IRS Form Basics: What Each Section Means

IRS forms can feel intimidating because they often combine multiple tax rules into one document. IRS Form 720 (Quarterly Federal Excise Tax Return) is a good example. It is a single return used to report many different federal excise taxes, from certain fuel taxes to specialty fees like the PCORI fee.

The good news is that Form 720 is meant to be “modular.” Most filers only complete the sections that apply to their business activity. This guide breaks down what each section is for, what information you typically need, and how the parts fit together so you can file with more confidence.

For the IRS’s official version of the form and the latest instructions, start here:

• IRS Form 720

Form 720 at a glance (what each section is for)

Use this as a map before you start entering numbers.

Form 720 section	What it generally covers	What you’re doing in that section	Common items you’ll need
Top section (header)	Filer identity and quarter	Identify the business and the filing period	EIN, legal name, address, quarter ending date
Part I	Major excise tax categories the IRS groups together (often including communications/air transportation, fuels, environmental, and other items depending on the year’s layout)	Calculate tax for applicable lines, based on the taxable activity and rate	Tax base (units, gallons, sales), rate from instructions, prior deposits
Schedule A (if required)	Excise tax liability by semi-monthly period (deposit schedule support)	Break total liability into period-by-period amounts when deposit rules apply	Liability records by date/period, deposit confirmations
Part II	Other excise taxes and fees (often includes items many smaller filers recognize, such as PCORI and certain specialty excise taxes)	Calculate tax for the specific items that apply	Fee calculations, coverage counts (for PCORI), premium data (for certain insurance excise taxes)
Schedule C (if applicable)	Claims and adjustments reported on the return	Reduce tax for eligible credits/adjustments that the IRS allows to be taken on Form 720	Documentation showing eligibility for the claim, amounts and categories
Part III	Totals and reconciliation	Add totals from Parts I and II, subtract credits, apply deposits, determine balance due/overpayment	Deposit totals, payment method, banking/payment confirmation
Signature area and preparer info	Authorization	Sign under penalties of perjury, optionally authorize a third party, include preparer details if paid preparer used	Signer name/title, phone, preparer PTIN (if applicable)

The top section (header): your identity and your quarter

The first section is straightforward, but it is also where avoidable errors happen.

What it means:

• It tells the IRS who is filing (legal name and EIN) and for which quarter.
• It signals whether the return is a “final” return (for example, the business stopped the excise-taxable activity).

What to watch closely:

• EIN and legal name match: The EIN must match the IRS record for the legal entity filing. Mismatches can slow processing or cause rejections in electronic workflows.
• Correct quarter: Form 720 is quarterly. Make sure you select the correct quarter ending month and year.
• Final return box: Only check it if you truly will not file future Form 720 returns because the business ended or the excise-taxable activity ended.

If you want the quarterly deadline calendar in one place, this companion guide is helpful: Form 720 due dates.

Part I: where many excise taxes are calculated

Part I is one of the main calculation areas. The exact line layout can change over time, but the concept stays the same: the IRS lists excise taxes by category, and each line corresponds to a specific tax type, with an “IRS number” or similar identifier in the instructions.

What Part I means:

• It’s where you calculate tax for certain excise categories the IRS groups together.
• Each applicable line generally follows the same logic: tax base × tax rate = tax.

What you’ll typically enter:

• A quantity or dollar amount that represents the taxable base (for example, gallons, units, tickets, sales price, or another measure depending on the tax).
• The calculated tax for that line.

How to approach Part I without guessing:

• Start with the activity, not the form: Identify what your business did that triggers excise tax (for example, selling a taxable product, providing a taxable service, importing a taxable item).
• Use the IRS instructions to find the correct line: Form 720 is not designed for you to fill “everywhere.” It’s designed for you to locate the specific tax line that matches your activity.
• Keep rate support: Rates and rules are set by law and summarized in the instructions. Keep the documentation you used to compute the base.

Common Part I mistakes:

• Reporting a tax on the wrong line because the business chose a category that sounded similar.
• Using the wrong base (for example, gross sales instead of taxable sales, or total units instead of taxable units).
• Ignoring deposit rules when they apply (Part I totals often tie to Schedule A for deposit-liability reporting).

Schedule A (when required): semi-monthly liability support for deposits

Schedule A is not “extra paperwork for everyone.” It is primarily there to support the IRS deposit system for certain excise tax liabilities.

What Schedule A means:

• It breaks your total liability into time periods within the quarter (semi-monthly periods) when deposit requirements apply.
• It helps reconcile what you owed during each period versus what you deposited.

When it matters:

• If your excise tax situation requires deposits (the rules depend on the type of excise tax and your liability levels), Schedule A is often the section that shows the timing of the liability.

