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 TAX RATE 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 TAX Secure 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

12. 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

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

15. DEPOSITS Regular method taxes September Rule Deposits are due by the 14 th day following the semimonthly period (due 29 th ) for the first semimonthly period. Deposit for the 2 nd semimonthly period is due by the 14 th of the following month. 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.

16. DEPOSITS Regular method taxes – EXAMPLE Semimonthly deposits  Jan 1 – Jan 15 th Deposit by Jan 29 th  Jan 16 – Jan 31 st Deposit by Feb 14th Additional deposits in September Paper Coupons  Sept 16 – Sept 25 th Due Sept 28 th Electronic Deposits  Sept 16 – Sept 26 th Due Sept 29 th

17. DEPOSITS Alternative method taxes September Rule 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 3 rd banking day after that 7 th day of the period. 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.

18. DEPOSITS Alternative method taxes (on amounts billed) Semimonthly deposits  Jan 1 – Jan 15 th Due Feb 11 th  Jan 16 – Jan 31 st Due Feb 25 th Additional deposits in September Paper Coupons  Sept 1 – Sept 10 th Due Sept 28 th Electronic Deposits  Sept 1 – Sept 11 th Due Sept 29 th

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

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

21. The Easiest Way To Pay Federal Taxes It’s easy to use You’re in control You decide your payment method Always at your fingertips! EFTPS

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

23.  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 SCHEDULE C

24. 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

25. 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%

26. 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

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

28. 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

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

30. Questions?

31. Thank you for attending