Business Taxes
IRS Excise Tax Problems

Published: March 5, 2025

By: Kari Brummond, EA|Reviewed by: Charles P. Corsello, EA

Excise Tax Problems and Resolutions for Businesses

Excise taxes are indirect taxes imposed on certain types of products, services, or activities. Businesses are generally responsible for paying and reporting excise taxes to the IRS or state tax authorities, but in select cases, businesses collect the tax from the consumer and then remit it to the IRS (for example, excise taxes on airline tickets).

Excise taxes commonly apply to fuel, firearms, alcohol, tobacco, heavy trucks, tires, airline tickets, and indoor tanning. When a business fails to properly file excise tax returns or pay excise taxes, it may be subject to tax penalties, IRS audits, and collection actions such as tax liens or levies. The IRS can cause major disruptions to your business if you fail to stay compliant or resolve any outstanding excise tax liabilities.

This guide covers common excise tax problems such as delinquent excise tax returns and unpaid excise taxes, as well as potential solutions to regain your compliance with federal and state excise tax laws. For expert assistance, TaxCure can connect you with an experienced tax professional who can help you resolve your excise tax issues.

Table of Contents

What Are Excise Taxes?

Excise taxes are specified taxes on certain goods or services. Businesses have the ultimate responsibility of submitting payments to the tax authorities and filing excise tax returns. But consumers often bear the cost of these taxes without realizing it as businesses may increase the prices of their goods or services in order to account for the excise taxes.

The U.S. federal government collects about $90 billion in excise taxes every year, making up about 1.8% of total federal tax receipts. The most common excise taxes are related to highways, aviation, tobacco, alcohol, and health.

There are many types of excise taxes at the federal level, including:

Environmental Taxes on petroleum and certain chemicals
Communications and Air Transportation Taxes
Fuel Taxes
Retail Tax for trucks, trailers, and semitrailers
Ship Passenger Tax
Foreign Insurance Taxes
Manufacturer's Taxes for coal, tires, gas guzzlers, and vaccines
Patient-Centered Outcomes Research Fee
Some sport fishing and boating equipment
Alcohol Taxes
Heavy Highway Vehicle Use Tax
Wagering and Lotteries

Excise taxes are entirely separate from a business’s income tax obligations and generally require a separate tax filing.

Common Excise Tax Problems Businesses Face

Businesses that need to pay excise taxes may face the following types of problems:

Failure to File Excise Tax Returns: IRS Form 720 is used to report many types of excise taxes, but some specialized taxes have their own tax return form, such as Form 2290 for Heavy Highway Vehicle Use Tax or Form 730 Monthly Tax Return for Wagers.
Missing Filing Deadlines: Business owners may miss filing deadlines if they are unaware of these filing requirements or the filing deadlines, which may be monthly, quarterly, or annually.
Unpaid or Underpaid Excise Taxes: Businesses that fail to send in timely payments due to cash flow issues or other errors may end up owing penalties and interest for late payments.
Incorrect Classification of Goods or Services: A business owner incorrectly classifies transactions as non-taxable or taxable at a lower rate, causing an underpayment of excise taxes. Or the owner misclassifies items in a way that overstates their tax liability.
IRS Excise Tax Audits: Missing or incomplete information may trigger an excise tax audit, where an auditor may examine financial records to confirm the accuracy of excise tax return filings.
Excise Tax Penalties and Interest: Late filings, late payments, or inaccurate returns may result in additional penalties and interest on top of the balance owed for excise taxes.

Another problem businesses commonly face is helping experienced help when they're facing excise tax issues. That's where TaxCure comes into play - using TaxCure, you can search for tax pros who have experience with business taxes, and you can narrow down the results to see pros who've dealt with issues such as audits, your state revenue agency, penalties, settlements, and more.

Experienced, knowledgeable help can be a lifesaver when you're dealing with specific tax problems such as unpaid excise tax, unfiled returns, penalties, and so on.

Consequences of Unresolved Excise Tax Issues

Serious tax problems can arise if a business fails to quickly address its excise tax issues. The IRS can pursue any of the following remedies to handle the failure to comply with excise tax laws:

Penalties: The failure to file penalty is 5% of the excise tax due per month, up to 25%. The IRS also assesses interest on unpaid tax liabilities.
Tax Liens and Levies: Business assets and business accounts may be seized or restricted due to unpaid excise taxes.
Seizure of Equipment or Inventory: The tools or products you need to run your business may be taken by the IRS to satisfy excise tax debts.
Business Interruption or Closure: The IRS can effectively shut down your business for unpaid taxes.
Trust Fund Recovery Penalty (TFRP): If you don't pay excise taxes that were collected for communications, air transportation, and indoor tanning services, you can face the TRFP of 100% of the unpaid tax, and the IRS can assess this against any liable party (owners, shareholders, accountants, etc.).
Fraud Penalties: If the IRS believes that you didn't file in an attempt to commit fraud, they can assess a civil fraud penalty of 75% of the tax. The agency may also pursue criminal charges if relevant.

