FAQ : Phone Tax Refund Questions and Answers
posted by Phone Tax Refund @ 9:04 PM   19 comments
One-Time Tax Refund Available to Long-Distance Telephone Customers

This year, telephone customers can request a one-time refund of taxes they paid on long-distance and bundled telephone service. Individuals, businesses and tax-exempt organizations can request this refund as a credit on their 2006 federal income tax returns.

Over 146 million individuals and more than 14 million businesses and tax-exempt organizations are expected to request the refund. This includes millions of people and organizations who don’t normally file returns, for example, low-income individuals (many of them senior citizens), churches and small charities. The government estimates that telephone excise tax refunds totaling $10 billion will be paid to individuals and another $5 billion to businesses and tax-exempt organizations.

The refund covers the three-percent tax paid on long-distance and bundled service billed after Feb. 28, 2003 and before Aug. 1, 2006. Several recent federal court decisions held that the tax does not apply to long-distance service as it is billed today. For that reason, the government stopped collecting the tax on service billed after July 2006 and authorized refunds of the taxes billed during the previous 41 months.

The federal excise tax continues to apply to local-only telephone service. Likewise, various state and local taxes and fees paid by telephone customers are unaffected and thus, not eligible for the refund.

Federal long-distance excise taxes paid on land line, cell phone, fax and Voice over Internet Protocol (VoIP) service qualify for the refund. This includes bundled service — local and long-distance service provided under a plan that does not separately list the charge for local service. Bundled service includes, for example, phone plans that provide both local and long-distance service for either a flat monthly fee or a charge that varies with the time for which the service is used.

Taxpayers can base their refund requests on the actual amount of tax paid. To do this, they must fill out Form 8913, Credit for Federal Telephone Excise Tax Paid. Individuals and businesses should attach it to their regular 2006 income-tax returns. Tax-exempt organizations should attach it to Form 990-T.

But many people don’t want to dig through 41 months of old phone bills or lack the records they need to figure the actual amount of tax paid. For that reason, the government created a standard amount that individuals can use to request the telephone excise tax refund. The amount is based on the number of personal and dependency exemptions an individual is eligible to claim on their tax returns. The standard amounts are:

  • 1 exemption — $30;
  • 2 exemptions — $40;
  • 3 exemptions — $50; or
  • 4 exemptions — $60.

The standard amount is optional. To choose it, taxpayers fill in one line on their federal income tax returns. The line, labeled “Credit for federal telephone excise tax paid,” is:

  • Form 1040, Line 71;
  • Form 1040A, Line 42; or
  • Form 1040EZ, Line 9.

There is no standard amount for businesses and tax-exempt organizations, because they typically have more varied phone usage patterns than individuals. Instead, they can choose to use a special formula (also called the estimation method) to estimate the actual amount of tax on long-distance and bundled service they paid.

The formula is optional. It makes it easier by basing the estimate on just two monthly phone bills (April 2006 and September 2006). Individuals reporting more than $25,000 of gross business, farm and rental income can choose the formula. It is also available to any partnership, corporation, estate, trust or tax-exempt organization.

For millions of people not required to file a regular income-tax return, the IRS has created a special short form for requesting the telephone excise tax refund. It is Form 1040EZ-T and is used exclusively for this purpose. Form 1040EZ-T can also be filed electronically for free via the Free File link on IRS.gov beginning in mid-January.

Form 1040EZ-T can be used to request a refund with either the actual amount of tax paid or the standard amount. Those choosing actual amounts must attach Form 8913.

The IRS wants to make it as easy as possible for taxpayers to get the refund they deserve. Accordingly, the agency has created a page on this Web site devoted entirely to the refund. To get answers to frequently-asked questions, download forms and get other helpful tips, visit the federal excise tax refund link.

posted by Phone Tax Refund @ 9:02 PM   1 comments
Phone Excises Tax Refund
IRS Announces Standard Amounts for Telephone Tax Refunds

The Telephone Excise Tax Refund (TETR) is a one-time payment available on your 2006 federal income tax return. It is designed to refund previously collected long distance telephone taxes. Individuals, businesses and tax-exempt organizations are eligible to request it.

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."

posted by Phone Tax Refund @ 8:48 PM   0 comments
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