Don't Forget to Claim Phone Excise Tax Refund, Says IRS

Phone Excise Tax Gives the IRS a Headache By Leonard Wiener

As if the IRS doesn't already have its hands full beginning to process

2006 tax returns and implement deductions authorized by Congress late last year, now comes a new headache policing the issuance of rebates of up to $60 in telephone excise tax to almost all tax filers.

Last month, the IRS advised that many early tax filers were failing to claim the rebate or claiming it incorrectly. At one point, the agency said about a third of filers who appeared to qualify for the rebate weren't taking it.

Now the focus has shifted to people claiming way too much -- either accidentally or as part of a scam.

In addition to probing individual returns, IRS agents armed with search warrants have seized records and computers at tax preparation firms in Texas, Georgia, California, Florida, and Louisiana where abuse is suspected. The IRS says other tax preparers across the country who are preparing questionable rebate claims "are receiving visits from IRS revenue agents."

The excise tax rebate results from the Treasury Department's concession last year that it erroneously collected a 3 percent levy on long-distance calls. The government is refunding some of that tax.

People who accept a standard amount of $30 to $60 -- based on the number of personal and dependent exemptions claimed on the 2006 tax return -- won't have to dig up past bills or even show they called long distance.

Self-employed people and business filers must follow somewhat more complex rules, and anyone can try to document and claim a bigger refund of the actual tax paid on land-line and cellphone calls during the 41-month period of March 2003 through July 2006.

A special line on the 1040, 1040A, and 1040EZ tax forms is used to claim the refund, and tax form instructions have the details. Tax preparation software can handle this, and tax preparers are also primed to get you the rebate.

People who aren't required to file a return, including many retirees and others on limited incomes, can file Form 1040EZ-T just to get the excise tax refund.

Businesses and filers claiming actual tax paid need Form 8913.

IRS guidance with links to more detailed information is available online.

The trouble, according to the IRS, is that some filers are asking for thousands of dollars back -- what seems to be many times more than would be legitimate. Some requests appear to be for entire phone bills rather than just the excise tax.

IRS Commissioner Mark Everson, targeting errant tax preparation firms, said there have been blatant and serious instances of abuse. "We've sent in criminal investigators to pursue the matter accordingly."

IRS spokesman Terry Lemons says this is the biggest refund program ever for the agency. But what for taxpayers may seem like found money -- and without question worth claiming -- has turned into an unexpected pain in the tax form for the IRS.

Copyright 2007, Associated Press.

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Leonard Wiener, AP NewsWire
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