If You’ve Paid Telephone Bills…You Can Receive a Telephone Excise Tax Refund

National Association of Tax Professionals (NATP) Appleton, WI – As taxpayers, we have been paying federal telephone excise taxes on long-distance phone calls since 1898 when the tax was imposed to fund the Spanish-American War. (How many of you knew that?) The taxes collected today go into the U.S. Treasury’s general fund, paying for no particular program. Collectors of the tax (generally long-distance carriers) were to stop collecting this tax by August 1, 2006.


According to Michael Womack of Zero Degrees Notary and Tax Service, an NATP tax preparer in Moore, OK, “Nearly everyone has paid telephone excise tax on their long-distance phone bill. The current tax is at 3%. You have one opportunity, on this year’s tax return, to claim your share of the estimated $15 billion refund pot, and you must file a tax return to receive a refund.” This amount represents the taxes paid only between March 1, 2003, and July 31, 2006, the time period to which the refund applies.


How Can Individuals Obtain Refunds? Taxpayers have the option of claiming actual excise taxes paid for the 41 months, or using a standard amount. Only individuals can use the standard amounts. They are as follows:
⢠$30 for a taxpayer filing with one exemption;
⢠$40 for two exemptions;
⢠$50 for three; and
⢠$60 for four or more exemptions.


Tax forms for the 2006 tax year include one line on Form 1040 for claiming this refund if you use the standard deduction method. If you are claiming the actual amount paid, you will need to attach Form 8913, Credit for Federal Telephone Excise Tax Paid, to your tax return. If you are not required to file a tax return for 2006, but have paid the long-distance excise tax, you will need to file a Form 1040EZ-T. You are not required to have supporting documentation to obtain this refund, however you must have paid the billed amounts, cannot have received a credit or refund, or cannot have ever requested a refund for this tax.


NATP member, Marilyn Meredith, Enrolled Agent, of Port Huron, MI, advises “Taxpayers who are a dependent of another taxpayer do not qualify for the refund. For individuals who do qualify and file Form 1040, this will not be a separate check. It will be included in their payments and be part of the total refund to be received (or it will reduce the amount that is due IRS, for those that owe). The ONLY way to get the refund is to file.” Filing instructions for 2006 include information on claiming this refund, as does the IRS website www.irs.gov.
How Can Businesses Obtain Refunds?


Corporations, partnerships, tax-exempts, organizations, and other businesses cannot use the standard deduction provided for individuals. They will need documentation to request the actual amounts paid, and can choose between calculating the tax based on April 2006 and September 2006 telephone bills, or using the actual amounts paid. The calculation method includes a cap for businesses.


The correct tax form for businesses is Form 8913, Credit for Federal Telephone Excise Tax Paid, and those partnerships and S corporations using a Form 1065 or Form 1120S will find a special line on the form for the refund amount. Options vary for sole proprietors, farm owners, and individual owners of rental properties who file Schedules C, E, or F, depending upon their gross income. Trusts and fiduciaries may only use the formula or actual amounts paid.


"Businesses that deducted their telephone expenses on their 2005 tax returns will need to include the business portion of their refund in their income for 2006." states Kevin Huston, Enrolled Agent, of Blue Ridge Tax Advisors, Inc., an NATP tax preparer in Asheville, NC


The telephone excise tax refund will not affect the federal excise tax on local telephone services. One caveat to this refund is that any interest amount paid to you or accrued on your refund will need to be claimed as income when it is received. For most recipients – individuals and businesses alike, that will likely be in 2007. Be sure to keep track of this amount for your 2007 tax return. Businesses will have to report the entire refund on their 2007 tax returns because they are getting a refund of an expense that they have deducted in a prior year.


To find a professional tax preparer, look to a member of NATP. These professionals subscribe to a strict code of ethics and standards of professional conduct. NATP maintains a listing of professionals at www.taxprofessionals.com. To receive a FREE brochure on finding the right tax professional for you, visit the NATP Press Room at www.natptax.com and download a copy.