Form 6627 is used exclusively to report various categories of Environmental Excise Taxes and is generally filed along with IRS Form 720. In Form 720, under certain IRS numbers, you will see an instruction to "attach Form 6627." For those specific categories, you must complete Form 6627 along with Form 720.
First and Foremost, download the latest Form 720 pdf and Form 6627 pdf from the IRS site.
Filing Form 6627 manually can be a tedious and complex process. Still, this guide outlines step-by-step instructions and helpful tips to ensure accuracy and compliance.
1. Basic Information
Provide the Name, Quarter Ending, and Employer Identification Number (EIN) exactly as you have listed on Form 720. Ensure there is no mismatch.
2. Part I – Tax on Petroleum (IRS Numbers: 53, 18, 16, 21)
Line 1a: Enter the quantity (in barrels) of crude oil received at a U.S. refinery.
Line 2a: Enter the quantity (in barrels) of crude oil taxed before receipt at the refinery.
Subtract Line 2a from Line 1a and enter the result in Column (a) for both Lines 3a and 3b.
Multiply Columns (a) × (b) to calculate tax and enter the result in Column (c) of Lines 3a and 3b.
Repeat the same for Lines 4a, 4b, and 4c.
Add Line 3a(c) + Line 4a(c) and enter the total in Line 5c.
Add Line 3b(c) + Line 4b(c) and enter the total in Line 6c.
For Petroleum Superfund Tax and Petroleum Oil Spill Tax (Lines 7 and 8), follow the same process:
Enter the quantity in Column (a), multiply with Column (b), and enter the result in Column (c).
3. Part II – Tax on Chemicals (Other Than ODCs) – IRS Number: 54
The form provides a table listing taxable chemicals and their rates.
Enter the quantity (in tons) in Column (a).
Multiply Columns (a) × (b) and enter the result in Column (c).
Add all values in Column (c) and report the total in Form 720, IRS No. 54.
4. Part III – Tax on Imported Chemical Substances – IRS Number: 17
Column (a): Enter the imported chemical substance that is subject to tax. List each substance separately on its own line.
Column (b): Enter the quantity of the imported substance in tons.
Column (c): Enter the taxable chemicals used in the manufacture of the imported substance, one by one. If you are calculating tax based on either the IRS-provided tax rate, or 10% of the appraised entry value, then you may leave Column (c) blank.
Column (d): Enter the appraised entry value of the substance or the conversion factor, depending on your chosen method.
If you are using the IRS-provided tax rate method and do not have a conversion factor, you can leave this column blank.
Column (e): Enter the tax rate for each chemical.
If using the IRS-provided tax rate, refer to the Part II table in Form 6627.
If you do not have a conversion factor and are calculating based on appraised entry value, enter 10% (0.10) here.
Column (f): Calculate the tax for each line item using the applicable method:
If you have both a conversion factor and a tax rate, multiply:
Column (b) × Column (d) × Column (e)
If you’re using the IRS-provided tax rate without a conversion factor, multiply:
Column (b) × Column (e)
If you’re using the 10% appraised value method, multiply:
Column (d) × Column (e)
Add all values in Column (f) and report the total in Form 720, IRS No. 17.
5. Part IV – Tax on Ozone-Depleting Chemicals (ODCs) – IRS Number: 98
Check the appropriate box to elect your reporting method.
Column (a): Enter the ODC name.
Column (b): Enter quantity in tons.
Column (c): Enter the tax rate per pound (refer to Part 4 of the instructions).
Column (d): Multiply Columns (b × c).
Add values in Column (d) and report the total in Form 720, IRS No. 98.
6. ODC Tax on Imported Products – IRS Number: 19
Column (a): List imported products and applicable ODCs.
Column (b): Enter the number of taxable imported products.
Column (c): Enter ODC weight in pounds (leave blank if using value method).
Column (d): Enter tax rate or use 1% (0.01) if using the value method.
Column (e): If using the value method, enter the entry value of all imported products.
Column (f): Multiply applicable columns (b × c × d or d × e).
Add all values in Column (f) and report in Form 720, IRS No. 19.
7. Tax on Floor Stocks of ODCs – IRS Number: 20
Column (a): Enter the ODC name.
Column (b): Enter quantity in pounds.
Column (c): Enter the tax rate per pound (see Part 6 of the instructions).
Column (d): Multiply Columns (b × c).
Add all values in Column (d) and report in Form 720, IRS No. 20.
Conclusion
Filing Form 6627 manually demands close attention to detail and strict compliance with IRS guidelines. Double-check all calculations, quantities, and IRS numbers to ensure accurate reporting.
Always refer to the latest IRS instructions for Form 6627 for updated tax rates and procedures. A well-prepared Form 6627 helps you avoid penalties and ensures smooth processing of your environmental taxes.