As a small business owner, it's essential to keep track of all the taxes you need to pay and forms you need to file. One form that often gets overlooked is Form 720, also known as the Quarterly Federal Excise Tax Return.
If you're not aware of Form 720, here's a quick overview. It's a form that certain businesses use to report and pay federal excise taxes. These taxes are generally paid on specific goods and services, such as airline tickets, gasoline, and indoor tanning services.
Now, let's talk about the consequences of not filing Form 720 on time.
One of the most significant consequences of not filing Form 720 on time is the penalties and interest you may incur. As of 2021, the penalty for not filing Form 720 on time is 5% of the unpaid tax amount per month, up to a maximum of 25% of the total unpaid tax.
Additionally, interest will accrue on any unpaid taxes, starting from the date the taxes were due. The interest rate is currently set at 0.5% per month, or 6% per year.
If you don't file Form 720 on time, you may miss out on certain tax deductions. For example, if you're a manufacturer or importer of certain goods, you may be eligible for a credit or refund of the federal excise taxes you've paid. However, you must file Form 720 to claim these deductions or credits.
If you continually fail to file Form 720 on time, you may be subject to an audit by the IRS. This can be a time-consuming and stressful process, and it may result in additional penalties and interest if errors are found.
Finally, failing to file Form 720 on time can damage your business's reputation and standing with the government. If you have a history of not fulfilling your tax obligations, it may be more challenging to obtain financing, licenses, or permits from government agencies.
It's critical to file Form 720 on time to avoid penalties, interest, missed deductions, audits, and damage to your business's reputation. If you're unsure of how to complete this form or need assistance, consider working with a tax professional or accounting firm.