Practical tip:

• Think of Schedule A as a timeline. Your accounting records should be able to support when the liability was incurred, not just the quarterly total.

For deposit timing, thresholds, and the practical reality of paying through EFTPS, see the IRS payment system details at EFTPS and review your Form 720 instructions for the specific deposit rules that apply to your tax category.

Part II: other excise taxes and fees (including items many smaller filers recognize)

Part II is another main calculation area, typically used for excise taxes and fees that are not listed in Part I.

What Part II means:

• It captures additional excise tax categories that apply to certain industries and special situations.
• Many businesses encounter Form 720 for the first time due to a specific Part II item.

Two examples you may recognize:

• PCORI fee: Many plan sponsors and insurers use Form 720 to report and pay the Patient-Centered Outcomes Research Institute fee (subject to the IRS rules for who owes it and how it is calculated).
• Foreign insurance tax: In certain situations involving premiums paid to foreign insurers for U.S. risks, reporting may be required under the applicable rules.

If your filing relates to foreign insurance tax and you want a deeper, dedicated walkthrough (rates, exemptions, and reporting pitfalls), see: Foreign Insurance Tax on Form 720.

Common Part II mistakes:

• Using an outdated fee amount or method (always use the current instructions for the filing period).
• Mixing up who is liable (for example, insurer versus plan sponsor rules for certain fees).
• Forgetting that some items have “special timing” even though Form 720 is quarterly (PCORI, for example, is often filed in a specific quarter based on the IRS rules for the fee year).

Schedule C (if applicable): claims and adjustments taken on the return

Schedule C is where you report certain credits, claims, or adjustments that the IRS allows you to take directly on Form 720.

What Schedule C means:

• It reduces the net tax on the return for eligible items, but only when the rules allow taking the adjustment on the return.

Important distinction:

• Not every refund or credit belongs on Schedule C. Some excise tax refunds are claimed using a separate form (commonly Form 8849), depending on the type of claim and IRS rules.

The IRS’s official landing page for the claim form is here: IRS Form 8849.

Documentation matters:

• Many credits and claims depend on “why” the tax is being adjusted (nontaxable use, export, specific statutory exception, and so on). Maintain records that connect your claim to the underlying transactions.

Part III: the math that ties everything together

Part III is the reconciliation section. It turns the separate calculations into one final result.

What Part III means:

• It totals excise taxes from Parts I and II.
• It subtracts credits/adjustments (often from Schedule C, if applicable).
• It accounts for deposits already made.
• It determines whether you have a balance due or an overpayment.

What to double-check before submitting:

• Totals match: Make sure the amounts you calculated in Parts I and II actually carry to the total lines.
• Deposits are complete and accurate: If you made deposits, reconcile them to your EFTPS confirmations and internal records.
• Overpayment handling: If you are due an overpayment, the form typically provides options (for example, applying it to a future return or requesting it). Choose the option that matches your cash-flow and compliance plan.

Signature and authorization: who can sign, and what it means

The signature section is more than a formality.

What it means:

• The signer is declaring, under penalties of perjury, that the return is true, correct, and complete.
• If you include a preparer, the preparer information supports accountability and IRS contact if needed.

Common issues:

• Unsigned paper returns (a frequent reason for delays).
• Using a signer who is not authorized for the entity type (for example, the rules can differ for corporations, partnerships, and other entities).

How the sections connect (a simple way to “sanity check” your return)

Before filing, it helps to run a quick logic check across the form:

• Part I and Part II are where you calculate taxes by category.
• Schedule A (when required) supports the timing of liability and deposit rules.
• Schedule C (when applicable) reduces tax through allowed adjustments.
• Part III is the final reconciliation: taxes minus credits minus deposits equals what you owe (or overpaid).

If something feels off, it usually is one of these:

• A tax was entered in the wrong category line.
• A deposit total is missing or duplicated.
• A claim was taken on the return when it should have been filed on a separate claim form.
• The quarter or EIN information does not match what the IRS expects.

Filing tip: why many businesses choose to e-file Form 720

Form 720 is manageable once you understand the sections, but it is still detail-heavy. Many filers prefer e-filing because it can reduce common mechanical errors (like math issues, missing fields, or incomplete sections) and provides a cleaner record of submission.

If you want an IRS-authorized option built specifically around Form 720, eFileExcise720 lets you create a free account and file online without downloading software. The platform supports Form 720 categories, and it can also help with Form 720 amendments (Form 720-X) and Form 8849 claims support when your situation requires them.

You can start here: eFileExcise720.

If you are still deciding whether to e-file or mail, this comparison can help you choose based on speed, proof of filing, and error handling: E-file IRS or mail (Form 720).