New - for 2006 Tax Returns only

Telephone Tax Refund

Below are two articles from the IRS regarding the Telephone Excise Tax Refunds that they have received already.  First is regarding the standard amounts allowed.  The second discusses the mistakes that were  made early on in the tax season.

The credit is the greater of the standard amount of $30 for a single person (increased by $10 per person on this year's return, up to 4 people for a max of $60) or the actual amount of the long-distance federal excise tax on all of your phone bills for the period of February 1, 2003 through August 1, 2006.  Remember to include your cell phone and fax lines also.

Business must use a different calculation.  They must have the actual phone bill from April and September to use an estimated amount, or use the actual phone bills for the 41 months.

From the IRS:

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IRS Announces Standard Amounts for Telephone Tax Refunds

WASHINGTON — The Internal Revenue Service today announced the standard amounts that most long-distance customers can use to figure their telephone tax refund. These amounts, which range from $30 to $60, will enable millions of individual taxpayers to request the telephone tax refund without having to dig through old phone bills.

In general, anyone who paid the long-distance telephone tax will get the refund on their 2006 federal income tax return. This includes individuals, businesses and nonprofit organizations. The 2006 return is usually filed during 2007.

The standard amounts are based on the total number of exemptions claimed on the 2006 federal income tax return. The standard amounts are $30 for a person filing a return with one exemption, $40 for two exemptions, $50 for three exemptions and $60 for four or more exemptions. For example, a married couple filing a joint return with two dependent children (for a total of four exemptions) will be eligible for the maximum standard amount of $60.

“The easiest way for eligible taxpayers to get their money back is to use the standard amounts,” said IRS Commissioner Mark W. Everson. “These amounts save taxpayers from locating 41 months of old phone bills and analyzing these bills to determine the taxes paid. We believe the standard amounts are both reasonable and fair.”

To get the standard amount, eligible taxpayers only need to fill out one additional line on their regular 2006 return. The IRS is creating a special short form (Form 1040EZ-T) for those who don’t need to file a regular return.

The standard amounts are based on actual telephone usage data, and the standard amount applicable to a family or other household reflects the long-distance phone tax paid by similarly sized families or households. Those who paid the long-distance tax on service billed after Feb. 28, 2003 and before Aug. 1, 2006 are eligible for a refund.

Only individuals can use the standard amounts. Alternatively, individual taxpayers can choose to figure their refund using the actual amount of tax paid.

Details on requesting the telephone tax refund will be included in all 2006 tax return materials and on irs.gov.

Though businesses and nonprofits must base their telephone tax refund on the actual amount of tax paid, the IRS is looking for ways to make the refund process easier for these taxpayers. The IRS is considering an estimation method businesses and nonprofits may use for figuring the tax paid.
 
"Businesses and nonprofits generally have more varied usage patterns than individuals do," Everson said. "We've met with a number of business and nonprofit groups to understand their concerns, and we plan to continue to work with them to come up with a reasonable method for estimating telephone excise tax refund amounts."

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Mistakes Abound on Telephone-Tax Refund Requests

 IRS Offers Tips for Getting a Speedy Refund

  IR-2007-21, Jan. 31, 2007

 WASHINGTON — The Internal Revenue Service today offered taxpayers tips for requesting the telephone excise tax refund, after early tax returns show some people are making basic mistakes, others are requesting excessive refunds and many are missing out on the refunds, altogether.

“We encourage taxpayers to take a few minutes and review the details of the telephone-tax refund,” said IRS Commissioner Mark W. Everson. “A little extra time will reduce the chance for a mistake, avoid a refund delay and possibly add a few dollars onto refund checks.”

 The government stopped collecting the long-distance excise tax last August after several federal court decisions held that the tax does not apply to long-distance service as it is billed today. Federal officials also authorized a one-time refund of the federal excise tax collected on service billed during the previous 41 months, stretching from the beginning of March 2003 to the end of July 2006. The tax continues to apply to local-only phone service.

 Early mistakes found on a sample of 2006 returns filed during January include:

·        Filling out the Form 1040EZ-T incorrectly by failing to show a refund amount on Line 1a. Designed exclusively for requesting the telephone-tax refund, this simple form is for people who don’t need to file a regular income-tax return. Filing an incomplete form typically delays a refund and often leads to follow-up correspondence with the IRS. More than 10 million low-income people, many of them senior citizens, are expected to file this form.

·        Failing to request the telephone tax refund on a regular federal income-tax return in situations where the taxpayer appears to qualify. More than one-third of early filers did not request the telephone tax refund. This includes filers on Forms 1040, 1040A, 1040EZ, 1040NR and 1040NR-EZ. About 136 million individuals and couples are expected to file one of these forms, and most will, likely, qualify for the telephone-tax refund. Anyone who files one of these forms cannot file Form 1040EZ-T.

·        Filing duplicate requests. Usually, this involves filing both Form 1040EZ-T and a regular income-tax return. Anyone who files a regular return cannot file Form 1040EZ-T. Doing so will delay any refund for months and result in a phone call or letter from the IRS.

—More—

·        Requesting a refund that appears to be based on the entire amount of the taxpayer’s phone bills, rather than just the three-percent tax on long-distance and bundled service.

·        Requesting a refund in the thousands of dollars, suggesting that the taxpayer paid more for telephone service than they received in income.

The IRS is investigating potential abuses among early filers who requested large and apparently improper amounts for the telephone tax refund. The IRS will take prompt action against taxpayers who request improper refund amounts and the return preparers who help them.

 The IRS wants to make it as easy as possible for anyone who paid the tax to get this special refund. If you paid the tax and haven’t filed yet, here are some tips to help you figure the refund correctly and get it quickly:

·        File electronically. Electronic-filing software flags often overlooked tax breaks and helps you figure them accurately and report them properly. If you use a professional tax preparer, ask that person to e-file your return.

·        E-file for free. If your income is $52,000 or less, use the Free File link on IRS.gov to connect to a private-sector company offering free e-file services.

·        Choose direct deposit. Whether you file electronically or on paper, you can get your refund at least a week sooner by having it deposited directly into your checking or savings account.

·        Consider using the standard-refund amount for the telephone-tax refund. Though using the standard amount is optional, it is easy to figure and approximates the eligible amount for most individual taxpayers. You only have to fill out one line on your return, and you don’t need to present proof to the IRS.  The standard amount, ranging from $30 to $60, is based on the number of exemptions you can claim on your return.

·        If you paid more than the standard amount, you may figure your refund using the actual amount of tax shown on your phone bills and other records. Base your refund request on the three-percent federal tax paid, not the total phone bill. Do not count tax paid on local-only service. You must have the phone bills or other records adequate to support the amount you are requesting. These documents should not be sent along with the refund request but should be retained in case the IRS questions the amount requested.

·        Do not file duplicate requests. If you file a regular income-tax return, do not file Form 1040EZ-T. If you want to take advantage of the earned income tax credit for low and moderate income workers, the child tax credit or other tax breaks, file a regular return and include your telephone-tax refund request on that return.

·        Stay away from tax preparers who falsely claim that many, if not most, phone customers can get hundreds of dollars or more back under this program.