Tax Tip of the Week
September 18, 2006

If you subscribed for long-distance telephone service between March 2003 and July 2006, you almost certainly paid a federal tax on your telephone bill. But recent court decisions ruled that the tax should not apply.

So the IRS has come up with a simple method to refund the taxes. They’ve developed standard refund amounts based on the number of exemptions you claim.

The standard refund will be $30 for one exemption, $40 for two, $50 for three, and $60 for four or more. Normally, you claim an exemption for yourself, one for your spouse, and one for each dependent. So a married couple with one dependent would be eligible for a $50 refund.

These amounts are based on a survey of average telephone taxes paid by families of different sizes. If you don’t want to take the standard refund, you can always go through 41 months of telephone bills and figure the actual amount you paid. Then you’ll need to fill out a special form to make your claim.

You’ll receive your refund when you file your 2006 taxes next year. The IRS is preparing Form 1040 EZ-T for those who paid the excise tax but are not obligated to file an income tax return.

As of now, businesses and nonprofits will have to detail the actual taxes they paid to receive their refunds. However, the IRS is trying to develop simplified methods for them too, so don’t start going through your bills just yet.

Questions for our Financial Expert?
E-Mail us at: finance@ClevelandSeniors.Com