TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Thursday, November 16, 2006

IRS Announces Telephone Tax Refund Formula for Businesses & Nonprofits

Irs_logo_319 The IRS yesterday announced (IR-2006-179) a formula that will allow businesses and tax-exempt organizations to estimate their federal telephone excise tax refunds. “The formula will provide a less burdensome option than gathering up to 41 months of old phone records,” said IRS Commissioner Mark W. Everson:

Businesses and tax-exempt organizations can figure their refund amounts by comparing two telephone bills from this year to determine the percentage of their telephone expenses attributable to the long-distance excise tax. The bills they should use are the bill with a statement date in April 2006 and the bill with a statement date in September 2006. They must first figure the telephone tax as a percentage of their April 2006 telephone bills (which included the excise tax for both local and long-distance service) and their September 2006 telephone bills (which only included the tax on local service). The difference between these two percentages should then be applied to the quarterly or annual telephone expenses to determine the amount of their refunds. The refund is capped at 2 percent of the total telephone expenses for businesses and tax-exempt organizations with 250 or fewer employees — which covers more than 99 percent of all businesses. The refund is capped at 1 percent for those with more than 250 employees. Most organizations in this category typically are able to figure the actual amount they paid in long-distance excise tax...

The IRS already has provided individual taxpayers with the option to use standard amounts based on the number of exemptions allowed to that taxpayer. Individual taxpayers can request a $30 refund with one exemption, $40 for two exemptions, $50 for three exemptions and $60 for four or more exemptions.

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