QUESTION: I paid the 1% due on my Swiss Annuity but now I am receiving
quarterly reports in the mail. This happened to our daughter also.
When she did not file the quarterly report, the IRS said they were
going to take over her bank accounts. After several months, they said
she did not owe any money. I am under the impression that I only
pay the 1% tax on the annuity and no quarterly payment is required.
Please help.

REPLY: I've had similar problems with state payroll tax reports
because I don't pay myself a salary on a regular frequency. Once you
get in their system, it generates a sequence of computer generated
responses. In some cases, the real problem is getting past the
computer system so that a real person is looking at the report. With
the quarterly payroll tax returns, I just file them with zero wages.
You might try doing that with the Form 720.

Near the top of the form 720 is a box you can check that says "Final
Return". Check that box on a return showing zero premiums and zero
taxes. As an added precaution, you might enclose a letter explaining
that the premium tax is based on premium payments and that you have
purchased a single premium annuity and don't expect to make any
further premium payments. Keep a copy that you can use if you get more
threatening letters from their computer.

Vern