For CPA firms that file Form 720 on behalf of self-insured employer clients, the PCORI fee section is straightforward in concept but surprisingly easy to get wrong in execution. The wrong subline, an outdated rate, a mismatched quarter date, or a payment submitted without the return are among the most common errors that generate IRS notices for otherwise compliant clients.
This post provides a detailed, line-by-line walkthrough of the Form 720 PCORI fee section for the 2025 and 2026 filing periods, covering the correct sublines for each plan year date range, how to enter covered lives, how to calculate the fee, and tips for e-signature and submission that reduce error risk.
What Form 720 Is and Why the PCORI Fee Lives There
Form 720 is the Quarterly Federal Excise Tax Return. It covers a wide range of federal excise taxes including fuel taxes, indoor tanning services, certain insurance premiums, and environmental levies. For most self-insured employer clients, the PCORI fee is the only reason they file Form 720 at all.
Despite the form’s quarterly structure, the PCORI fee is reported and paid only once per year: on the second quarter return, due July 31. This is a persistent source of confusion. The quarter ending date on the form should always be June 30 of the filing year, regardless of when the employer’s plan year ended. Submitting the PCORI fee on a Q1, Q3, or Q4 Form 720 is an error that can cause the IRS to misapply the payment and treat the filing as late.
Locating the PCORI Fee on Form 720: Part II, IRS No. 133
The PCORI fee appears in Part II of Form 720, under IRS No. 133, labeled as the Patient-Centered Outcomes Research (PCOR) fee. There are multiple sublines under IRS No. 133, and using the correct subline is critical. Using the wrong one is one of the most commonly cited Form 720 errors in IRS correspondence.
The sublines are divided into two categories: lines for issuers of specified health insurance policies (fully insured carriers), and lines for plan sponsors of applicable self-insured health plans. For CPA clients who are self-insured employers, you will always use the applicable self-insured health plan sublines, which are lines 133(c) and 133(d) for the current filing periods.
The Correct Sublines for 2025 and 2026 Filings
The specific subline used depends on when the employer’s plan year ended. Two sets of sublines are relevant for filings due in 2025 and 2026:
| Plan Year End Date | Applicable Rate | Correct Subline | Filing Deadline |
| Jan 1, 2024 through Sep 30, 2024 | $3.22 per covered life | Line 133(c) | July 31, 2025 (past) |
| Oct 1, 2024 through Dec 31, 2024 | $3.47 per covered life | Line 133(d) | July 31, 2025 (past) |
| Jan 1, 2025 through Sep 30, 2025 | $3.47 per covered life | Line 133(c) | July 31, 2026 |
| Oct 1, 2025 through Dec 31, 2025 | $3.84 per covered life | Line 133(d) | July 31, 2026 |
For most calendar-year plan clients with plan years ending December 31, 2025, the applicable subline is 133(d) at the $3.84 rate, with a filing deadline of July 31, 2026.
Note: Lines 133(a) and 133(b) are used by issuers of specified health insurance policies (fully insured carriers), not by self-insured plan sponsors. Using these lines for an employer client will result in a mismatch that the IRS may flag.
How to Count Covered Lives: The Three IRS-Approved Methods
Before completing Line 133, you need the average number of covered lives under the plan for the plan year. The IRS permits three methods for self-insured plan sponsors:
Actual Count Method. Total all covered lives for each day of the plan year and divide by the number of days in the plan year. This method is the most precise but requires daily enrollment records. Most employer clients will not have this data readily available.
Snapshot Method. Count covered lives on one designated date per quarter (four dates total) and average those four counts. This is the most widely used method. The snapshot date does not have to be the same date each quarter, but it should be documented and applied consistently.
Form 5500 Method. Use the participant counts reported on the employer’s most recently filed Form 5500. Specifically, add the number of participants at the beginning of the plan year to the number at the end of the plan year, then divide by two. This method is only available if the Form 5500 was filed by the PCORI fee due date. If an extension was filed for the Form 5500, this method may not be available.
One important nuance for HRA clients: when the employer sponsors both a self-insured major medical plan and an HRA with the same plan year and plan sponsor, only the covered lives under the major medical plan are counted (the HRA is disregarded). However, if the HRA covers employees who are not covered by the self-insured major medical plan, those additional employees must be added to the count. For HRAs paired with fully insured major medical plans, covered lives for the HRA count only enrolled employees, not their dependents.
Once a calculation method is chosen for a plan year, it must be applied consistently throughout that year. The employer may change methods for a subsequent plan year, but the change should be documented.
Completing Line 133: Step by Step
Once you have the average covered lives figure and have confirmed the correct subline, completing the PCORI fee section of Form 720 follows a straightforward sequence:
- Download the current version of Form 720 from IRS.gov. The form is updated each year; always verify you are using the revision dated for the current filing period (Rev. June 2026 for July 2026 filings). Do not use a prior-year version.
