IRS to Refund Telephone Service Excise Taxes

The IRS has been in a battle with several companies concerning the excise tax on long distance telephone service. As a result, the IRS will be forced to refund excise taxes to businesses, non-profit agencies, and individuals. Companies including Amtrak, Office Max, and American Bankers Insurance Group recently won several lawsuits against this practice. For most of us, we can expect a refund when filing 2006 tax returns.

The refund period will cover excise taxes between February 28, 2003 and August 1, 2006. Anyone who used long distance services during that period will be able to claim a refund. The IRS will allow a standard amount for individual taxpayers. If you prefer, you will be able to use the exact amount of excise tax. This will require you to go back through 41 months of telephone bills to get the exact amounts. The refund will apply to long distance only and not local service excise taxes.

The standard refund amounts were determined by an IRS telephone service study. That study indicates that excise taxes were usually higher according to the number of individuals in a household. Therefore, the standard refund will be based on the number of exemptions claimed on 2006 tax returns. For example, an individual will be able to get a refund of $30. That amount will be increased by $10 for every additional exemption. The maximum will be $60 with four or more exemptions.

Taxpayers filing Forms 1040, 1040A, 1040NR, or 1040EZ, will only have to enter the amount on these forms. There will be a special line added for this purpose. Taxpayers wishing to use the exact excise amount will have to file Form 8913 and attach it to their return.

You can still claim the refund if you do not have to file a return for 2006. People that received disability or Social Security may not need to file a return. However, if they paid any long distance excise taxes during the specified period, they can claim a refund. A simple form will be provide just for the purpose of claiming the refund. It will be Form 1040EZ-T.

The IRS will provide specific, detailed information in the 2006 tax form package. The IRS will also provide guidance on claiming interest on the refund amount for those who file Form 8913. The standard refund amounts will already include interest. Businesses and non-profit organizations will have to use the exact excise tax method to claim a refund. Those at home who had a small business with its own telephone line, will also be able to claim a refund.

Further guidance for businesses should be forthcoming from the IRS by the end of this year. The IRS is considering a simplified method for businesses to claim a refund. And don't forget about excise taxes on your cell phone accounts. These accounts are also eligible for refunds.

This has been an effective "hidden" tax collection method for the IRS over the years. In 2005, the IRS collected almost $6 billion from this one tax alone. IRS officials have stated that it is time for this tax to be repealed since it dates back to 1898. They say it is no longer applicable to today's modern telephone system. This is another example of an antiquated out-of-date tax system. The IRS certainly fits the bill. The entire systems needs overhauling.