Form 4720

What Is a Form 4720

Form 4720, also known as the 'Return of Certain Excise Taxes under Chapters 41 and 42 of the Internal Revenue Code', is a document filed by the Internal Revenue Service (IRS). This form primarily reports and calculates excise taxes connected to charitable organizations, non-profit entities, and certain other foundations.

In simpler terms, the IRS uses Form 4720 to determine the excise taxes due from organizations and individuals involved in excess benefit transactions or self-dealing, among others. If these excise taxes are not paid promptly, penalties can accrue, making understanding and completing Form 4720 a high priority for those to whom it applies.

Form 4720 Instructions

Now that we've outlined what a Form 4720 is let's delve into some essential Form 4720 instructions. Completing and submitting this form must follow the specific guidance the IRS provides.

Identification:

The first part of the form requires basic identifying information about the taxpayer.

Calculation of Taxes:

The next part involves calculating the excise taxes that the organization or individual owes. This is determined by the type of violation, with different sections for each violation.

Schedules:

Depending on the circumstances, different schedules of Form 4720 might need to be completed. Each schedule pertains to a specific violation, such as self-dealing, failure to distribute income, or excess business holdings.

Payment and Signature:

Once all the necessary schedules have been completed, taxpayers calculate their total tax liability. The form is then signed, dated, and mailed to the IRS, along with the appropriate payment.

Mine Rescue Team Training Credit:

Interestingly, the IRS Form 4720 also comes into play when we discuss the Mine Rescue Team Training Credit. This tax credit is available to mine operators to offset the costs of training mine rescue team members.

To claim this credit, taxpayers fill out Form 8923 (Mine Rescue Team Training Credit) and attach it to their income tax return. However, if the taxpayer is a trust, estate, or non-profit organization liable for certain excise taxes on credit, they must report and pay those taxes using Form 4720.