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The IRS has released a formula that individuals and businesses and tax-exempt organizations can use to estimate their federal long-distance telephone excise tax refunds. The Service has also issued a "Questions and Answers for Businesses and Tax-Exempt Organizations" document with details on using the formula and other information on the refund.
In May 2006, the IRS announced that taxpayers who paid the tax from March 2003 through July 2006 can request the refund on their 2006 federal income tax returns.
The formula is meant to provide a more limited, but simpler, approach for calculating the refund, instead of requiring businesses to determine the actual tax paid on 41 months' worth of phone bills.
Under the formula, businesses or tax-exempt organizations compare their April 2006 phone bill (i.e., the bill with an April 2006 statement date) with their September 2006 bill. They must figure the telephone tax as a percentage of their April bill (which included the excise tax for both local and long-distance service) and their September bill (which only included the tax on local service). They then multiply the difference between these two percentages by the total telephone expenses shown on their phone bills dated after February 28, 2003, and before August 1, 2006, to determine the refund amount. The refund is capped at two percent of total telephone expenses for businesses with 250 or fewer employees, and at one percent for businesses with more than 250 employees.
Sole proprietors, independent contractors, farmers and individual owners of rental property can use the formula only if they report more than $25,000 of gross rental and business income on their 2006 federal income tax returns. In August, the Service provided individual taxpayers with "safe harbor" amounts to figure their refunds.
Businesses and tax-exempt organizations can request the refund by completing Form 8913, Credit for Federal Telephone Excise Tax Paid. Businesses must attach Form 8913 to their regular 2006 income tax returns, while tax-exempt organizations attach it to Form 990-T.
Details on the refund will be included in 2006 tax return materials, and on the IRS website (http://www.irs.gov/).
| If you have tax-related questions, you are welcome to contact Tax Specialist Crystal Martin at 717-757-6999 or 800-745-8233 or email her using the form below. |
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
IRS Circular 230 Notice: To ensure compliance with requirements imposed by the IRS, we inform you that any US tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code.
Securities and advisory services offered through Geneos Wealth Management, Inc. Member FINRA/SIPC. Geneos Wealth Management, Inc is not affiliated with Stambaugh Ness. |
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