If you manage tax compliance for employer clients, there’s a good chance at least some of them sponsor self-insured health plans and that means they owe the PCORI fee, reported annually on IRS Form 720. For many CPA firms, this filing is a small but recurring obligation that falls squarely in the “easy to miss, painful to explain” category.
This guide walks through exactly how to handle Form 720 for your employer clients: which line items apply, how to read the schedule, key deadlines, and why e-filing has become the preferred method for firms that handle this at any volume.
What Form 720 Actually Is
Form 720 is the Quarterly Federal Excise Tax Return. Despite the word “quarterly” in the title, the PCORI fee is only reported and paid once per year, in the second quarter filing, due July 31.
The form covers a wide range of federal excise taxes (fuel taxes, airline ticket taxes, tanning services, and more), but for most CPA firms with employer benefits clients, the only relevant section is Part II, which contains Schedule B, the Health Insurance Providers fee and the PCORI/CERF line.
Which Line Items Apply to Health Plan Clients
When completing Form 720 for a self-insured employer client, focus exclusively on Part II, Line 133. This is the PCORI fee line (also labeled as the Affordable Care Act section 4376 fee).
Here’s what you’ll need to complete it:
- The applicable fee rate for the client’s plan year. The IRS updates this annually via IRS Notice (e.g., Notice 2023-70 set the rate at $3.22 per covered life for plan years ending on or after October 1, 2023, and before October 1, 2024). Always verify the current rate. Using the wrong one is a common and easily avoidable error.
- The average number of covered lives under the plan during the plan year. This includes employees and their covered dependents. (See the section below on calculation methods.)
- The total fee, which is simply: average covered lives × applicable rate.
No other lines on Form 720 typically apply to a standard self-insured employer health plan. However, if your client also offers certain other taxable benefits (e.g., indoor tanning services, certain insurance policies), additional lines may be relevant, so review the full form for each client’s situation.
Quarterly vs. Annual Deadlines
This is a point of confusion worth addressing clearly with clients:
Form 720 is a quarterly form, but the PCORI fee is an annual payment. It is reported and paid in Q2 only, on the return due July 31 of each year. You do not report PCORI in Q1, Q3, or Q4.
The fee applies to plan years ending during the prior calendar year. For example:
- A calendar-year plan ending December 31, 2024 → PCORI fee due July 31, 2025
- A non-calendar plan year ending June 30, 2024 → PCORI fee also due July 31, 2025
The July 31 deadline does not change based on the client’s plan year end date. Mark it once and it applies to every self-insured employer client in your portfolio.
Calculating Average Covered Lives: The Three IRS-Approved Methods
The IRS allows three methods for calculating average covered lives under a self-insured health plan:
1. Actual Count Method Count the total number of covered lives for each day of the plan year, then divide by the number of days in the plan year. Most accurate, most labor-intensive.
2. Snapshot Method Count covered lives on a single designated date each quarter (or the first day of each month), then average those counts. Simpler, and widely used.
3. Snapshot Factor Method Count only the number of participants with self-only coverage and multiply by 1.0; count participants with family coverage and multiply by 2.35. Divide by the number of dates used. This method is specifically available for plans using enrollment data rather than dependent-level records.
For most employer clients, the Snapshot Method hits the right balance of accuracy and practicality. Whichever method is used, it must be applied consistently and documented.
Attaching the Right Schedules
Form 720 itself is the main return, but the PCORI fee calculation detail lives on Schedule B (Form 720). This is a separate attachment where you report:
- The type of plan (specified health insurance policy vs. applicable self-insured health plan)
- The average number of lives covered
- The applicable rate
- The total fee
Make sure Schedule B is completed and attached to the Form 720 filing. Submitting the Form 720 without Schedule B, or paying without filing, are both common errors that generate IRS notices.
Payment: EFTPS, Not a Check
The PCORI fee must be paid via the Electronic Federal Tax Payment System (EFTPS), not by paper check. The payment should be coded to Form 720, the applicable tax period (Q2 of the filing year), and the correct excise tax category.
When filing electronically through an authorized e-file provider, payment is typically integrated into the submission workflow, reducing the risk of a “filed but didn’t pay” or “paid but didn’t file” situation, both of which trigger IRS notices.
Why E-Filing Reduces Error and Saves Time
For a CPA firm handling PCORI filings for even three or four employer clients, the manual approach, downloading PDFs, calculating fees in a spreadsheet, mailing or faxing, coordinating EFTPS payments separately, is surprisingly error-prone and time-consuming relative to the dollar amount involved.
Purpose-built e-filing platforms like Akore Federal are designed specifically for this workflow:
- Built-in fee rate lookups: no need to check the annual IRS Notice manually
- Covered lives calculator: input your numbers, the platform applies the correct method
- Integrated Schedule B: auto-populated based on your inputs
- IRS e-signature and submission: direct filing with acknowledgment receipt
- Multi-client management: handle all your employer clients from a single dashboard
The result: a filing that takes hours manually gets done in under 10 minutes per client with a clear audit trail and IRS confirmation on file.
A Note on Authorization
When filing on behalf of an employer client, ensure you have a signed Form 8655 (Reporting Agent Authorization) or equivalent engagement letter language that authorizes you to file excise tax returns on the client’s behalf. The filing is submitted under the employer’s EIN, not the CPA firm’s.
File Form 720 for Your Clients with Akore Federal
Whether you’re filing for one client or fifty, Akore Federal’s Form 720 e-filing platform is built for accounting professionals who need accuracy, speed, and a clean paper trail.
Start filing at AkoreFederal.com →
