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LONG-DISTANCE TELEPHONE TAX REFUND FOR ALL TAXPAYERS

by Dianne Goodman

Since 1898 Americans have been paying a federal excise tax of 3% on long distance calls that has now been repealed by Congress. This tax was originally intended to be a luxury tax for wealthy Americans. The Treasury Secretary has indicated the law has become antiquated and also would like to see Congress repeal this tax on local service as well.

As a result, taxpayers who were billed after February 28, 2003 and before August 1, 2006 can claim a refund for the tax paid during this time period on their respective 2006 tax return. A tax refund can be claimed on tax returns for the 1040 series, 1041, 1065, 1120 series and 990-T. There will be instructions available for each of these forms once they come out on how to report the refund.

There will be two ways to determine the amount of the refund for individual taxpayers (1040 series). The IRS will soon be announcing a simplified method in which no documentation will be required to support the amount. This "safe harbor" amount is only available to individual taxpayers. An individual taxpayer may choose to determine the actual amount based on the amounts actually paid and billed. All other taxpayers (1041, 1065, 1120 series and 990-T) are required to determine the actual amount paid and billed in order to receive their refund. All taxpayers who determine the actual amount of refund should retain their records to substantiate the actual amount of the claim including proof of amount billed and paid.

More details can be found in IRS Notice 2006-50. There will be further guidance on this including the safe harbor amount and other details in the future.

For more articles like this go to http://www.dgoodmancpa.com/whatsnew.htm.

This article was intended to provide general information about the long distance telephone tax refund. It does not contain all the rules and exceptions that may apply to your situation. If you have further questions, I can be reached at www.dgoodmancpa.com.



CONTACT INFORMATION

Dianne Goodman, CPA
Comprehensive Small Business Solutions, PC
505 323-2307
1 888-851-1975 toll free
www.dgoodmancpa.com

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