Instructions For Form 720 - Quarterly Federal Excise Tax Return

or call 1-800-555-4477. Also see Publication 966, The

Communications and Air Transportation Taxes —

Secure Way to Pay Your Federal Taxes.

Uncollected Tax Report on page 3.

Depositing on time. For EFTPS deposits to be on time,

The net tax liability that is considered collected during

you must initiate the transaction at least 1 business day

the semimonthly period must be either:

•

before the date the deposit is due.

The net amount of tax reflected in the separate account

for the corresponding semimonthly period of the preceding

Federal tax deposit coupons. If you are not making

month, or

deposits by EFTPS, use Form 8109 to make the deposits at

•

One-half of the net amount of tax reflected in the separate

an authorized financial institution. See the instructions in the

account for the preceding month.

coupon book for additional information. If you do not have a

coupon book, call 1-800-829-4933.

Special rule for deposits of taxes in September 2006. If

you are required to make deposits, see the chart below. The

You will automatically be enrolled in EFTPS when

special rule does not apply to taxes not required to be

TIP

you apply for an EIN. You will receive a separate

deposited (see Payment of Taxes on page 7). See

mailing containing instructions for activating your

Regulations sections 40.6302(c)-2 and 40.6302(c)-3 for

EFTPS enrollment after you receive your EIN. You will still

rules to figure the net tax liability for the deposits due in

have the option to use FTD coupons, but see Electronic

September.

deposit requirement above.

When To Make Deposits

Additional deposit of taxes in September 2006

There are two methods for determining deposits: the regular

For the Period

method and the alternative method.

Beginning

Ending

Due Date

The regular method applies to all taxes in Part I of Form

Type of Tax

720 except for communications and air transportation taxes

Regular method taxes

if deposits are based on amounts billed or tickets sold,

EFTPS

Sept. 16

Sept. 26

Sept. 29

rather than on amounts actually collected. See Alternative

Non-EFTPS

Sept. 16

Sept. 25

Sept. 28

method below.

Alternative method taxes (IRS

If you are depositing more than one tax under a method,

Nos. 22, 26, 27, and 28)

combine all the taxes under the method and make one

(based on amounts billed)

deposit for the semimonthly period.

EFTPS

Sept. 1

Sept. 11

Sept. 29

Regular method. The deposit of tax for a semimonthly

Non-EFTPS

Sept. 1

Sept. 10

Sept. 28

period is due by the 14th day following that period.

See Electronic deposit requirement above.

Generally, this is the 29th day of a month for the first

semimonthly period and the 14th day of the following month

for the second semimonthly period. If the 14th or the 29th

For the remaining days in September, be sure to

day falls on a Saturday, Sunday, or legal holiday, you must

make your deposits by the regular due date.

make the deposit by the immediately preceding day that is

CAUTION

not a Saturday, Sunday, or legal holiday.

Amount To Deposit

Alternative method (IRS Nos. 22, 26, 27, and 28).

Deposits of communications and air transportation taxes

Deposits of taxes for a semimonthly period must be at least

may be based on taxes included in amounts billed or tickets

95% of the amount of net tax liability for that period, unless

sold during a semimonthly period instead of on taxes

the safe harbor rule applies. See Safe Harbor Rule below.

actually collected during the period. Under the alternative

The net tax liability for a semimonthly period is the total

method, the tax included in amounts billed or tickets sold

liability for the period minus any claims allowed on Schedule

during a semimonthly period is considered collected during

C for the period. Net tax liability for a semimonthly period

the first 7 days of the second following semimonthly period.

may be figured by dividing the net tax liability for the month

The deposit of tax is due by the 3rd banking day after the

by 2, provided this method of computation is used for all

7th day of that period.

semimonthly periods in the calendar quarter.

Example. The tax included in amounts billed or tickets

sold for the period June 16-30, 2006, is considered collected

The net tax liability for a semimonthly period is not

from July 16-22, 2006, and must be deposited by

reduced by any amounts from Form 720X.

July 26, 2006.

CAUTION

To use the alternative method, you must keep separate

Safe Harbor Rule

accounts of the tax included in amounts billed or tickets sold

The safe harbor rule applies separately to deposits under

during the month and report on Form 720 the tax included in

amounts billed or tickets sold and not the amount of tax that

the regular method and the alternative method. Persons

is actually collected. For example, amounts billed in

who filed Form 720 for the look-back quarter (the 2nd

December, January, and February are considered collected

calendar quarter preceding the current quarter) are

during January, February, and March and are reported on

considered to meet the semimonthly deposit requirement if

the deposit for each semimonthly period in the current

Form 720 as the tax for the 1st quarter of the calendar year.

quarter is at least

(16.67%) of the net tax liability reported

The separate account for each month must reflect:

for the look-back quarter.

1. All items of tax included in amounts billed or tickets

For the semimonthly period for which the additional

sold during the month, and

deposit is required (September 1-11 and 16-26 for EFTPS,

2. Other items of adjustment relating to tax for prior

or September 1-10 and 16-25 for non-EFTPS), the

months (within the statute of limitations on credits or

additional deposit must be at least

(12.23%),

refunds).

(11.12%) for non-EFTPS, of the net tax liability reported for

The separate account for any month cannot include an

the look-back quarter. Also, the total deposit for that

adjustment resulting from a refusal to pay or inability to

semimonthly period must be at least

(16.67%) of the net

collect unless the refusal has been reported to the IRS. See

tax liability reported for the look-back quarter.

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Instructions For Form 720 - Quarterly Federal Excise Tax Return - 2006 Page 8

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