The idea seems simple. If you paid for long-distance phone service between March 1, 2003, and July 31, 2006, you can claim a one-time refund of the related federal excise tax on your 2006 return.
But the instructions look complicated, and the IRS has issued warnings about making mistakes. How can you get it done right?
Here's a quick guide.
You made long-distance calls on your personal phone.
If your long-distance charges are typically moderate, claiming the standard amount, which ranges from $30 to $60, may make sense. This method requires no extra tax forms and no substantiation.
Did you make lots of long-distance calls? You can request a refund of the actual excise tax paid instead of the standard amount. Unless your phone company provides a breakdown, you'll need all or most of your phone bills from March 1, 2003, through July 31, 2006, to complete the calculation.
In addition to your personal phone use, you made long-distance calls for your sole proprietorship, your rentals, or your farm.
You can request a standard refund, which includes the excise tax paid on both personal and business calls.
Alternatively, you can add up the actual amount of federal excise tax you paid on long-distance calls. You'll have to dig out your statements and work through the calculation for both your personal and business phones. It's okay if you're missing a few bills, as long as you can support the amount you claim.
Depending on your income, you may have a third option. The "estimation formula" method requires computing a percentage from your business phone bills for the months of April and September 2006.
You'll need to know the total amount paid for your phone service for the entire 41 months. Under this method, you'll use the actual amount of excise tax paid to claim the refund for your personal phone.
You made long-distance business calls on your partnership or corporate phone.
You can claim a refund on your business tax return by calculating the actual amount of tax paid, or by using the estimation formula. There's no standard refund for these businesses.
Please call us for any assistance you need in making the proper request for this one-time refund.
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