Monday, January 22, 2007

Telephone tax refund - Business and personal phone


If you are filing a Schedule C with Form 1040, if you are filing Forms 1065 or 1120 or 1120S, then you should claim a refund or tax credit for telephone excise tax.

This tax on long-distance calls was enacted to finance the Spanish-American war. Someone finally noticed the war is over and this tax should no longer to be collected.

You can go through a lot of receipts which I won’t go into, or you can do it the easy way.

[1] First, you take your April 2006 phone bill and divide the federal excise tax by the total phone bill. This bill includes the tax on both local and long-distance service.

[2] Next you take your September 2006 phone bill and divide the federal excise tax by the total phone bill for that month. This bill only includes the tax on local service.

[3] Then you subtract the percent in September from the percent in April which indicates the percent applicable to long-distance only. This percent is limited to 2% --or 1% if you have more than 250 employees.

[4] Now you apply the percent calculated in step 3 to a 41-month period:

10/12 X your 2003 phone bills X the appropriate percent.

100% of your 2004 phone bills X the appropriate percent

100% of your 2005 phone bills X the appropriate percent

7/12 of your 2006 phone bills X the appropriate percent

You don’t have to add all those phone bills if you have your tax returns for those years. Just look up how much you deducted for telephone expense each year.

Enter these amounts on Form 8913 (using the same figure per month within each year, and enter them in the appropriate line of your Form 1040, 1065, 1120 or 1120S (for example, line 71, Form 1040 or line 23d of Form 1120S)

This is NOT for the refund of tax on your personal telephone which is determined by another method.
For your personal telephone tax refund:

1 exemption ----------- $30

2 exemption------------$40

3 exemptions-----------$50

4 or more---------------$60

LINKS and References – go to

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