Tax Tips
Telephone Tax Refunds
Internal Revenue Service releases Safe Harbor Amounts for Individuals
Standard safe harbor amounts reaching $60 are available to individual taxpayers who claim
refunds of the federal telephone tax based on actual amounts of tax paid. The refunds are
the result of the government's decision to no longer collect the long distance portion of
the federal telephone excise tax and will be issued in 2007. However, businesses and
nonprofits cannot use the safe harbor amounts.
The safe harbor amounts are most helpful to individuals who did not save their telephone
bills indicating tax charged and receipts, such as checks and credit card statements,
showing tax paid. Do not to expect a separate refund check. Refunds will be treated as a
one-time payment on the taxpayer's 2006 return. The refund will reduce the amount owed or
increase the amount of the taxpayer's total refund.
Long distance portion
Earlier this year, the IRS announced that taxpayers -- individuals and businesses -- will
be able to request refunds of the long distance portion of the telephone tax. Taxes paid
over a 41-month period - from March 1, 2003 through July 31, 2006- are eligible for the
refund.
Currently, only the portion of the telephone tax that applies to long distance service
has been discontinued. The tax still applies to local service. Several bills have been
introduced in Congress to repeal the tax on local telephone service.
Standard safe harbor amounts
Individuals can apply for refunds on their 2006 returns, or on special Form 1040EZ-T for
taxpayers who do not file a Form 1040. Refunds reflect the amount of tax paid or the
standard safe harbor amounts. Individuals can take a standard safe harbor amount from $30
to $60 based on the number of exemptions claimed on their return. The standard safe harbor
amounts are:
l One exemption: $30;
l Two
exemptions: $40;
l Three
exemptions: $50; and
l Four
exemptions: $60.
The standard amounts are based on actual telephone usage data, the IRS explained. Based on
a three percent tax, the safe harbor covers from $1,000 to $2,000 in long distance phone
bills over the 41-month period. The IRS's announcement implies that the number of
exemptions for purposes of the safe harbor is counted only based on the 2006 tax year,
even though 2006 covers only seven of the 41 months during which the excise tax was
improperly charged.
Individuals electing not to use the safe harbor amounts will calculate their refunds by
using the actual amount of tax paid. Taxpayers must show and substantiate the actual
amount of tax charged and the amount of tax paid.
If you received a credit or refund from their telephone service provider cannot double-dip
and claim the federal refund.
Taxpayers who paid the federal excise tax on their long-distance internet plan can also
request a refund, the IRS reported.
Businesses and nonprofits
Businesses and nonprofit organizations cannot use the standard safe harbor amounts. Their
refunds will be calculated on the actual amount of tax paid. They must submit Form 8913.
The IRS is requesting comments on ways to simplify the refund process for business and
nonprofit organizations, including the possibility of a standard amount table.