Form 720 Late Filing Penalties Explained (2025 Guide)
For many business owners, Form 720 deadlines slip by unnoticed. Amid the day-to-day hustle, quarterly excise tax filings often aren’t top of mind. But then one day, you receive an IRS notice, and you realize that even a small delay can end up costing more than you anticipated.
Form 720 is how businesses report federal excise taxes on things like fuel, indoor tanning, air transportation, manufacturing, and other taxable activities. Filing late doesn’t just mean filling out an extra form; it triggers penalties and interest that compound month after month until the return is filed.
At eFileExcise720, we’ve witnessed this all too often. Many businesses aren’t ignoring taxes—they’re overwhelmed by the complexity of the process. This guide outlines the penalties you might face, how the IRS calculates them, and what steps you can take if you’ve missed the deadline.What Is Form 720 and Who Should File It?
Form 720 is a quarterly return used by the IRS to collect federal excise taxes on specific goods and services. These are taxes levied on products like fuel, indoor tanning, air transportation, and manufactured goods.
Businesses must file this form if they sell or provide taxable items covered under excise tax laws. CPAs and tax professionals also use Form 720 to file on behalf of their clients. In essence, Form 720 lets the IRS know how much excise tax your business owes each quarter. Filing on time helps keep your business compliant and avoids costly penalties later.
When Is Form 720 Due?
Form 720 is a quarterly requirement, not an annual one. It needs to be filed four times a year, with deadlines on the last day of the month following the quarter’s end. Here are the key due dates:
For the quarter January to March: Due by April 30
For April to June: Due by July 31
For July to September: Due by October 31
For October to December: Due by January 31 of the following year
Missing even one of these deadlines can trigger penalties. Many businesses set reminders a week or two before the due date to ensure everything is filed on time. A quick check-in before each quarter ends can save both stress and money.
What Happens If You File Form 720 Late?
If Form 720 isn’t filed on time, the IRS treats it as a missed legal deadline. The first penalty is for failure to file, which is typically 5% of the unpaid excise tax for each month or part of a month the return is late. This penalty can grow up to 25% if the return is delayed for several months.
If you file the form but fail to pay the tax on time, the IRS will charge a failure to pay penalty of 0.5% per month, continuing until the tax is paid. Both penalties are compounded by interest on the unpaid tax, making delays increasingly costly.IRS Penalty Rates and Interest Charges
Once the Form 720 deadline passes, businesses can face both failure to file and failure to pay penalties. Here's how they work:
You can verify these details directly from the official IRS documents
The failure to file a penalty is typically higher than the failure to pay a penalty. In some cases, the IRS may reduce the combined penalties slightly if both apply, but the total still increases each month. Interest is recalculated daily, adding to the total amount owed, making it vital to file as soon as possible, even if you can’t pay immediately.
How Late Filing Penalties Add Up
Let’s take a look at how penalties can accumulate if you miss the deadline for Form 720. Imagine your business owes $10,000 in excise tax for the quarter ending March 31. If you miss the April 30 deadline, here’s how the penalties can add up:
Common Reasons Why Businesses Miss the Deadline
Late filings are not always due to negligence. Here are some of the common reasons businesses miss the Form 720 deadline:
Confusing filing frequency: Many business owners assume Form 720 is filed annually, but it’s required every quarter.
Reliance on paper forms: Paper filings take longer to process and can be delayed if not received on time.
Misunderstanding “filed” versus “paid”: Filing and paying are two separate actions. Both must be done on time to avoid penalties.
Busy seasons: Small businesses often operate with lean teams, and during peak times, excise tax filings may not be prioritized.
Not setting up reminders: Without automated reminders, it’s easy to overlook quarterly filings, especially when managing multiple forms.
What To Do If You Filed Form 720 Late?
If you’ve missed the deadline, the most important thing is to act quickly. The longer you wait, the higher the penalties and interest will climb. Here’s what you should do:
File immediately: Even if you can’t pay the full amount right away, submit the Form 720 to stop the failure to file penalty from growing.
Set up a payment plan: If you can’t pay in full, consider making partial payments. The IRS allows installment agreements.
Request penalty relief: If there’s a legitimate reason for the delay (e.g., illness or a natural disaster), you can request relief under the reasonable cause provision. Be sure to include supporting documentation.
Keep all records: Retain proof of filing, payments, and any communications with the IRS in case of an audit or review.
How to Avoid Future Form 720 Penalties?
Staying on top of your Form 720 filing doesn’t have to be complicated. Here are some simple tips to avoid penalties in the future:
Mark your calendar: Add the quarterly due dates (April 30, July 31, October 31, and January 31) to your calendar with reminders.
Switch to e-filing: Electronic filing removes the risk of postal delays and provides instant confirmation.
Review your liability monthly: Regularly track taxable activities rather than waiting until the end of the quarter.
Double-check both filing and payment: Sending one without the other can still lead to penalties.
Use a trusted filing platform: Platforms like eFileExcise720 simplify the filing process and ensure timely submission.
Closing thoughts
Deadlines are easy to miss when you’re busy running a business. But Form 720 is not just another form -it’s a signal to the IRS that your business is in order. By staying organized, filing electronically, and using simple systems, you can reduce stress, save money, and ensure compliance.
Act quickly to reduce penalties, keep accurate records, and plan ahead for the next quarter. Small, consistent habits now will protect your business from costly mistakes down the road.