Phone tax refund is yours to claim

rostasi · December 13, 2006

Phone tax refund is yours to claim

End of old IRS policy can add up to savings on 2006 returns

08:25 AM CST on Monday, December 11, 2006

By JENNIFER CHAMBERLAIN / The Dallas Morning News

The abolition of a tax originally levied to fund the Spanish-American War in 1898 could add up to extra money on your tax return for 2006.

Individuals and businesses can receive a credit for long-distance federal telephone excise taxes they've paid over the last three years -- but the credit must be claimed on their 2006 returns, which are due April 16.

"What people really need to know is that it's money due them, but they're going to have to do a little work to get it back," said Dick Hansen, president of Technology Change Management, a telecommunications consulting company based in Houston. "I call it a 'claim it or lose it' deal."

Also Online

Get information from the IRS about the telephone excise tax refund

See a draft version of IRS Form 8913

Technology Change Management's Website

After a long-running legal dispute, the Treasury Department announced in May that it would no longer collect the outmoded tax, which was originally established as a luxury tax on those wealthy enough to own a telephone.

The IRS agreed to offer taxpayers refunds, which are estimated to total $15 billion.

Taxpayers can claim a refund for excise taxes on long-distance service billed between Feb. 28, 2003, and Aug. 1, 2006. That includes service over landline, cellphone, voice-over-Internet protocol and fax, as well as bundled services, in which local and long-distance are not differentiated.

The excise tax on local phone service is not included, though there have been efforts to repeal that tax as well.

So what if you don't have copies of your phone bills for the past three years?

Individuals can claim a standard amount based on their exemptions. Those amounts are:

*$30 for one exemption.

*$40 for two.

*$50 for three.

*$60 for those claiming four or more exemptions.

However, if you can track down those phone records, you'll probably be able to get a much bigger refund, tax experts say.

"If you look at the standard amount, it's probably less than one-half of what you would actually have paid if you had the records," said Mr. Hansen, who estimates that the average person with a landline and cellphone could get back $120 to $150 by claiming the actual amount paid.

Phone companies' policies vary widely as to what they charge for back copies of bills. Some examples: Texas residential customers of AT&T, formerly SBC, can get paper copies of archived bills at no cost, a spokeswoman said. Vonage customers can access their billing records online for free. Verizon Wireless offers one bill reprint per year free but charges $5 for each additional bill.

You don't have to itemize deductions to claim the full amount of excise taxes paid -- this is a tax credit, not a tax deduction -- but you will have to fill out IRS Form 8913 and attach it to your return. That form hasn't been finalized yet but should be available soon at http://www.irs.gov.

For businesses, the refund payoff can be even bigger, particularly for those that are telecom-intensive, says Ken Sibley, a certified public accountant and managing director of Sibley & Co. in Dallas. And since businesses are required to keep records for seven years, finding the documentation shouldn't be a problem.

"It's worth the effort, especially for businesses," he said. "For the vast majority of individuals, it's probably not going to be worth their time going back and picking up every 50 cents or a dollar for a month's worth of charges."

Mr. Hansen has set up a Web site, http://www.refundphonetax.com, to help get out the word about the excise tax refund.

He also is working with business clients to educate their employees through posters, e-mails and W-2 envelope inserts.

"Companies are getting back about $50 per employee, so if they have 10,000 people, they could actually get back half a million," he said.

Edited December 13, 2006 by rostasi