Your 2006 federal tax refund should be boosted by this year’s Telephone Excise Tax Refund (TETR). The IRS states that “this refund will be the most wide-reaching in IRS history – more than 160 million filers may request it,” meaning that you are must likely eligible for this refund as well. So, what is the Telephone Excise Tax Refund and how do you make sure that you are getting your proper refund?
A quick background: From February 28, 2003 – August 1, 2006, any long-distance calls that you made were subject to federal taxes. The courts have determined that these taxes were collected improperly – thus, the IRS will be refunding these taxes to you via your 2006 tax return. This refund applies to landline, cellular or Voice over Internet Protocol (VoIP) long distance or bundled (local and long distance combined) services. Separate local calling plans are subject to the federal tax and will not be refunded.
The IRS has made getting the Telephone Excise Tax Refund fairly easy. Instead of going through old phone bills to determine exactly what taxes you paid during this period, you can simply choose a standard amount depending upon the number of exemptions that you claim on your taxes. The standard refund amount ranges from $30-$60, with a single person filing one exemption receiving a $30 refund and a family of four or more receiving a $60 refund. Depending upon your situation, however, you may want to look for those old bills since you may qualify for a much larger refund than that allotted in the standard amount.
Before looking for those old bills, you can get a quick idea of whether you think that you are eligible for more than the standard amount of the Telephone Excise Tax Refund. The tax that was imposed on these long-distance or bundled plans was 3%, so in order to determine the monthly phone charges that you would require, simply divide your standard amount by 1.23. As an example, let’s look at a married couple with no children, who would qualify as two exemptions. In order to determine their breakeven monthly charge, they would divide $40 (their standard amount) by 1.23 (41 months of charges * 3% tax rate) and would find that they would need to have $32.52 in monthly long-distance landline and cellular phone charges over the past 4 years in order to make it worth their while. With many couples having two cellular phones and a landline with total monthly costs exceeding $100, it may make sense in this case to look further into this refund. In this example, if your monthly phone costs were $100/month over the previous 4 years, you would be eligible for a refund of at least $123, a significant increase over the $40 standard refund.
If you do decide that it’s worth your while to look for those old phone bills, you will need to fill out Form 8913 (http://www.irs.gov/pub/irs-pdf/f8913.pdf). In this form, you will outline your long-distance and bundled phone charges, showing your taxes paid, and determining the interest owed on these taxes. This can be a time-consuming process, but may be worth it depending upon your personal situation.
For additional information on the Telephone Excise Tax Refund, consult the IRS website at