Not paying excise taxes can cost you significant amounts of money in interest and penalties, but it can also significantly impair your ability to run your business. The consequences can vary based on the type of tax as well - for instance, if you don't file the HVUT return for heavy vehicles, you will not be able to register your truck with the state.

Solutions For Excise Tax Problems

If you are behind on paying or filing excise taxes, the first step is to get caught up on past filings. A tax pro can help you go through your records and recreate old returns. Then, you need to make a plan for paying the tax. Here are the main options.

Installment Agreements for Excise Taxes

IRS Payment Plans offer more time to pay back your excise tax debt. Monthly payments can be tailored to your situation and keep you protected from enforced collection actions. To qualify for an in-business express agreement, you must owe $25,000 or less in penalties and interest ($50,000 or less for individuals).

Penalty Abatement

If you had reasonable cause for paying late, you may qualify for a penalty waiver. You must reach out to the IRS to ask for relief, and you will have to explain what prevented you from paying on time.

Offer in Compromise (OIC) for Excise Taxes

The Offer in Compromise program is a tax debt settlement for less than your current balance owed. Businesses that can provide financial distress may qualify to have some of their tax debt forgiven if their OIC is accepted.

Audit Reconsideration

Excise tax auditors can make mistakes. If you disagree with the results of your audit, you may be able to appeal the findings or request an audit reconsideration to seek a more favorable result. Note that you generally have to meet strict deadlines to make these requests, but even if you miss the deadline, you may be able to pursue an offer in compromise based on doubt as to liability.

Currently Not Collectible (CNC) Status

Businesses that don’t have the assets or income to make monthly payments may qualify for CNC status, which will temporarily protect them from IRS levies without requiring any payments to be made. Generally, you will not be able to get this option on unpaid excise tax if you are still in operation.

Preventing Excise Tax Problems

Excise taxes are a specialized subject matter with complex rules. Businesses that are subject to excise taxes should consider working with a CPA or tax professional that focuses their practice on excise tax compliance.

You should verify that all excise tax returns (including Forms 720, 730, and 2290) are filed on time. Certain software can also help automate and track excise tax compliance.

When to Seek Professional Help

Contact a tax professional when your excise tax problems become too serious to solve on your own. You should talk to an expert if you encounter any of the following situations:

Large Unpaid Excise Tax Bills exceeding $10,000
IRS liens or tax levies that interfere with business assets or inventory
Unfiled excise tax returns for several years or filing periods
Complex excise tax situations involving multiple states or several types of excise taxes

Even severe excise tax problems can be resolved with the right approach. Act quickly to avoid facing increased penalties and interest or more serious collection actions such as IRS levies or liens.

TaxCure connects business owners with excise tax problems with a tax professional who can develop a customized tax resolution strategy. Use TaxCure to find an experienced pro and then schedule a free consultation with a tax expert to learn more about how you can put your excise tax problems behind you.

FAQs

Q: What happens if I don’t file excise tax returns on time?

A: Penalties and interest can apply if you file Form 720, Form 730, Form 2290, or other excise tax returns after their deadlines. The penalty is 5% of the tax due per month, up to 25% of the balance. Repeatedly failing to file excise tax returns can result in more severe tax problems.

Q: Can I negotiate my excise tax debt with the IRS?

A: Excise tax debts may qualify for several types of debt negotiation programs, including installment agreements and Offers in Compromise, depending on the amount of the tax debt, the overall financial situation of your business, and whether or not you are still in operation.

Q: Can excise tax issues lead to personal liability?

A: Only if you are personally liable for the business's tax debts based on the structure of the business or in situations where the business collected the tax from another party (for example, taxes on indoor tanning) and failed to pay it.

Q: How does TaxCure help businesses with excise tax problems?

A: TaxCure’s expert matching connects you with an experienced tax professional. You can search for tax pros in your area, narrow down the results to find a pro with the experience you need, and contact multiple pros until you find the right fit.

Talk to a tax professional now before your excise tax problems become even more serious. TaxCure’s platform can match you with the right tax professional to help resolve your excise tax problems.

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