms

Filing and Submission Options for the Federal Excise Tax Return

Electronic Filing (Recommended)

Paper Filing Instructions

Filing Deadlines

Payment Procedures and Schedules

Electronic Funds Transfer Requirement

Semimonthly Deposit Schedule

Using Form 720-V Payment Voucher

Required Attachments and Supporting Forms

Common Errors and How to Avoid Them

Filing Mistakes

Calculation Errors

Payment and Deposit Issues

Zero Activity and Final Return Guidance

Filing With No Activity

Filing a Final Return

Tips for First-Time Filers

Identifying Applicable Excise Taxes

Setting Up EFTPS

Recordkeeping Best Practices

Conclusion

Frequently Asked Questions

What is the purpose of Federal Form 720?

Who must file Form 720?

What are the filing deadlines for Form 720?

How can I pay federal excise tax electronically?

What happens if I file Form 720 late?

What are common errors to avoid when filing?

Can I file Form 720 if my business had no excise activity?

Frequently Asked Questions

Related Articles

Step-by-Step Form 720 2018 Instructions for Businesses

Overview of Federal Form 720

Who Must File Form 720

Structure of the Form

What’s New for 2018 in the Form 720 2018 Instructions

Electronic Funds Transfer Requirement

Updates to Environmental Taxes

Fee Changes for Research and Health Plans

Other Notable Changes

Step-by-Step Instructions for Filing Form 720 Quarterly Federal Excise Tax Return

Step 1: Prepare Required Information

Step 2: Complete the Header Section

Step 3: Fill Out Part I – Primary Excise Taxes

Step 4: Fill Out Part II – Additional Excise Taxes

Step 5: Complete Part III – Summary and Payment Information

Step 6: Attach Required Schedules and Forms

Filing and Submission Options for the Federal Excise Tax Return

Electronic Filing (Recommended)

Paper Filing Instructions

Filing Deadlines

Payment Procedures and Schedules

Electronic Funds Transfer Requirement

Semimonthly Deposit Schedule

Using Form 720-V Payment Voucher

Required Attachments and Supporting Forms

Common Errors and How to Avoid Them

Filing Mistakes

Calculation Errors

Payment and Deposit Issues

Zero Activity and Final Return Guidance

Filing With No Activity

Filing a Final Return

Tips for First-Time Filers