- Complete the header section on Page 1. Enter the employer’s legal name, address, and EIN. In the quarter ending field, enter June 30, 2026 for all PCORI filings due July 31, 2026, regardless of when the plan year ended. Do not check the Final Return box unless the employer is going out of business or will no longer have a self-insured plan.
- Navigate to Part II, IRS No. 133. Confirm you are using the applicable self-insured health plans row, not the specified health insurance policies row.
- Select the correct subline (133(c) or 133(d)) based on the plan year end date as shown in the table above.
- In column (a), enter the average number of covered lives calculated using one of the three IRS-approved methods. Round to the nearest whole number.
- In column (b), the applicable rate is shown on the form. Verify it matches the rate for the plan year date range.
- In column (c), the fee amount is calculated as covered lives multiplied by the applicable rate. Enter this figure as the tax amount.
- Complete Part III (Total Tax section). Transfer the PCORI fee amount to Part III, lines 3 and 10, to calculate the total balance due.
- Sign and date the form at the bottom of Page 3.
- If filing by paper, complete Form 720-V (the payment voucher) for the second quarter of the filing year and mail the return to the IRS address in Ogden, Utah. If e-filing, the payment and submission are handled within the e-filing workflow.
Common Errors That Generate IRS Notices
Based on IRS correspondence patterns, these are the most common Form 720 PCORI errors CPA firms encounter:
Wrong quarter date on Page 1. Entering December 31 (the plan year end date) instead of June 30 (the filing quarter date) is a frequent mistake that causes the IRS to misroute the payment.
Wrong subline. Using 133(a) or 133(b) (the carrier lines) instead of 133(c) or 133(d) for a self-insured employer will result in an IRS mismatch notice.
Using an outdated form version. Rate tables on older form versions are incorrect for current plan years. Always download the current revision directly from IRS.gov.
Filing without payment, or paying without filing. These two-step errors are the most common source of CP162 notices. The return and payment must be coordinated. E-filing through an authorized provider handles both in a single workflow.
Wrong rate applied to the plan year. Applying the $3.47 rate to a plan year ending October 2025 (which should use $3.84) is a calculation error that requires an amended return to correct.
Checking Final Return incorrectly. If the employer still maintains a self-insured plan in the following year, checking the Final Return box will close the account and create complications for future filings.
E-Signature, E-Filing, and Submission Tips
Electronic filing of Form 720 is available but not currently mandatory for most employers. However, e-filing through an IRS-authorized provider offers meaningful advantages over paper submission:
- Immediate IRS acknowledgment: an e-filed return receives an electronic confirmation from the IRS, providing a timestamped record that the return was received. Paper returns offer no such confirmation.
- Integrated payment: authorized e-file providers connect directly to EFTPS, eliminating the coordination gap between filing and payment that produces the most common IRS notices.
- Built-in rate and subline lookups: reputable platforms automatically populate the correct rate and subline based on the plan year end date entered, reducing manual calculation errors.
- Multi-client management: for CPA firms filing on behalf of multiple employer clients, a centralized e-filing dashboard significantly reduces the administrative overhead of managing separate filings, deadlines, and payment confirmations.
- Audit trail: every filed return, calculation input, and payment record is stored and retrievable, which is essential for responding to any future IRS inquiry.
For e-signature purposes, the authorized individual signing Form 720 must be an officer or authorized representative of the employer, not the CPA firm. When filing on behalf of a client, ensure the client’s authorized signatory has reviewed and approved the return before submission. A signed Form 8655 (Reporting Agent Authorization) should be on file for each client for whom you file excise tax returns.
Amended Returns: What to Do If You Made an Error
If an error is discovered after the Form 720 has been filed, the correction is made on Form 720X, the Amended Quarterly Federal Excise Tax Return. Form 720X allows the filer to report the difference between the original amount and the corrected amount.
Common scenarios that require a Form 720X include:
- The covered lives count was incorrect due to enrollment data errors
- The wrong fee rate was applied to the plan year
- The return was filed under the wrong quarter date
- A HRA was omitted from the original filing when it should have been included
Form 720X should be filed as soon as the error is identified. Penalties and interest continue to accrue on any underpayment until corrected. Overpayments can be credited against future periods or refunded, depending on the circumstances.
File Form 720 for Your Clients with Akore Federal
Akore Federal is designed for CPA firms and accounting professionals who need an efficient, accurate way to manage Form 720 PCORI filings across a client portfolio. The platform applies the correct rate and subline automatically based on the plan year end date, walks through the covered lives calculation, populates Schedule B, and submits directly to the IRS with electronic acknowledgment.
A multi-client dashboard gives accounting teams visibility across all active client filings, with status tracking and documentation stored for each return.
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Have questions about Form 720 filing procedures, covered lives calculation methods, or managing PCORI filings for multiple employer clients? Contact the Akore Federal compliance support team.
