Form 720 Penalties and Interests

Federal taxes has to be paid on time to keep IRS audit and penalties away, usually tax returns are ready to file before the due but in some cases we may be waiting for some papers or receipts at that we can pay a estimated amount as tax and pay the remaining liabilities as soon as you get the necessary documents. By doing so you have the chances of reducing the Penalties and Interests.

Form 720 is used yo prepare and pay the liabilities for Federal Excise Taxes we owe and when not meeting the due we may incur  Penalties and Interests.

Penalties and interest may result from any of the following acts.

  • Failing to collect and pay over tax as the collecting agent (see Trust fund recovery penalty, later).
  • Failing to keep adequate records.
  • Failing to file returns.
  • Failing to pay taxes.
  • Filing returns late.
  • Filing false or fraudulent returns.
  • Paying taxes late.
  • Failing to make deposits.
  • Depositing taxes late.
  • Making false statements relating to tax.
  • Failing to register.
  • Misrepresenting that tax is excluded from the price of an article.
With reference to the IRS posting in the website
Failure to register.   The penalty for failure to register if you are required to register, unless due to reasonable cause, is $10,000 for the initial failure, and then $1,000 each day thereafter you fail to register.
Claims.   There are criminal penalties for false or fraudulent claims. In addition, any person who files a refund claim, discussed earlier, for an excessive amount (without reasonable cause) may have to pay a penalty. An excessive amount is the amount claimed that is more than the allowable amount. The penalty is the greater of two times the excessive amount or $10.

Trust fund recovery penalty.   If you provide taxable communications, air transportation services, or indoor tanning services, you have to collect excise taxes (as discussed earlier) from those persons who pay you for those services. You must pay over these taxes to the U.S. Government.   If you willfully fail to collect or pay over these taxes, or if you evade or defeat them in any way, the trust fund recovery penalty may apply. Willfully means voluntarily, consciously, and intentionally. The trust fund recovery penalty equals 100% of the taxes not collected or not paid over to the U.S. Government.   The trust fund recovery penalty may be imposed on any person responsible for collecting, accounting for, and paying over these taxes. If this person knows that these required actions are not taking place for whatever reason, the person is acting willfully. Paying other expenses of the business instead of paying the taxes is willful behavior.

A responsible person can be an officer or employee of a corporation, a partner or employee of a partnership, or any other person who had responsibility for certain aspects of the business and financial affairs of the employer (or business). This may include accountants, trustees in bankruptcy, members of a board, banks, insurance companies, or sureties. The responsible person could even be another corporation—in other words, anyone who has the duty and the ability to direct, account for, or pay over the money. Having signature power on the business checking account could be a significant factor in determining responsibility.

If your excise tax return is examined and you disagree with the findings, you can get information about audit and appeal procedures from Publication 556, Examination of Returns, Appeal Rights, and Claims for Refund. An unagreed case involving an excise tax covered in this publication differs from other tax cases in that you can only contest it in court after payment of the tax by filing suit for a refund in the United States District Court or the United States Court of Federal Claims.

The IRS has a program for assisting taxpayers who have technical problems with tax laws and regulations. The IRS will answer inquiries from individuals and organizations about the tax effect of their acts or transactions. The National Office of the IRS issues rulings on those matters.

A ruling is a written statement to a taxpayer that interprets and applies tax laws to the taxpayer’s specific set of facts. There are also determination letters issued by IRS directors and information letters issued by IRS directors or the National Office.

There is a fee for most types of determination letters and rulings. For complete information on the rulings program, see the first Internal Revenue Bulletin published each year.

Contacting your Taxpayer Advocate. The Taxpayer Advocate Service (TAS) is an independent organization within the IRS whose employees assist taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe that an IRS system or procedure is not working as it should.

You can contact the TAS by calling the TAS toll-free case intake line at 1-877-777-4778 to see if you are eligible for assistance. Persons who are deaf, hard of hearing, or have a speech disability and have access to TTY/TDD equipment should call 1-800-829-4059. You can also call or write to your local taxpayer advocate, whose phone number and address are listed in your local telephone directory and in Publication 1546, Taxpayer Advocate Service—Your Voice at the IRS. You can file Form 911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order), or ask an IRS employee to complete it on your behalf. For more information, go to