IRS issues warning about claiming too much telephone tax refund
The IRS is warning taxpayers not to make unsubstantiated exorbitant claims for the Telephone Excise Tax Refund. Those seeking refunds for unreasonable amounts could face an audit.
The government stopped collecting the long-distance excise tax last August after several federal court decisions held that the tax does not apply to long-distance service as it is billed today. Federal officials authorized a one-time refund of tax collected on service billed during the previous 41 months, stretching from the beginning of March 2003 to the end of July 2006.
But David D. Stewart of the Internal Revenue Service’s (IRS) Pennsylvania media relations office in Philadelphia said some people are claiming too much.
Others are just making mistakes in their filings.
“Early tax returns show some people are making basic mistakes, others are requesting excessive refunds and many are missing out on the refunds, altogether,’ he said.
So far, Stewart added, more than one-third of early filers have not requested the telephone tax refund.
The IRS said taxpayers have a choice of taking a standard refund amount between $30 and $60, based on the total number of exemptions claimed on their 2006 tax return, to eliminate the need to locate old phone bills; or they can locate those bills and use the actual amount.
Stewart said the IRS is investigating potential abuses in this area and will take prompt action against taxpayers who claim improper refund amounts and the tax return preparers who help them.
According to a press release the IRS issued earlier this month, the tax agency examined a sample of returns filed through mid-January. In some cases, taxpayers appear to be requesting a refund of the entire amount of their phone bills, rather than just the 3 percent tax on long-distance and bundled service that they are entitled to.
“Some individuals are making requests for thousands of dollars, indicating that they had phone bills topping $100,000 – an amount exceeding their income,’ the IRS said.
And, according to the tax agency, some tax preparers are helping their clients file apparently improper requests.
“If we find inappropriate refund claims, we will aggressively pursue tax preparers and promoters who make the improper requests, and we will contact individual taxpayers in egregious situations,” IRS Commissioner Mark W. Everson said. “Audit letters will be sent out soon and, when appropriate, our investigators will visit tax preparers who have been preparing questionable telephone tax refunds,” he added.
Stewart said those taking the refund will find an extra line on their paper returns. Those who want to get an exact amount from old telephone bills will have to fill out Form 8913 and attach it to their return.
Those who don’t need to file a return can still request a refund by using Form 1040EZ-T, Request for Refund of Federal Telephone Excise Tax, to choose the standard amount. Again, they will have to attach Form 8913 to Form 1040EZ-T if they use the actual amount. Also, some companies offer free e-filing of Form 1040EZ-T, Stewart said.
Businesses and tax-exempt organizations can dig through their old phone bills for the past 41 months to base their telephone tax refund on the actual amount of tax paid. Or they can review their bills for two months and use a special formula to figure the refund, he added.
Meanwhile, Stewart said the IRS has beefed up its enforcement efforts to find tax scofflaws.
As Sept. 30, 2006, the IRS reported total individual returns audited increased by more than 6 percent to 1,293,681 in 2006 from 1,215,000 in 2005. That’s the highest number since 1998, he said.
Audits of individuals with income of $1 million and higher increased to 17,015 from 12,835, a nearly 33 percent increase in just one year.
“About one in every 16 of these taxpayers faced audits last year,’ Stewart said.
“Audits of individuals with incomes over $100,000 surpassed 257,000, an 18 percent increase from 2005. That’s the highest figure in more than a decade, and well over double the 92,000 completed in fiscal year 2001,’ he said.
The IRS, Stewart added, also is warning taxpayers against scams.
“In one case, fraudsters sent bank customers fictitious correspondence and IRS forms in an attempt to trick them into disclosing their personal financial data. In another, abusive tax preparers used clients’ Social Security numbers and other information to file false tax returns without the clients’ knowledge. Sometimes scammers pose as the IRS itself. If taxpayers have any doubt whether a contact from the IRS is authentic, they can call 1-800-829-1040 to confirm it,’ Stewart said.
“Promoters also have been known to make outlandish claims. Don’t believe these claims. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law.
“Dishonest return preparers can cause many headaches for taxpayer; skimming refunds, charging inflated fees promise large refunds. The taxpayer is ultimately responsible for its accuracy,’ Stewart said.
For more information on tax issues or filing, call 1-800-829-1040 from 7 a.m. to 10 p.m. weekdays or visit www.IRS.-gov.