Duvall & Associates, Inc.
BUSINESS ADVISOR NEWSLETTER
 

Ruling means taxpayers hit telephone lottery

- by Alan Duvall 

Published in Dayton Daily News  January 21, 2007 

“All I’ve got is this touch-tone phone ... Long distance lovin’s gonna drive me out of my mind.” - BB King. 

Recently defeated in court by a phalanx of company plaintiffs, the IRS surrendered and announced a mini-lottery of refunds which will benefit nearly every telephone-using taxpayer. 

From February 28, 2003 through August 1, 2006 the government unjustly billed excise taxes on long distance and bundled telephone services.  Bundled services are local and long distance services provided under a plan that does not separately state the charge for the local telephone service. Taxes paid on prepaid telephone cards and cellular phones were likewise invalid if priced as bundled services.  Federal taxes on local-only services were deemed lawful. 

As a result, taxpayers will be able to claim refunds for payments of long-distance and bundled excise taxes paid during the 41-month period.  

Individuals can accumulate past receipts and calculate refunds of excise taxes actually paid using Federal Form 8913.  The refund will appear as a tax reducing credit on their Federal income tax returns.  Interest calculation tables are provided to increase the refund amount. 

If old receipts cannot be located, you can claim a credit based upon the number of exemptions reported on your return.  The credit is $30 for a single exemption and incrementally increases to a maximum $60 for 4 or more return exemptions.  Refunds are even possible for deceased taxpayers who paid excise taxes during this period. 

Businesses (including sole proprietors and farmers) and non-profit organizations can likewise utilize Form 8913 to calculate refunds of actual excise taxes. 

If companies and non-profits cannot find the receipts, it's possible to use an alternate formula to determine the refund.  The method traverses ten steps to generate an estimated rate which is multiplied times actual gross telephone expenses for the 41-month period to derive a refundable excise tax figure.     

Of course what the IRS giveth, the IRS can taketh away.  The refundable interest portion of the credit must be reported by individuals as income on their 2007 income tax returns.  Businesses will be taxed on the entire amount of their refund if the taxes were deducted when paid on earlier returns. 

So dig out those dusty old boxes of receipts and tabulate your freebie tax gift of the new year. 

“Now that’s the way you do it ... money for nothin’ and chicks for free.”  Dire Straits 

Alan Duvall is a certified public accountant in Dayton.  Contact him at Alan@Duvallcpa.com.