Among the business filings of communication and transportation service providers in the United States, Form 720, the Quarterly Federal Excise Tax Return, is considered a vital one. On this return, the filer will determine, and subsequently remit to the IRS, the excise taxes payable for services such as telephone communications or air transportation. In this blog, we will provide you with key guidelines regarding filling out Form 720 for communications and transportation services.
Understanding Form 720
Form 720 is used to file federal excise tax for some particular products and services. Two of the major groups are communication and transportation, where communication service encompasses primarily phone services and transportation service comprises essentially airline travel. Businesses collect excise taxes from consumers and are supposed to file the same on a quarterly basis on Form 720. These forms help the business keep up with tax compliance requirements and avoid a penalty.
Excise Tax on Communication Services
Excise tax on communication services is yet another federal excise tax. This comprises telephone services, be they local or long distance in nature. All telephone services fall under this category, and the tax amount is collected from the consumers. The enterprise providing the telephone services must be able to track accurately for this tax and present while making tax return Form 720.
Critical consideration would comprise:
List of Services under Communication: The excise tax comprises a landline telephone system, VoIP (Voice over Internet Protocol), and even wireless communication.
-Federal Rate of Taxation : Generally, the federal tax rate on phone services typically crosses 3% added to the consumer’s bill and remitted to the IRS quarterly.
As they file, business amounts collected are to be reported in the proper section of Form 720.
Excise Tax on Transportation Services
Federal excise taxes are levied on transportation services-air transportation being primarily taxed. Airline companies and travel providers must collect excise taxes from passengers and freight carriers. These are to be reported using Form 720. These taxes go towards financing airport infrastructure and other transportation services. Remember to note the following:
- Passenger and Freight Taxation: Excise tax is imposed on domestic air transportation, some international air transportation, and airborne importations of freight.
- Tax Rates: The rate for the excise tax on air transportation is 7.5%. Other overcharge premiums are added to certain international air transportation and between the continental United States and certain U.S. possessions.
Excise taxes must be reported precisely on Form 720, “Air Transportation Tax” to be accepted by the IRS.
Quarterly Filing and Filing Dates
Form 720 must be filed quarterly. Depending on the calendar year, quarterly filing dates fall on the following dates:
- First Quarter: April 30th
- Second Quarter: July 31st
- Third Quarter: October 31st
- Fourth Quarter: January 31st of the following year
Failure to file on time or reporting tax returns inaccurately may attract penalties and interest charges. Correct and accurate monitoring of excise taxes can relieve communication and transportation businesses in following required deadlines.
E-Filing Form 720
Tax preparation software providers advise that filing Form 720 through the e-file form reduces processing time and receives instant confirmation of receipt. The chances of error are relatively low too, as the forms fill automatically. Most tax preparation software providers support e-filing compatible with Form 720 and will help the organization file in a completely accurate and smooth manner.
Consequences of Non-Compliance
Others are penalized by law for failure to file Form 720 or make mistakes in the reporting of excise taxes. Fines are assessed by the IRS as a percentage of the tax owed plus interest on any balance remaining unpaid. The individual may also be charged additional penalties if, say, they fail to report quarterly. That is why knowing the deadlines and reporting accurately is essential.
To adhere to the excise tax on communication and transportation services, businesses will be required to submit their Form 720 after properly presenting all its details. Deadlines are met entirely in complete organizational study, taking help from e-filing which would make it impossible to get penalized. Many questions, however, demand an IRS resource or a tax professional’s advice to ensure accurate filings.
This will keep you up-to-date with the latest changes in regulations and know how they apply to your business keeping you on track and compliant year-round.