Form 4720 – IRS Excise Tax Guide for Foundations and Managers

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A foundation director mentions, almost in passing, that the foundation leased office space from a company he owns. That single arrangement is self-dealing, and Form 4720 now applies to two people in the room, not one: an excise tax on the disqualified person and a separate tax on the manager who approved it. Each liable taxpayer files their own return now, so the manager and the foundation can no longer be combined on a single filing.

Form 4720 reports and pays excise taxes under Chapters 41 and 42, from self-dealing through executive compensation and the 1.4% net investment income excise on certain colleges. For a calendar-year 2025 organization the return is due May 15, 2026, with up to a 6-month extension on Form 8868 that buys time to file but not time to pay. Private foundations must e-file, and other filers cross into the e-file requirement once they file 10 or more returns in the year.

Key Takeaways

• Form 4720 reports and pays excise taxes under IRC Chapters 41 and 42, including sections 4941–4945, 4955, 4958, 4960, 4965, 4966–4968, and others. The IRS lists the current materials on the Form 4720 page.
• As of the 2025 instructions, each liable taxpayer files a separate Form 4720. Managers, disqualified persons, donors, and related persons no longer piggyback on the organization’s filing.
• Due date for organizations is the due date of their annual return or, if none, the 15th day of the fifth month after year end. Individuals and other persons generally use the 15th day of the fifth month after their own tax year end.
• You can request up to a 6‑month extension using Form 8868. An extension to file does not extend time to pay.
• Private foundations must e‑file Form 4720. Other filers may be required to e‑file if they file 10 or more returns in the calendar year.
• For section 4968 colleges and universities, the 1.4% excise applies only if all four threshold tests are met.

What Form 4720 Is, in Plain English

Form 4720 is the IRS return you use to calculate and pay certain excise taxes connected to exempt organizations and related persons. Think self‑dealing, taxable expenditures, excess benefit transactions, excess business holdings, jeopardizing investments, 4960 executive pay, donor‑advised fund penalties, prohibited tax shelter transactions, and the 4968 tax on net investment income for some private colleges and universities. The IRS “About Form 4720” page links to the current form and the print‑version instructions, and it notes there are no recent developments posted as of March 28, 2025. That “quiet” page is your anchor before you start data entry.

If you are unsure whether an act triggers a Chapter 41 or 42 excise tax, look up the relevant schedule in the 4720 instructions first, then decide what to gather. It saves hours in review.

Who Must File in 2025

You must file if you owe a Chapter 41 or 42 excise tax. That includes private foundations, section 4947(a)(2) split‑interest trusts, managers, disqualified persons, donors, donor advisors, related persons, entities subject to section 4960, organizations that are parties to prohibited tax shelter transactions under section 4965, and applicable educational institutions liable for the section 4968 tax. The 2025 instructions make one point crystal clear, and it is the one that trips teams at deadline. Each liable taxpayer files their own Form 4720. The manager, self‑dealer, or disqualified person does not fulfill their obligation by signing the organization’s return. They have a separate return with their name at the top and the related organization listed in Part II.

Why does this matter operationally? Because your binder needs separate workpapers for each liable person. It also means your e‑file controls must confirm all required 4720 returns are generated, cleared through diagnostics, and transmitted, not just the organization’s return. The IRS pages for private foundations reinforce that if a person other than the organization owes a tax, that person is responsible for Form 4720 and for paying their tax.

The Return You Will Actually Use

• Current form and print‑version instructions live on the IRS site and are the source of truth for 2025 filing. Bookmark them and start every project by checking the “Current revision” and “Recent developments” tiles.
• The instructions include every schedule, due date rule, the separate‑return requirement, e‑file mandates, and line‑by‑line guidance, including notes that you cannot combine Part I and Part II amounts in Part III.

Due Dates, Extensions, and Planning Windows

Here is the high‑trust version that keeps you on time.

• Organizations, file Form 4720 by the due date of your annual return, typically Form 990‑PF, 990, 990‑EZ, or 5227. If you do not file an annual return, file by the 15th day of the fifth month after your accounting period ends.
• Managers, self‑dealers, disqualified persons, donors, donor advisors, and related persons file by the 15th day of the fifth month after the end of their own tax year. If the date falls on a weekend or legal holiday, use the next business day.
• Need more time to file, not to pay, use Form 8868. Extensions are generally up to 6 months. Build your cash plan because interest applies on unpaid amounts even during an approved extension.

Quick Date Table for Organizations

The IRS publishes a simple table for exempt organization excise returns. Use it when you schedule your delivery plan.

