Instructions For Form 720 - Quarterly Federal Excise Tax Return

see Publication 966, The Secure Way to Pay Your

The net amount of tax that is considered collected

Federal Taxes.

during the semimonthly period must be either:

•

The net amount of tax reflected in the separate

Depositing on time. For EFTPS deposits to be on

account for the corresponding semimonthly period of the

time, you must initiate the transaction at least one

preceding month or

business day before the date the deposit is due.

•

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

Federal Tax Deposit Coupons. If you are not making

separate account for the preceding month.

deposits by EFTPS, use Form 8109 to make the deposits

Special rule for deposits of taxes in September 2005.

at an authorized financial institution. See the instructions

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

in the coupon book for additional information. If you do

The special rule does not apply to taxes not required to

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

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

Regulations section 40.6302(c)-2 for rules to figure the

You will automatically be enrolled in EFTPS when

net tax liability for the deposits due in September.

TIP

you apply for an EIN. You will receive a separate

mailing containing instructions for activating your

Additional deposit of taxes in September 2005

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 on page 7.

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 on page 7.

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.

CAUTION

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

Amount To Deposit

semimonthly period and the 14th day of the following

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 below.

holiday.

The net tax liability for a semimonthly period is the

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

total liability for the period minus any claims on Schedule

Deposits of communications and air transportation taxes

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

may be based on taxes included in amounts billed or

may be figured by dividing the net tax liability for the

tickets sold during a semimonthly period instead of on

month by 2, provided this method of computation is used

taxes actually collected during the period. Under the

for all semimonthly periods in the calendar quarter.

alternative method, the tax included in amounts billed or

The net tax liability for a semimonthly period is not

tickets sold during a semimonthly period is considered

reduced by any amounts from Form 720X.

collected during the first 7 days of the second following

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

CAUTION

banking day after the 7th day of that period.

Safe Harbor Rule

Example. The tax included in amounts billed or

The safe harbor rule applies separately to deposits under

tickets sold for the period June 16-30, 2005, is

the regular method and the alternative method. Persons

considered collected from July 16-22, 2005, and must be

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

deposited by July 27, 2005.

calendar quarter preceding the current quarter) are

considered to meet the semimonthly deposit requirement

To use the alternative method, you must keep a

if the deposit for each semimonthly period in the current

separate account of the tax included in amounts billed or

quarter is at least

(16.67%) of the net tax liability

tickets sold during the month and report on Form 720 the

reported for the look-back quarter.

tax included in amounts billed or tickets sold and not the

amount of tax that is actually collected. For example,

For the semimonthly period for which the additional

amounts billed in December, January, and February are

deposit is required, the additional deposit must be at

considered collected during January, February, and

least

(12.23%),

(11.12%) for non-EFTPS, of the

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

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

1st quarter of the calendar year.

the total deposit for that semimonthly period must be at

least

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

The separate account for any month cannot include an

look-back quarter.

adjustment resulting from a refusal to pay or inability to

collect unless the refusal has been reported to the IRS.

Exceptions. The safe harbor rule does not apply to:

•

See Communications and Air Transportation Taxes —

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

Uncollected Tax Report on page 4.

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

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Instructions For Form 720 - Quarterly Federal Excise Tax Return - 2005 Page 8

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