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R. Klein, EA
R. Klein, EA, Enrolled Agent
Category: Tax
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What is a form 720 for? .... my partner just filled out online

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What is a form 720 for? .... my partner just filled out online for our EIN number as a new business (we are selling final expense insurance) and the instant letter she received said we need to file form 720 by 4/30/13..the form looks like transportation tax form and we are insurance...I'm confused...please help

Randalltax :

Form 720 is for all types of Federal Excise Taxes. This is not the same as state sales tax or income tax.

Randalltax :

There are taxes on certain life insurance sold.

Randalltax :

If you are the writer of insurance policy, you may have a tax on the sale of the policy. If you are merely a salesperson and earning a commission, this tax does not apply to you.

Randalltax :

It applies to the Insurer.

Randalltax :

It really only applies to foreign insurers because the US is not collecting its normal taxes on these policies.

Randalltax :


  • Who must file. The person who pays the premium to the
    foreign insurer (or to any nonresident person such as a
    foreign broker) must pay the tax and file the return.
    Otherwise, any person who issued or sold the policy, or who
    is insured under the policy, is required to pay the tax and file
    the return



Randalltax :

If this does not apply, then don't need to feel.

Randalltax :

file

Customer:

But the letter states I must file by 4/30/13, so won't I get fined if I don't file and should I contact the irs to ask them why this form is required?

Randalltax :

Are you subject to this tax?

Randalltax :

If not, there is no penalty for not filing a form that you do not need to file.

Randalltax :

Just write a note to whomever sent you the notice that the tax does not apply to you.

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