An air transportation service excise tax is a federal levy that applies to the sale of airline tickets, the movement of freight, and some aviation services. Companies that operate in the travel industry such as airlines and charter companies as well as individuals who own private planes are required to file and remit this tax by using Form 720 (Quarterly Federal Excise Tax Return). This article will guide you step by step to help you file the tax form, the deadlines, and what steps you need to take to remain compliant with IRS regulations.
Who is required to file Form 720 for the Air Transportation Excise Tax?
Excise Form 720 must be filed by: Commercial airlines which sell passenger tickets. Operators of charter flights that sell ticket services. Air freight regular and charter service providers. Owners of private jets who lease flights that are taxable. Aviation service providers who are also commercial taxpayers. Related Read: Understanding Air Transportation Excise Tax and Who Needs to Pay.
Air Transportation Excise Taxes Types.
While filing Form 720, the following excise taxes must also be reported: Passenger ticket tax – Applies to airline and domestic international tickets. Freight and cargo tax – Tax on the transportation of goods by air. Fuel tax for commercial airfare carrier – Tax on certain classes of aviation fuels. Related Read:
A Breakdown of Federal Excise Taxes on Air Travel.
Step by step instructions on filing Form 720.
Step 1: Required Information Before submission make sure that you have: Your Employer Identification Number (EIN). The sum of all the revenue earned from taxable air services. Amount of excise tax collected from Passengers or Shippers. If applicable, details of fuel tax.
Step 2: Fill Other Relevant Part Section.
Part I – Excise taxes on passenger tickets and transport of cargo. Part III – Payment and declaration particulars.
Schedule A – If needed, report deposit transactions in connection to economic tax obligations.
Step 3: Figure Out The Total Tax Payable
Calculate the total excise tax due using the IRS provided tax brackets. Take care with your calculations, else the IRS will reject them.
Step 4: Submit the 720 Form with the IRS
You can submit your documents:
Through e-file to the IRS using one of their approved vendors (preferred as it takes less time to process).By paper to the IRS, but it may take a while to get processed.
Step 5: Settle Your Tax Obligation
Use the Electronic Federal Tax Payment System (EFTPS) to make your payment online.
Attach your payment to your Form 720 submission by check or money order.
See also: Settling Federal Excise Taxes Payment via Online Step-by-Step Instructions
Due Dates of Submitting Form 720
Along with form 720, Air Transportation Income Tax also requires its owners to have quarterly payments as previously noted. For this reason, Form 720 must be filed quarterly. The following are the deadlines:
Q1 (January – March)→ Due on the 30th day of April of the same year
Q2 (April – June)→ Due on the 31st day of July of the same year
Q3 (July – September)→ Due on the 31st day of October of the same year
Q4 (October – December)→ Due on the 31st January of the following year
Common Filing Errors
Tax identification number and other business particulars do not match
Misclassification of excise taxes
Late submission of returns resulting in extra charges
Payment of non-substantial taxes
See also: Common Missteps When Filing Form 720 That Might Result In The IRS Denying Your Application
It is imperative for flying businesses to be careful in filing IRS Form 720 as it is in connection with the excise tax for air transportation. By adhering to these guidelines, penalties can be avoided. If they ever feel overwhelmed by the simple nuances that revolve around these systematic procedures, they can always rely on an eFile provider to help them out.
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