Filing or Amending a 2016 Form 720 Excise Tax Return

Form 720, the Quarterly Federal Excise Tax Return, is used to report and pay federal excise taxes, which are indirect taxes on the sale or use of specific goods and services. This guide covers the form, regulations, and tax rates applicable during the 2016 tax year for those who may have had a filing requirement for that period.

Who Was Required to File in 2016

Any business or individual with a liability for a federal excise tax reported on Form 720 was obligated to file for the quarters in 2016 when that liability occurred. This requirement applied to all business structures, including sole proprietorships, partnerships, and corporations, and was necessary whether the business collected the tax or was directly liable.

Entities that commonly had a filing obligation in 2016 included manufacturers, retailers, and importers. Providers of services like air transportation and communications were also required to file, as were issuers of certain insurance policies and entities involved with specific fuels or heavy vehicles.

Excise Taxes Reported on the 2016 Form

The 2016 Form 720 was structured into parts to report various categories of excise taxes. Each tax had a specific IRS abstract number and a corresponding rate for that year, which is needed to accurately calculate a past liability.

Part I Taxes

Part I of the form covered several major tax categories. Environmental taxes were calculated using Form 6627 and included the oil spill liability tax (IRS No. 18 and 21) and taxes on ozone-depleting chemicals (IRS No. 98 and 19). The specific rates for these taxes were detailed on Form 6627.

Communications and air transportation taxes were another section. The tax on local telephone service (IRS No. 22) was 3% of the amount paid. For air transportation of persons (IRS No. 26), the tax consisted of a 7.5% tax on the flight cost and a domestic segment tax of $4.00 per segment for 2016. The tax on the use of international air travel facilities (IRS No. 27) was $17.80 per person for flights beginning or ending in the U.S.

Fuel taxes were a complex area in Part I. Gasoline (IRS No. 62) was taxed at $0.184 per gallon, while diesel fuel (IRS No. 60) was taxed at $0.244 per gallon. Kerosene for use in aviation (IRS No. 69) was taxed at $0.219 per gallon. A Leaking Underground Storage Tank (LUST) tax of $0.001 per gallon also applied to many of these fuels.

The retail tax on heavy trucks, trailers, and semitrailers (IRS No. 33) was 12% of the sales price. Manufacturers taxes covered items like coal, where for 2016, underground-mined coal was taxed at the lower of $1.10 per ton or 4.4% of the sales price. Manufacturers also paid tax on sport fishing equipment (10% of sales price) and arrow shafts, which were taxed at $0.49 per shaft in 2016 (IRS No. 106).

Part II Taxes

Part II of the 2016 Form 720 listed other excise taxes, including the Patient-Centered Outcomes Research Institute (PCORI) fee (IRS No. 133). For plan years ending on or after October 1, 2015, and before October 1, 2016, this fee was $2.17 multiplied by the average number of lives covered under the health insurance policy or self-insured plan.

Another tax in this section was the foreign insurance tax (IRS No. 30), levied on premiums for certain policies issued by foreign insurers. The rate was 4% on casualty insurance and indemnity bonds, and 1% on life insurance, sickness and accident policies, and annuity contracts. A 10% tax on the amount paid for indoor tanning services (IRS No. 140) was also reported here.

Completing and Filing the 2016 Form 720

Preparation and Completion

You must obtain the correct versions of the tax form and its instructions for the specific 2016 quarter you are filing for, which are available on the IRS website. You will need your employer identification number (EIN) and basic business details to fill out the top portion of the form.

Using the tax rates from the 2016 instructions, you calculate the tax liability for each applicable category in Part I and Part II. These amounts are entered on the corresponding lines of the form. Part III, the Schedule of Tax Liability, was required for anyone with a liability in Part I and breaks down the total tax liability by semimonthly periods for deposit purposes. Certain situations required attaching additional schedules, such as Schedule A or Schedule C.

Filing Procedures

For the 2016 tax year, Form 720 was due quarterly. The deadlines were April 30 for the first quarter, July 31 for the second, October 31 for the third, and January 31, 2017, for the fourth quarter. If a due date fell on a weekend or holiday, the deadline shifted to the next business day.

Tax payments were required to be deposited using the Electronic Federal Tax Payment System (EFTPS). This was mandatory if the total net tax liability for the quarter exceeded $2,500. The completed form was mailed to the IRS address specified in the 2016 instructions. If a payment was made by check or money order, Form 720-V, Payment Voucher, was to be completed and included.

Correcting or Late Filing a 2016 Return

Amending a 2016 Return

If you discover an error on a Form 720 that you already filed for a 2016 quarter, you must use Form 720-X, Amended Quarterly Federal Excise Tax Return, to make the correction. This form is used to report an underpayment or an overpayment of tax.

When completing Form 720-X, you will need to reference the original 2016 return, enter the previously reported amounts, the corrected amounts, and calculate the difference. The form requires a detailed explanation for each correction.

If the amendment results in an overpayment, you can choose to have the amount refunded or credited to a future excise tax return. If it results in an underpayment, the additional tax should be paid with the filing of the Form 720-X.

Late Filing a 2016 Return

If you had an obligation to file Form 720 for one or more quarters in 2016 but failed to do so, you should file the return as soon as possible. You must use the 2016 version of Form 720 for the appropriate quarter.

Failing to file on time results in penalties. The IRS can assess a failure-to-file penalty of 5% of the unpaid tax for each month the return is late, up to a maximum of 25%. A separate failure-to-pay penalty of 0.5% per month on the unpaid tax also applies. Interest will have accrued on the unpaid tax liability from the original due date.