Year End	Initial Due Date	Extended Due Date
December 31	May 15	November 15
September 30	February 15	August 15
June 30	November 15	May 15
February 28/29	July 15	January 15

Note that extensions top out at six months. If the date lands on a weekend or federal holiday, the due date shifts to the next business day.

What Taxes and Schedules Are On Form 4720

Form 4720 is a package of schedules. The mapping below shows what most firms handle week to week. Always validate specifics in the instructions before you compute.

IRC section	Topic	Schedule on 4720	Typical filer
4941	Self‑dealing	Schedule A	Foundation, managers, self‑dealers
4942	Failure to distribute income	Schedule B	Private foundations
4943	Excess business holdings	Schedule C	Private foundations, some supporting orgs
4944	Jeopardizing investments	Schedule D	Foundations, managers
4945	Taxable expenditures	Schedule E	Foundations, managers
4955	Political expenditures	Schedule F	Section 501(c)(3) orgs, managers
4911	Excess lobbying by electing charities	Schedule G	Public charities that elected 501(h)
4912	Disqualifying lobbying expenditures	Schedule H	Organizations losing 501(c)(3) status due to lobbying
4958	Excess benefit transactions	Schedule I	Disqualified persons, managers, applicable org
4965	Prohibited tax shelter transactions	Schedule J	Certain tax‑exempt entities and entity managers
4966–4967	Donor‑advised funds	Schedules K and L	Sponsors, donors, donor advisors, related persons
4959	Hospital CHNA failures	Schedule M	Hospital organizations
4960	Excess executive compensation	Schedule N	ATEOs and related orgs
4968	1.4% excise on NII of certain colleges	Schedule O	Applicable educational institutions

The line‑up above follows the IRS instructions and related guidance. Keep in mind, the 4965 rules include separate manager‑level consequences and disclosure on Form 8886‑T for PTSTs.

Common Pitfalls That Slow Reviews

• Assuming one signature covers everyone. It does not. Each liable person files their own 4720. Build separate workpapers and separate e‑file steps.
• Mixing up Schedule C with Schedule O. Schedule C relates to excess business holdings. Schedule O is the 4968 net investment income tax for certain private colleges and universities.
• Combining organization and individual taxes in Part III. The instructions warn against it. Keep Part I and Part II separate.
• Missing e‑file mandates. Private foundations must e‑file Form 4720. Other filers may be required to e‑file based on total return counts.
• Relying on old due date lore. For 2025 planning, use the IRS “When to file” and due date table pages, not memory.

A five‑minute check of the IRS “About Form 4720” and “When to file” pages before you start data entry prevents most avoidable revisions later.

How To Work Through High‑Frequency Scenarios

Self‑Dealing, Section 4941, Schedule A

You will document each act, each party, dates, amounts, and whether a correction was made. Identify the disqualified person, state the facts, compute the initial tax, and capture your methodology in the binder. Managers who knowingly participated complete their part as well. Make sure each taxpayer who owes a tax has their own Form 4720 populated and ready to sign.

Practical steps you can follow today:

• Pull a clean related‑party list and tie names to EINs or SSNs.
• Match transactions to accounting entries and fair market value support.
• Record correction details, dates, and safeguards to prevent repeats.
• Keep a cross‑reference that links Schedule A entries to Part II for each person.

Taxable Expenditures, Section 4945, Schedule E

Confirm the nature of the expenditure, especially if grants involve lobbying or non‑qualifying recipients. Record corrections and safeguards if applicable. For managers, compute the manager‑level tax where the facts support it, and prepare a separate return for each manager who owes a tax.

Excess Benefit Transactions, Section 4958, Schedule I

When an excess benefit transaction occurs, the disqualified person, not the organization, owes the excise tax. The organization completes the schedule for reporting, but it does not pay the disqualified person’s liability. If a manager receives an excess benefit, they can be taxed both as a disqualified person and as a manager. The instructions detail how to list transactions and calculate amounts.

Excess Business Holdings and Jeopardizing Investments, Schedules C and D

For Schedule C, compute the excess business holdings position using permitted ownership limits and attributions. For Schedule D, document the investment, the risk analysis, and whether the investment jeopardizes charitable purposes, then quantify the tax. Align any manager‑level liabilities to separate person‑level returns.

Political Expenditures, Section 4955, Schedule F

Political expenditures by a section 501(c)(3) organization trigger this schedule. You will show the act, any correction you made, and managers who agreed to the expenditure. Managers who knowingly agreed may owe a separate first‑tier tax and must file their own returns.

