Tel Excise Tax disagreement

[Kram BergGold]

If a person was out of the Us from 2003 through 2006 and paid no telephone excise tax can they receive the IRS $30-$60 credit. Obviously they can't file form 8913.

[jainen]

Disclaimer

Disclaimer: This is part of a series of posts that forum moderators have identified as containing “bogus information.”
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The excise tax doesn't have anything to do with income tax. It's only on the tax returns as a convenience and the IRS doesn't actually have any jurisdiction over the court order.

Collecting the money was illegal in the first place, so it makes sense that the repayment should be illegal to make up for it. Everybody who files is entitled to the standard amount.

[gkaiseril]

From the instructions for the 1040-EZ T:

"If you were billed after February 28, 2003, and before
August 1, 2006, for the federal telephone excise tax on long
distance or bundled service, you may be able to request a
refund of the tax paid. You had bundled service if your local
and long distance service was provided under a plan that
does not separately state the charge for local service."

If the taxpayer was not billed for U.S. telephone long distance excise tax, there should be no refund. The court ordered the refund to those who paid the tax. This concept also prevents those who did not pay the tax in protest from collecting the tax.

If you think 2 wrongs make a right go for it. You also might be showing your client more about yourself than you want.

"Madam, we have already determined what your are, we are now just determining your price." B. Franklin

[ChEAr$]

Not Franklin quote

From the instructions for the 1040-EZ T:

"If you were billed after February 28, 2003, and before
August 1, 2006, for the federal telephone excise tax on long
distance or bundled service, you may be able to request a
refund of the tax paid. You had bundled service if your local
and long distance service was provided under a plan that
does not separately state the charge for local service."

If the taxpayer was not billed for U.S. telephone long distance excise tax, there should be no refund. The court ordered the refund to those who paid the tax. This concept also prevents those who did not pay the tax in protest from collecting the tax.

If you think 2 wrongs make a right go for it. You also might be showing your client more about yourself than you want.

"Madam, we have already determined what your are, we are now just determining your price." B. Franklin

I've noticed quite a few of my client have not had long distance service on their home
phones since before 2003 even, hence no excise tax rebate.

And it was George Bernard Shaw whose dinner companion was the talkative lady.

[gkaiseril]

Thank you for the correction.

This illustrates the point that we depend on the honesty of our clients to answer our questions and they depend on their tax preparer to complete their return within the law.

It should be noted that there will be many people who have paid this tax, but do not have to file an income tax return. This could be a source of additional returns and acquainting new clients with your services.

[Koss]

Excise Tax: Court Order??

I fully agree that a person who actually paid zero federal excise tax during the applicable period is not entitled to claim the credit. They should not even claim the standard amount.

With that being said, I have a couple observations:

(1) Wireless phone service qualifies if the service had separate charges for long distance calls, or if the service was "bundled." Most wireless service during the last three years has been bundled. On most wireless phone plans today, there is no distinction between local and long distance calls when it comes to billing. And this is exactly why the federal excise tax is not applicable.

(2) Even though I agree in principle that someone who paid no FET at all should not claim the credit... the whole point of the "standard amount" is that you don't have to provide any documentation. I do not encourage clients to cheat on their taxes or make fraudulent claims. My point is that we, as professionals, do not necessarily have to agonize over this question, or grill the client about exactly what type of phone service they had if they're not sure. The IRS does not intend to challenge anyone claiming the standard amount.

(3) I was not aware that a court order had been issued in connection with the FET refund. I thought the Treasury Department simply conceded that the tax was not applicable to certain types of phone service, directed the carriers to stop collecting it, and then developed procedures for taxpayers to claim a refund for the applicable period. I know there was significant litigation over the interpretation of the tax, but the IRS was appealing it. I think they simply decided not to appeal it further. I don' t think there is a valid, binding court order that applies to the entire country. Does anyone have a citation?

(4) The IRS guidelines and instructions leave a lot of room for interpretation on how to go about claiming the credit. For example, the IRS says you can claim the standard amount if you paid the tax. It doesn't exactly say that the bill had to be in your name. It's actually very common for a person to pay a phone bill even though the account is not in their name, especially when it comes to cell phones.

(5) Also of interest: The IRS has some sort of a FAQ on their website that indicates that you can file Form 8913 using a valid estimate. It explicitly says that you do not have to have the phone bill from each month of the 41 month period. It says you have to have records to support the amount you are claiming.

Take, for example, a family of six. Married couple, with four kids. During the applicable period, they always had four cell phones and one home phone. They may not have every bill, but they have some bills from that period, and they didn't change the rate plan or the services in any dramatic way during the 41 month period. They also have checkbook registers and bank statements.

You can probably take an average of some sort. The FET is a 3 percent tax, but it is not applicable to the entire phone bill. Even when the carriers were following the IRS directives, the tax was not applied to entire bill. (On cell phones, for example, I don't think it was applicable to text messaging charges.)

Nevertheless, it is entirely plausible for some clients to legitimately claim that throughout the applicable period, they were paying somewhere in the neighborhood of $250 per month for bundled wireless service (think about the larger family plans that support multiple lines). This is not by any means far fetched for some clients. So, let's say conservatively that perhaps the FET was only applicable to about $180 per month of that bill. 3% of 180 x 41 months = $221.

I'm never going to encourage clients to make up numbers out of thin air--not for the FET credit or for any other section of the tax return. But the IRS will accept records other than phone bills, and they will accept reasonable estimates based on those records. The real test of what is reasonable is whether the client had enough income during those years to support his claim that he paid those kinds of phone bills.

For a few of my clients, accurately calculating the credit on Form 8913--even if the calculations do involve some type of estimate--could generate a credit that would almost pay the fee for the tax return.

Burton M. Koss