Can You Get an Extension on Federal Excise Tax?
No, the IRS does not offer an extension in filing of Form 720, Quarterly Federal Excise Tax Return. Organizations or individuals who are mandated to file the federal excise tax returns should do so within the IRS deadline.
Unlike other types of tax returns such as the Form 1040 which can be subject to extension of filing deadline, Form 720 does not have that kind of provision.
However, individuals who find themselves in such circumstances may be eligible for reasonable cause penalty relief, and some individuals who are affected by qualifying disasters will get more time through IRS disaster relief provisions.
In this guide, we will discuss the Form 720 filing deadlines, the consequences for missing these deadlines, and the situations under which the IRS considers granting penalty relief.
Is It Possible to Have a Deadline Extension for Form 720?
No, there is no provision by the Internal Revenue Service for Form 720 due date extensions.
Businesses required to report excise taxes on activities such as fuel sales, air transportation, communications services, and certain manufactured products etc must follow the quarterly filing schedule.
Important Points to note
1)When a Form 720 filing date falls on a Saturday, Sunday, or legal holiday, the IRS allows filing on the next business day. This is a standard deadline adjustment, not an extension.
2)The Patient-Centered Outcomes Research (PCOR) fee, commonly called the PCORI fee, is generally reported annually on the second-quarter Form 720, due July 31, for applicable plan or policy years.
Important Rules for Excise Tax Payments and Deposits
Semimonthly tax deposits: The IRS generally requires semimonthly deposits for applicable Form 720 Part I taxes. These deposits have separate deadlines, and there is no general extension for making them. Certain exceptions apply, including when the quarterly net Part I liability does not exceed $2,500.
Penalties for late filings and late payments: Late filing of Form 720, late payment of taxes and making deposits, if any, will be subject to penalties in accordance with IRC sections 6651 and IRC sections 6656.
Disaster relief: There are special deadlines for those taxpayers who qualify under IRS's tax relief in the event of disasters as provided in IRC section 7508A.
What If I Am Not Able to File Form 720 on Time Due to Reasons Beyond My Control?
If there is failure in filing Form 720 within its specified period, this does not automatically mean that the taxpayer is eligible for form 720 penalty. In this case, it should be noted that the IRS understands the possibility of taxpayers being unable to fulfill their tax filing obligations due to no fault of their own.
The IRS provides relief from penalties under its reasonable cause provisions, which states that taxpayers can ask to remove or reduce certain penalties if they can prove that they were exercising ordinary business care and prudence and could not fulfill their tax obligation anyway.
These requests are looked at on a case-by-case basis by the IRS based on the reason for the delay and the taxpayer’s attempts to comply with the filing requirements.
What Are the Grounds for Penalty Relief Under IRS Reasonable Cause?
The following are some of the specific reasons that have been listed by the IRS as qualifying for penalty relief.
1. Natural Calamities or Sudden Emergencies
A fire, flood, storm, or other major calamity can cause an inability for the taxpayer to access their business records and file their tax return.
Example: A company suffers from a fire outbreak just days before their deadline for filing the Form 720 returns, thereby damaging their records.
2. Lack of Access to Required Tax Documents
This includes situations where the required tax documents have not been accessed even after the taxpayer tried his best to access them.
Illustration: The company is unable to access excise tax documents that have been affected by a surprise event.
3. Death, Sickness, or Inevitable Absence
Illness, death, or inevitable absence of the taxpayer himself or the person who must file the tax forms on behalf of the company may qualify as reasonable cause.
Example: An individual who owns a company and needs to file Form 720 becomes hospitalized before the deadline.
4. Issues Relating to Electronic Filing/Payment Systems
In addition, there will also be a discussion of systems issues preventing timely submission or payment, provided that reasonable steps were taken to comply.
Example: A taxpayer tries to submit his Form 720 prior to the deadline but there is an electronic filing issue.
These examples illustrate circumstances the IRS may consider. None guarantees penalty relief. Taxpayers should maintain records of what happened, the steps taken to comply, and when the problem was resolved.
Situations that generally do not qualify
The IRS also identifies several common reasons that, on their own, generally do not establish reasonable cause.
The IRS distinguishes between an unavoidable event and a failure to exercise reasonable care. A taxpayer must provide sufficient facts showing why timely compliance was not possible.
IRS Penalty Relief Request page gives you detailed steps regarding how you can apply for it if you are eligible
Conclusion
The best method to ensure that you don't have any troubles at the last minute and incur penalties is to file Form 720 before the deadline set by the IRS. As there is no filing extension available, you need to get all your excise tax data ready before the deadline so that you can file your return. Instead of seeking penalty protection when you miss a deadline, it is always advisable to be ahead of schedule with your filings.
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