Instructions For Form 720 - Quarterly Federal Excise Tax Return

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

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

may be figured by dividing the net tax liability for the

semimonthly period and

month by 2, provided this method of computation is used

2. Enter the total in the applicable box.

for all semimonthly periods in the calendar quarter.

Additional rules. Report communications and air

The net tax liability for a semimonthly period is not

transportation taxes based on:

•

reduced by any amounts from Form 720X.

Actual collections on line 1.

•

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

CAUTION

tax to report for a semimonthly period is the net amount

Safe Harbor Rule

that is considered collected during that period.

The safe harbor rule applies separately to deposits

Example. The amounts billed for communications

under the regular method and the alternative method.

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

Persons who filed Form 720 for the look-back quarter

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

(the 2nd calendar quarter preceding the current quarter)

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

are considered to meet the semimonthly deposit

quarter of 2002.

requirement if the deposit for each semimonthly period in

Reporting tax liability under the special September

the current quarter is at least

(16.67%) of the net tax

rule. An additional reporting is required under the

liability reported for the look-back quarter.

special September rule (for the period shown in the chart

on page 7) as follows:

For the semimonthly period for which the additional

deposit is required, the additional deposit must be at

least

(12.23%),

(11.12%) for non-EFTPS, of the

Regular method taxes

Enter the tax liability for the period

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

beginning September 16 and ending

September 25/26 in the (line 1) Special

the total deposit for that semimonthly period must be at

rule for September box.

least

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

look-back quarter.

Alternative method taxes

Enter the tax included in amounts billed or

tickets sold during the period beginning

Exceptions. The safe harbor rule does not apply to:

September 1 and ending September 10/11

•

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

in the (line 2) Special rule for September

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

box on the 4th quarter return.

deposit of taxes for each semimonthly period in the

For the remaining days in the September period,

calendar quarter is at least

(16.67%) of the tax liability

report the liability as follows:

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

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

quarter;

Regular method taxes

Enter the liability for the period beginning

•

Any quarter if liability includes any tax not in effect

September 26/27 and ending September

30 in box F.

throughout the look-back quarter; or

•

For deposits under the alternative method, any quarter

Alternative method taxes

Enter the tax included in the amounts billed

if liability includes any tax not in effect throughout the

or tickets sold for the period beginning

September 11/12 and ending September

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

15 in box M of the 4th quarter return.

quarter.

Enter the tax included in amounts billed or

Requirements to be met. For the safe harbor rule to

tickets sold during the period beginning

apply, you must:

September 16 and ending September 30 in

•

box N of the 4th quarter return.

Make each deposit timely at an authorized financial

institution and

•

Pay any underpayment for the current quarter by the

Schedule C—Claims

due date of the return.

Complete all information requested for each line,

The IRS may withdraw the right to make deposits

including month income tax year ends and period of

of tax using the safe harbor rule from any person

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

not complying with these rules.

CAUTION

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. Also, you are certifying to the

Schedule A—Excise Tax Liability

applicable statement(s) on Schedule C when you make a

claim. See Pub. 378 and Pub. 510 for more information.

How to complete. Complete Schedule A to record net

You must include in your gross income the

tax liabilities for Part I taxes for each semimonthly period

amount from line 4 of Form 720 if you took a

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

deduction on your income tax return that included

CAUTION

the amount of the taxes and that deduction reduced your

The following table will help you determine which

boxes to complete on Schedule A.

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

Do not use Schedule C:

AND enter the net

•

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

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

Form 720.

the...

line...

boxes...

•

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

Regular method

A – F

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

Alternative method

M – R

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

Taxes, and its separate schedules.

•

If you are reporting more than one type of tax on

To request an abatement or refund of interest under

lines 1 and 2:

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

-8-

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

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