Reviewer’s One‑Page Checklist

• Do we have a list of every taxpayer who owes a tax, and a separate Form 4720 created for each one
• Are Schedule narratives complete, with dates, valuation support, and correction details
• Are Part I and Part II totals kept separate, with Part III populated correctly for each filer
• Did we confirm electronic filing requirements for this filer type
• Is our due date based on the filer’s year end, not just the organization’s year end
• Did we run a final tie‑out to the IRS instructions for each schedule we used

Tight documentation shortens review time. Most revision loops start with thin narratives or missing support for dates and valuations.

Section 4960, Excess Executive Compensation, Schedule N

If an ATEO pays more than 1,000,000 in remuneration to a covered employee, or pays an excess parachute payment, a 21% excise applies (the rate tracks the corporate income tax rate set by the Tax Cuts and Jobs Act of 2017 and was not modified by the One Big Beautiful Bill Act of July 2025, despite some 2025 commentary suggesting otherwise). Related organizations are jointly in the picture and must report their ratable share on their own Form 4720. In some fact patterns a related organization may need two Form 4720 filings, one for its Schedule N liability and another for any manager or disqualified person liability on Part II. The instructions walk through who counts as related and how to allocate.

Key setup moves you should make:

• Identify covered employees and confirm the related‑organization tree.
• Compute remuneration over the 1,000,000 threshold and any parachute payments.
• Allocate the tax across related organizations and prepare a separate return for each.

Section 4968, 1.4% Excise on Net Investment Income, Schedule O

The 4968 tax applies only if all four tests are met. Use prior‑year data to determine eligibility, then compute net investment income and apply the 1.4% rate.

Threshold	Test
Eligible educational institution	As defined in section 25A(f)(2)
Tuition‑paying students	Daily average of at least 500
U.S. location test	More than 50% of students in the United States
Asset test	Non‑exempt‑use assets of at least 500,000 per student at prior year end

The instructions also explain how to factor in related organizations, how to treat basis for property held on December 31, 2017 and continuously thereafter, and how modified capital gain net income and capital loss carryovers work for this schedule.

Practical notes:

• Pull a registrar‑verified daily average student count.
• Aggregate related organization assets, then exclude amounts already counted for another educational institution or assets not intended or available for the institution unless control rules apply.
• Document your basis decisions for legacy assets.

Prohibited Tax Shelter Transactions, Section 4965, Schedule J

Entities described in sections 501(c), 501(d), or 170(c) that are parties to a PTST must file Schedule J. Entity managers who approve a PTST knowing or having reason to know it is prohibited face a separate manager‑level tax, currently 20,000 per instance (this manager tax is separate from the entity-level tax under section 4965, which is based on the greater of net income attributable to the PTST or 75% of proceeds attributable to it, with the rate depending on whether the entity knew or had reason to know it was a PTST when it became a party). PTSTs generally require disclosure on Form 8886‑T, and there are specific definitions for listed transactions and prohibited reportable transactions.

E‑File Requirements You Should Not Miss

• Private foundations must e‑file Form 4720 when they report Chapter 42 liabilities. Paper filings are not accepted for those cases.
• Filers other than private foundations are required to e‑file if they file 10 or more returns in the calendar year, per T.D. 9972. The Form 4720 instructions summarize this and the IRS may grant hardship waivers.

Vendor tip, optional: Many firms use ProConnect or Lacerte, while others prefer CCH Axcess or UltraTax. Regardless of software, make sure you explicitly enable Form 4720, complete all supporting schedules, clear diagnostics, include 4720 in the transmission, and archive acknowledgments. The IRS materials remain your authoritative reference for what must be filed and when.

Amended Returns, Abatement, and Payments

If you discover changes after filing, use the same‑year Form 4720, check “Amended return,” complete the entire form again, and include a statement identifying what changed and why. If you owe more, pay with the amended return. If you have an overpayment, the refund is handled on Part III, line 4. For first‑tier taxes under sections 4942 through 4945, 4955, 4958, 4966, and 4967, abatement or refund relief can be requested on Form 843 under section 4962. The instructions tell you when to attach Form 843 or mail it separately.

Payment reminders:

• Pay through EFTPS or by check, and remember that extensions to file do not extend the time to pay.
• Interest runs on unpaid amounts even if you extend with Form 8868.

A Delivery System That Prevents Missed Deadlines

Here is the operational backbone my team uses when we help firms move Form 4720 out of crisis mode and into a calm weekly cadence.

• SOPs for each schedule with checklists and examples.
• Structured workpapers that match the form’s parts, with clear naming, version control, and reviewer notes.
• Multi‑layer review, preparer to senior to quality, with short loops and early escalation for open questions.
• Live tracking for every filer who needs a return, not just the organization.
• Continuity plan if a staff member is out, so returns do not stall.

