New phone tax confusing to some citizens
Published 12:00 am Saturday, February 24, 2007
Since its introduction in January, the telephone excise tax refund has confused and even been abused by many citizens; two problems the Internal Revenue Service hopes to soon rectify.
The IRS created the one-time telephone tax refund for this tax season in response to the federal government's change in the way it taxes long distance phone calls.
“The tax was obsolete,” said Dan Boone, spokesman for the IRS.
The government stopped collecting the long-distance excise tax last August after several federal court decisions held that the tax does not apply to long-distance service as it is billed today.
“It's now based on minutes and not the distance of the call,” Boone said.
Due to the change, citizens can receive a refund off their phone bills for the previous 41 months, which stretches from the beginning of March 2003 to the end of July 2006. Since the refund's creation, it has caused several headaches for IRS employees.
“We're seeing a couple of different things … one is error,” Boone said. “Partly because it's a brand new line on the tax return.”
Since January, a third of the tax returns filed have failed to request to refund. Others have mistakenly tried to claim a refund for the full amount of their phone bill. The refund is only supposed to be three percent of a person's long-distance phone bill.
“Some people have seen e-mails about it and thought it was a scam,” Boone said.
Besides confusion, there have also been several cases where people have tried to take advantage of the new refund.
Over the past few weeks, IRS Criminal Investigation special agents and IRS revenue agents have conducted special site visits with tax preparers across the nation, including Alabama, to prevent inflated requests made for the one-time telephone tax refund.
“We've seen patterns of tax preparers trying to claim 1,000s of dollars in refunds,” Boone said. “We've already made some visits … one of which was in Alabama.”
Taxpayers who request more of a refund than they are entitled to receive will have their refunds held and they may be subject to an audit.
Boone said there are two ways to calculate the refund. One way is for taxpayers can either subtract the three percent from each of their phone bills from the past 41 months.
“That could mean a lot of work,” Boone said.
The way that Boone suggests is for taxpayers to take the IRS's standard refund amount, which is based on personal exemptions and ranges from $30 to $60.
“It's a standard amount and we won't question it,” Boone said.
For more information concerning the tax refund or to download a tax refund form, visit the telephone excise tax refund section on the on the front page of IRS.gov.