For many of our clients, the Quarterly Federal Excise Tax Return, IRS Form 720, is the largest return they file. Not in pages; from that perspective, it just might be the smallest. No, Form 720 is typically the largest return in dollars paid out. And not just the largest indirect tax dollars but the largest return filed in the entire company across all taxes – income, property, and sales tax.

Why?

Excise tax on fuel is transaction-based. For large companies, this can mean hundreds of thousands of transactions to evaluate, resulting in tax liabilities of millions or, in some cases, billions of dollars paid each year.

One of our clients already filed a large Federal Excise Tax Return when they acquired a company of comparable size. This acquisition almost doubled their already-sizable Federal Excise Tax liability. But, due to pending system integrations, the Federal Excise Tax returns could not be combined. The legacy company had to maintain its separate Federal Excise Tax return filings until the underlying systems were consolidated – a process that does not happen overnight!

That’s where KSM came in.

We supported the client by preparing the acquired company’s separate Federal Excise Tax returns. This allowed our client to focus on two priorities – timely filing of their historical returns and integrating the newly-acquired company into their existing systems.

Using our 720 Return Recap process and tax technical expertise, we reconciled the acquired company’s transactional data and related general ledger accounts. But, like a good mechanic performing routine maintenance, you notice when something is not running smoothly. Our process uncovered an accrual issue in the acquired company’s system. Millions of dollars were accrued and paid on prior period returns… but not recovered.

That’s when we shifted gears.

Working with the client, we researched the available options to recover the outstanding balance, recommended a change to their current accruals to correct the issue going forward, and prepared the documentation to recover the outstanding funds – all of them.

Fast forward two and a half years. Our client successfully integrated the acquired company’s systems into their own, combined the Federal Excise Tax returns, and resumed return preparation internally, as planned.

Then, KSM was hired again.

What for? To review their combined Federal Excise Tax Return. We were happy to help!