If you prefer to keep production in house, adopt these controls and stick with them. If you are building additional capacity, a disciplined offshore workflow can help you scale without losing review quality or control of signatures and deadlines. Accountably supports firms that want a controlled offshore delivery system, with trained teams that work in your software and your templates, so your reviewers see exactly what they expect. Use that kind of structure only where it truly adds value to your process.

Closing Thoughts

You do not need heroics to finish Form 4720. You need a checklist, reliable schedules, and a repeatable review path for every filer who owes a tax. Start each project by checking the current IRS pages, schedule your due dates and extensions, and document corrections and safeguards with care. If your team is stretched, strengthen your process first. If you still need capacity, consider structured help, onshore or offshore, that fits neatly into your workflow and protects review time. This is how you keep Form 4720 on time, accurate, and calm.

Note: This guide reflects IRS pages last reviewed between January 8, 2025 and March 28, 2025, and the 2025 Form 4720 instructions available as of November 21, 2025. Always confirm the current revision before filing.

Common Mistakes We See Every Season

The 4720 filings that come back to my desk for rework almost always trip on the same five patterns. Each one is fixable with a pre-file check that takes minutes when the workpapers are organized at intake.

Reusable Checklists

These checklists are sized to drop straight into an engagement letter or firm SOP. Each list reflects the actual flow of a Form 4720 engagement, from filer roster build through pre-signature review.

Keep 4720 Season From Stalling

Form 4720's delivery challenge is not volume, it is fragmentation. A single private foundation engagement can pull in five or six separate Part II filers across managers, self-dealers, donors, and donor advisors – each with their own signature, knowledge memo, and deadline tracking. Per the 2025 Form 4720 instructions, the organization's Part I and any individual's Part II cannot be combined in one Part III, so every liable person carries a self-contained production track from intake to signature.

The fix is to treat 4720 less like a single return and more like a coordinated bundle of mini-returns, each tied to one taxable event. Build the bundle at intake, lock the schedules to specific transactions, and run a uniform review path across all filers in the bundle so reviewer time stays predictable as filer counts grow.

• Standardize a per-filer workpaper template: knowledge memo, transaction summary, schedule selection (A through O), tax computation, signature block, and Form 8868 payment record if extended.
• Map every Chapter 41 or 42 trigger to a single schedule and rate before drafting, so preparers do not switch tables mid-return (Schedule A self-dealing at 10%, Schedule E taxable expenditures at 20%, Schedule N excess compensation at 21%, Schedule O private-college net investment income at 1.4%).
• Run a Part III reconciliation pass that confirms each filer reports either Part I Line 15 or Part II Line 10 on Part III Line 1 – never both – and that Form 8868 extension payments flow correctly to Line 2.
• Track the May 15 deadline against each individual filer's tax year, not just the organization's, since managers and donors can file on their own calendar.
• Build a final-review SLA that scales with filer count: a multi-filer 4720 engagement needs a wider review window than a single annual return on its own.

If your team cannot absorb that fragmentation in-house, a structured offshore production layer can take the per-filer build while reviewers stay on the knowledge calls and signatures. Accountably's tax delivery service is built to run that kind of bundle work with documented SOPs, named review queues, and the U.S. time-zone overlap that lets the loop close inside the same business day.

FAQs

What is Form 4720 used for

Form 4720 reports and pays excise taxes under Chapters 41 and 42, including self‑dealing, taxable expenditures, excess benefit transactions, 4960 executive pay, 4965 PTSTs, donor‑advised fund penalties, and 4968 NII for certain colleges and universities. The IRS “About Form 4720” page lists the current form and print‑version instructions.

Who must file a separate return

Each person or organization that owes a Chapter 41 or 42 excise tax files their own Form 4720. Managers, disqualified persons, donors, and related persons no longer satisfy their obligation by using the organization’s return.

When is Form 4720 due

Organizations typically file by the due date of their annual return, or by the 15th day of the fifth month if they do not file one. Individuals and other persons generally file by the 15th day of the fifth month after their own tax year end. Extensions up to 6 months are available using Form 8868, but time to pay does not extend.

Can I combine organization and person‑level taxes on one Part III

No. The instructions are explicit that Part I and Part II amounts cannot be combined in Part III. Each taxpayer completes their own Part III.

What triggers the 1.4% tax for private colleges and universities

All four tests must be met, including at least 500 tuition‑paying students on a daily average basis, more than 50% in the United States, and non‑exempt‑use assets of at least 500,000 per student at prior year end. See Schedule O instructions for computation details.