What is a Tax form 720 & Why is it Important?
The United States is known for its unique taxation system and a lot of people need help to provide the revenue service with reliable files. Since April 15, which is the deadline for tax filings, is getting close, now is the perfect time to start collecting all of the papers that are necessary for the whole process. The main reason why you should be more careful is related to the tax returns. As we all know, there are various factors like overpaying, tax liability, children, marriage status, and more, which can all affect the amount of money you could get through tax returns.
On the other hand, there are special forms of taxes related to business owners. When it comes to Form 720, it is related to all those businesses that are selling goods or offer various services. Also, you will need to provide the file that is using this form if you own a property outside of the country, for example, in Spain.
The business owners will have to pay additional taxes for the services or products they are selling, and it is similar to standard taxes for sales. On the other side, the main issue is that a lot of people are not even aware that they are already paying it through standard prices of some products like petrol or cigarettes. Therefore, each company will have to file a Form 720 in form of a report four time a year. We are going to introduce you more about this form in the following article.
Who Must File This Form?
As we already mentioned, most businesses will have to pay these taxes. The categories under Form 720 are cigarettes, petrol, usage of highways, healthcare, alcohol, airline companies, indoor tanning, and manufacturing. Also, you will need to fill it every three months by quarters. Moreover, there are two tests provided by IRS that you will have to finish in each quarter. Therefore, it is very important to save your documentation and pay for the taxes in the following quarter. The tax year starts on January 1, and you will have to finish this form by the end of April when it comes to the first quarter.
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How To Report Excise Taxes?
The main reason why so many people are asking for assistance from experts in this field is that the reporting process might seem too complicated for those with less experience. Here are the main steps of filling the file 720.
- Information About Your Company; The first step is related to providing the revenue service with all of the essential data related to your business, such as the name of the company, address, EIN of workers. Also, you need to specify the quarter.
- Part One; You will have to add additional information in case that you have to pay excise taxes for petrol, water transport, shipping, communication taxes, retail taxes for trucks and trailers, insurance taxes, and taxes for manufacturers of tires, vaccines, coal, and more. You can use special software that can help you to calculate the right amount that you have to report.
- Schedule A; After you finish with Part One, you will have to create a report related to a tax liability for each month in the quarter. This form is only related to Part One.
- Part Two; This file is related to healthcare, equipment for fishing, chemicals, electric engines for boats, tanning services, and more.
- Schedules T and C; Schedule T is related to transactions related to funds that were not part of any sale, like buying supplies, while C is the part of Form 720 that you can use to claim a tax refund from excise taxes.
- Part Three; This is the last file in the form where you will have to determine the tax liability. You must calculate the taxes and include deposits and potential returns.
The Process of Payment
In case that you are being late with your payment at the moment when you are applying the Form 720, you are required to do that right after. The most common option is electronic payment with a credit card. You must finish with the payment process until the last day of the following three-month period. Moreover, there are some cases where you can ask for a delay, but only if you have a proper liability.
It is essential to start with the process of making this file on time. That way, you can avoid potential mistakes that are not so rare since a lot of people find this process complicated. Also, keep in mind that it is crucial to saving every bill and documents related to your business. The main advantage of hiring professionals is that you can save a lot of time and effort. Moreover, every mistake you make might cause issues with the IRS, and that could be a big problem for your business. Moreover, you should use the benefits of online services and file every report online. The great thing about the tax system is that they are implementing modern technology and have online platforms that help people to save a lot of time.
Furthermore, another advantage of getting the help of experts is that they could improve your liability and help you to get a bigger refund. Since the United States have such a unique system of taxation, not understanding some details might even cause penalties and blocked bank account, which is a serious problem when you run a business. Also, if your company have any property outside of the country, you must add that to the report.
Even though this system looks complicated, the great advantage is that you can apply for tax returns every year. That means that you should keep all of your bills and documents related to both private spending and your company. For example, you could have a deduction for spending a certain amount on gas, and many other terms.