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Internal Revenue Service

Internal Revenue Service. Anna Crowder Indian Tribal Governments Specialist (505) 837-5583. Communications Tax – an Excise Tax. OBJECTIVES. Learn how to: File Form 720 Make deposits for a semimonthly period Make deposits that are subject to the

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Internal Revenue Service

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  1. Internal Revenue Service • Anna Crowder • Indian Tribal Governments Specialist • (505) 837-5583

  2. Communications Tax – an Excise Tax

  3. OBJECTIVES Learn how to: • File Form 720 • Make deposits for a semimonthly period • Make deposits that are subject to the special September rules • Know the due dates of returns • Avoid penalties and interest by following the rules

  4. EXCISE TAXES Telecommunications tax is a “collected” tax Telecommunications tax is due on the amount collected

  5. Communications Tax • “Attaches” at the time of payment • Levied against others • Person furnishing the service must act as a collecting agency for the tax imposed

  6. COMMUNICATIONS TAXRATE 3 %

  7. TAX IS IMPOSED ON: • Local telephone service • Toll telephone service • Teletypewriter exchange

  8. EXEMPTIONS - Communications Tax • Installation charges • Answering services • Mobile radio telephone service • Coin-operated telephones • Telephone-operated security systems • News services (with exceptions) • Common carriers & communications companies (WATS) • Military personnel serving in a combat zone

  9. EXEMPTIONS on COMMUNICATIONS TAXSecure an initial exemption certificate: • American National Red Cross & other • international organizations • Nonprofit hospitals • Nonprofit educational organizations • International organizations • Federal state and local government • (includes Indian tribal governments • IF services involve an essential • tribal government function)

  10. WHAT DO I DO WITH THE TAX COLLECTED FROM MY CUSTOMERS? • File Form 720, Quarterly Federal Excise Tax Return • Returns are due: • April 30 • July 31 • October 31 • January 31 • May have deposit requirements

  11. SCHEDULE A, EXCISE TAX LIABILITY • Must be completed if you have a telecommunications tax liability • Tax liability (not deposits) must match tax on return • If not included with the return or if it is not correct, you may be assessed a failure to deposit penalty

  12. MAKE DEPOSITS SEMIMONTHLY 1—15 16—END OF MONTH TRUST FUND MONEY

  13. DEPOSITS Regular method taxes Deposits are due by the 14th day following the semimonthly period (due 29th ) for the first semimonthly period. Deposit for the 2nd semimonthly period is due by the 14th of the following month. September Rule For 2004, make non-EFTPS deposits by September 28 for Sept 16—25 taxes. If depositing electronically, include amounts billed September 16—26 and deposit by Sept 29.

  14. DEPOSITS

  15. DEPOSITS Alternative method taxes Deposit based on amounts considered as collected. Tax included in amounts billed during a semimonthly period is considered as collected during the first 7 days of the second following semimonthly period. Deposit by the 3rd banking day after that 7th day of the period. September Rule For 2004, deposit by September 28 the amounts billed from September 1—10 if using paper coupons. If depositing electronically, include amounts billed September 1—11 and deposit by September 29.

  16. DEPOSITS

  17. DEPOSIT TIP When using the alternative method taxes, report deposits under the September rule on Form 720 for the 4th quarter. Amounts billed in September are considered collected in October.

  18. FILE & MAKE DEPOSITS BY TELEPHONE Use EFTPS, Electronic Federal Tax Payment System

  19. EFTPS The Easiest Way To Pay Federal TaxesIt’s easy to useYou’re in controlYou decide your payment methodAlways at your fingertips!

  20. EFTPS How to enroll:IRS Form 9779To get a form call 1-800-555-4477

  21. SCHEDULE C • A credit can be claimed on Form 720, Schedule C, if you have a tax liability to report on Form 720 for the quarter • Use Form 8849 to file a claim to get a refund if you have no tax liability for the quarter • Use Form 720X to make adjustments to prior periods

  22. Penalties and Interest may result from: • Failing to collect and pay over the tax as the collecting agent • Failing to file returns • Failing to pay taxes • Filing returns late • Filing false or fraudulent returns or making false statements • Paying taxes late • Failing to make deposits • Depositing taxes late • Misrepresenting that tax is excluded from the price of an article

  23. FTD Penalty: 4-Tier Penalty 1 - 5 days late --------------> 2% 6 - 15 days late---------------------> 5% More than 15 days late, but paid by the 10th day after Notice & Demand--------> 10% Taxes still unpaid after 10th day following Notice & Demand for payment-----------------> 15%

  24. TRUST FUND RECOVERY PENALTY • Pay over collected taxes to U.S. Government • Penalty may be imposed on any person responsible for collecting, accounting for, and paying over these taxes

  25. Need Forms Or Assistance? • IRS Web Site www.irs.gov • Forms 1-800-TAX-FORM • FAX forms (703) 368-9694

  26. SUMMARY • The communications tax is a collected tax, imposed on the person paying for the facility or service • The person furnishing the facility or service is the collecting agency required to collect the tax from the person making the payments • The tax is based on the amount paid for the facility or service, and it attaches at the time of payment • Certain organizations, states, and political subdivisions are exempt from tax

  27. Telecommunications tax is a “Collected” tax • The duty to collect is the person who must report the tax.

  28. Questions?

  29. Thank you for attending

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