Here’s one we’ve all been waiting for. Drum roll please…the IRS announces a telephone tax refund! What? You haven’t heard of this yet? Well, back in May, the United Statesmoney phone government issued notice that it would stop collecting federal excise tax on long-distance telephone service. An excise tax is a tax levied on the manufacture, sale or consumption of a non-essential good or service. You’ll find excise taxes on airline tickets, alcohol, even gasoline.

The long distance excise tax was one of the pesky little surcharges tacked on to the end of your phone bill. My last landline phone bill included over $9.00 in surcharges, government fees and taxes. For those of us who watch our money carefully these extra fees add up quickly–for me over $100 a year.

The federal courts decided that the tax doesn’t apply to long distance phone services as it is billed today. If you paid the long-distance telephone tax anytime between February 28, 2003 and August 1, 2006 you’re eligible for a refund. The refund applies to individuals, business and non-profit organizations.

For individuals there are two ways to calculate your refund:

1. The IRS is offering a standard refund amount between $30 and $60. If you choose this route, you’ll only need to fill out one extra line on your tax return”even if you don’t itemize. Your refund amount is based on the number of exemptions you claim.

  • For one exemption, the standard refund amount is $30
  • Two exemptions, $40.
  • Three exemptions, $50.
  • Four or more exemptions, $60.

2. Calculate your refund based on the actual amount of tax paid. This is much more time consuming and tricky. Gather all your phone bills since February 28, 2003 and start adding. Taxes paid on local-only service don’t qualify. Fill out form 8913 and attach it to your tax return.

To claim the refund for a business or non-profit is you’ll need to calculate the actual amount of tax you paid. Unfortunately, there is no approved standard amount. Unless the IRS announces changes, you’ll need to gather your actual phone bills and complete form 8913.

Don’t fret if your bills didn’t differentiate between long distance and local, the IRS will refund you too. Simply choose the standard refund amount for your filing status.

Remember, it is completely legal to use the calculation (either actual or standard) that will give you the largest refund! Go ahead a take your share of the $10 billion the U.S. Department of Treasury anticipates refunding.

For more information visit the IRS website, send me an e-mail or contact your licensed professional.