Don't Mess With Taxes

Taxpayers who made long-distance calls in the last 3½ years can expect a refund of between $30 and $60 next filing season by simply submitting a return.

The cash back is courtesy of the IRS decision in May to discontinue the 3% federal excise tax that had been tacked onto phone bills for most of the years after its origination in 1898. You can find details on the tax and the IRS' change of collection heart in this earlier blog.

Unfortunately, despite the phone tax's long history, only the fees paid on long-distance service after Feb 28, 2003, and before Aug 1, 2006, count. That's why the $60 ceiling on the standard phone tax-rebate.

And local phone taxes are sill being collected and aren't included in this federal tax-back program.

To arrive at the $30-to-$60 figure, the IRS calculated average costs based on the total number of exemptions a filer claims on his or her return. A taxpayer claiming one exemption gets $30 back; the refund is $40 for two exemptions, $50 for three exemptions and $60 for four or more exemptions.

To get the refund, you'll just have to fill out one additional line on your 2006 tax return, filed next year. If you don't have to file a regular return, the IRS is creating a special short form, Form 1040EZ-T, that you can use to get back your phone tax money.

Of course, if you believe you paid more than the standard amount you're allowed, then you can document your actual phone taxes paid and claim that figure instead. But that will mean tracking down or digging out all your old phone bills. You'll just have to decide if the effort is worth any extra refund.

The standard phone refund amounts also apply only to individual filers. Businesses and nonprofit groups must base their telephone tax refund on actual taxes paid, but the IRS says it is looking for ways to make the refund process easier for these taxpayers.

Complete details on the telephone tax refund will be included in 2006 tax return materials and on the IRS's Web page. Until that is available, you can check out this official telephone tax refund FAQ page.