Instructions For Form 720 - Quarterly Federal Excise Tax Return

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Safe Harbor Rule

Amounts billed or tickets sold on line 2. The amount of

tax to report for a semimonthly period is the net amount

The safe harbor rule applies separately to deposits

that is considered collected during that period.

under the regular method and the alternative method.

Persons who filed Form 720 for the look-back quarter

Example. The amounts billed for communications

(the 2nd calendar quarter preceding the current quarter)

services from June 1-15, 2002, are considered collected

are considered to meet the semimonthly deposit

during the period July 1-7, 2002, and are reported for the

requirement if the deposit for each semimonthly period in

3rd quarter of 2002 on Schedule A in box M, not the 2nd

the current quarter is at least

(16.67%) of the net tax

quarter of 2002.

liability reported for the look-back quarter.

Reporting tax liability under the special September

For the semimonthly period for which the additional

rule. An additional reporting is required under the

deposit is required, the additional deposit must be at

special September rule (for the period shown in the chart

least

(12.23%),

(11.12%) for non-EFTPS, of the

on page 7) as follows:

net tax liability reported for the look-back quarter. Also,

the total deposit for that semimonthly period must be at

Regular method taxes

Enter the tax liability for the period

least

(16.67%) of the net tax liability reported for the

beginning September 16 and ending

look-back quarter.

September 25/26 in the (line 1) Special

rule for September box.

Exceptions. The safe harbor rule does not apply to:

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Alternative method taxes

Enter the tax included in amounts billed or

The 1st and 2nd quarters beginning on or after the

tickets sold during the period beginning

effective date of an increase in the rate of tax unless the

September 1 and ending September 10/11

deposit of taxes for each semimonthly period in the

in the (line 2) Special rule for September

calendar quarter is at least

(16.67%) of the tax liability

box on the 4th quarter return.

you would have had for the look-back quarter if the

increased rate of tax had been in effect for that look-back

For the remaining days in the September period,

quarter;

report the liability as follows:

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Any quarter if liability includes any tax not in effect

throughout the look-back quarter; or

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Regular method taxes

Enter the liability for the period beginning

For deposits under the alternative method, any quarter

September 26/27 and ending September

if liability includes any tax not in effect throughout the

30 in box F.

look-back quarter and the month preceding the look-back

Alternative method taxes

Enter the tax included in the amounts billed

quarter.

or tickets sold for the period beginning

Requirements to be met. For the safe harbor rule to

September 11/12 and ending September

15 in box M of the 4th quarter return.

apply, you must:

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Enter the tax included in amounts billed or

Make each deposit timely at an authorized financial

tickets sold during the period beginning

institution and

September 16 and ending September 30 in

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Pay any underpayment for the current quarter by the

box N of the 4th quarter return.

due date of the return.

The IRS may withdraw the right to make deposits

of tax using the safe harbor rule from any person

Schedule C— Claims

not complying with these rules.

CAUTION

Complete all information requested for each line,

including month income tax year ends and period of

claim (or for line 10, earliest and latest date of sale)

Schedule A—Excise Tax Liability

included in the claim. Your claim will be disallowed if you

do not follow the required procedures or do not provide

all the required information. See Pub. 378 and Pub. 510

How to complete. Complete Schedule A to record net

for more information.

tax liabilities for Part I taxes for each semimonthly period

in a quarter even if your net liability is under $2,500.

You must include in your gross income the

amount from line 4 of Form 720 if you took a

The following table will help you determine which

deduction on your income tax return that included

boxes to complete on Schedule A.

CAUTION

the amount of the taxes and that deduction reduced your

AND enter the net

income tax liability. See Pub. 378 for more information.

IF you are reporting under THEN you report on tax liability in

the...

line...

boxes...

Do not use Schedule C:

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If you are not reporting a liability in Part I or Part II of

Regular method

A – F

Form 720.

Alternative method

M – R

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To claim amounts that you took or will take as a credit

on Form 4136, Credit for Federal Tax Paid on Fuels, or

If you are reporting more than one type of tax on

as a refund on Form 8849, Claim for Refund of Excise

lines 1 and 2:

Taxes, and its separate schedules.

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To request an abatement or refund of interest under

1. Add the net tax liability for each tax for each

section 6404(e) (due to IRS errors or delays) or an

semimonthly period and

abatement of a penalty or addition to tax as a result of

2. Enter the total in the applicable box.

erroneous IRS written advice. Use Form 843, Claim for

Additional rules. Report communications and air

Refund and Request for Abatement.

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transportation taxes based on:

To make adjustments to liability reported on Forms 720

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Actual collections on line 1.

filed for prior quarters, use Form 720X.

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Instructions For Form 720 - Quarterly Federal Excise Tax Return - 2002 Page 8

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