Instructions For Form 720 - Quarterly Federal Excise Tax Return

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The liability is for taxes listed in Part II (Form 720),

collected during the first 7 days of the second following

except for the floor stocks tax that generally requires a

semimonthly period. The deposit of tax is due by the 3rd

single deposit. See Floor Stocks Tax on page 7.

banking day after the 7th day of that period.

Example. The tax included in amounts billed or

How To Make Deposits

tickets sold for the period June 16-30, 2006, is

To avoid a penalty, make your deposits timely and do not

considered collected from July 16-22, 2006, and must be

mail your deposits directly to the IRS. Records of your

deposited by July 26, 2006.

deposits will be sent to the IRS for crediting to your

To use the alternative method, you must keep a

accounts.

separate account of the tax included in amounts billed or

Electronic deposit requirement. You must make

tickets sold during the month and report on Form 720 the

electronic deposits of all depository taxes (such as

tax included in amounts billed or tickets sold and not the

deposits for employment tax, excise tax, and corporate

amount of tax that is actually collected. For example,

income tax) using the Electronic Federal Tax Payment

amounts billed in December, January, and February are

System (EFTPS) in 2006 if:

considered collected during January, February, and

•

The total deposits of such taxes in 2004 exceeded

March and are reported on Form 720 as the tax for the

$200,000 or

1st quarter of the calendar year.

•

You were required to use EFTPS in 2005.

The separate account for any month cannot include an

If you are required to use EFTPS and use Form 8109,

adjustment resulting from a refusal to pay or inability to

Federal Tax Deposit Coupon, instead, you may be

collect unless the refusal has been reported to the IRS.

subject to a 10% penalty. If you are not required to use

See Communications and Air Transportation Taxes —

EFTPS, you may participate voluntarily. To get more

Uncollected Tax Report on page 3.

information or to enroll in EFTPS, visit the EFTPS

The net amount of tax that is considered collected

website at or call 1-800-555-4477. Also

during the semimonthly period must be either:

•

see Publication 966, The Secure Way to Pay Your

The net amount of tax reflected in the separate

Federal Taxes.

account for the corresponding semimonthly period of the

Depositing on time. For EFTPS deposits to be on

preceding month or

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time, you must initiate the transaction at least one

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

business day before the date the deposit is due.

separate account for the preceding month.

Federal tax deposit coupons. If you are not making

Special rule for deposits of taxes in September 2006.

deposits by EFTPS, use Form 8109 to make the deposits

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

at an authorized financial institution. See the instructions

The special rule does not apply to taxes not required to

in the coupon book for additional information. If you do

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

not have a coupon book, call 1-800-829-4933.

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

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

You will automatically be enrolled in EFTPS when

September.

TIP

you apply for an EIN. You will receive a separate

mailing containing instructions for activating your

Additional deposit of taxes in September 2006

EFTPS enrollment after you receive your EIN. You will

still have the option to use FTD coupons, but see

For the Period

Electronic deposit requirement above.

Beginning

Ending

Due Date

Type of Tax

When To Make Deposits

Regular method taxes

There are two methods for determining deposits: the

EFTPS

Sept. 16

Sept. 26

Sept. 29

regular method and the alternative method.

Non-EFTPS

Sept. 16

Sept. 25

Sept. 28

The regular method applies to all taxes in Part I of

Alternative method taxes (IRS

Form 720 except for communications and air

Nos. 22, 26, 27, and 28)

transportation taxes if deposits are based on amounts

(based on amounts billed)

billed or tickets sold, rather than on amounts actually

EFTPS

Sept. 1

Sept. 11

Sept. 29

collected. See Alternative method below.

Non-EFTPS

Sept. 1

Sept. 10

Sept. 28

If you are depositing more than one tax under a

See Electronic deposit requirement above.

method, combine all the taxes under the method and

make one deposit for the semimonthly period.

For the remaining days in September, be sure to

Regular method. The deposit of tax for a semimonthly

make your deposits by the regular due date.

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

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

CAUTION

semimonthly period and the 14th day of the following

Amount To Deposit

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

Deposits of taxes for a semimonthly period must be at

the 29th day falls on a Saturday, Sunday, or legal

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

holiday, you must make the deposit by the immediately

unless the safe harbor rule applies. See Safe Harbor

preceding day that is not a Saturday, Sunday, or legal

Rule on page 9.

holiday.

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

The net tax liability for a semimonthly period is the

Deposits of communications and air transportation taxes

total liability for the period minus any claims allowed on

may be based on taxes included in amounts billed or

Schedule C for the period. Net tax liability for a

tickets sold during a semimonthly period instead of on

semimonthly period may be figured by dividing the net

taxes actually collected during the period. Under the

tax liability for the month by 2, provided this method of

alternative method, the tax included in amounts billed or

computation is used for all semimonthly periods in the

tickets sold during a semimonthly period is considered

calendar quarter.

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

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