Blog Details

Most organizations and some private individuals are not aware that, under the provision of the federal excise tax, the IRS taxes some specific services of communication. The form of taxes so determined comes from various services, which are reported through IRS Form 720. Such services include local and long-distance telephone calls, teletypewriter exchange services, and toll communications. It includes telecom operators involved in providing VoIP services, as well as businesses employing very extensive communication systems. However, awareness of these rules for communications excise tax will help avoid noncompliance and penalties in terms of penalties.

Taxable communication services, by the very definition used by the IRS, do not just mean traditional telephone service. Generally, the definition of taxable communications could because its coverage swept such features as wireless services or satellite communications, including some kinds of data transmission lines, applicable by tax when made into service as a particular means of connecting individuals through speaking or typing through text. For instance, international calls routed through U.S. exchanges could still incur excise taxes. Companies providing these services are responsible for collecting and remitting the tax to the IRS via quarterly Form 720 filings.

When filing, Form 720 contains a specific section that is strictly for air transport and communications taxes. It is important for service providers to compute taxes on the basis of the percentage rate of service charge applicable to them before reporting quarterly. Penalties and interest charges from the IRS for non-filing and underreporting can be incurred; therefore, one must keep proper records of call charges, invoices, and customer usage to comply.

Some businesses overlook it, but there are audits and data matching from the IRS. Stay informed about telecom tax rules, changes in federal excise tax rates, and reporting requirements. You keep your business protected from very costly disputes, apart from keeping compliant. With this knowledge of how the IRS taxes the talk time pertaining to your business, you can continue managing the services you have better, ensuring accurate Form 720 submissions and keeping a very strong compliance record.