The Internal Revenue Service is being inundated with returns from taxpayers that don’t correctly claim the one-time telephone tax refund the federal government is issuing for the 2006 tax year.

The government stopped collecting the long-distance excise tax last summer after several court decisions found that the tax does not apply to long-distance service as it is billed in the modern era. Federal officials also authorized a one-time refund of the federal excise tax collected on service billed during the previous 41 months, spanning from March 2003 through July 2006.

The standard amount, ranging from $30 to $60, is based on the number of exemptions that a taxpayer claims on their return. The agency recently announced that it is investigating potential abuses among early filers who requested especially large amounts for the telephone tax refund.

Early mistakes found on a sample of 2006 returns filed during January included taxpayers:

  • Filling out Form 1040EZ-T, “Request for Refund of Federal Telephone Excise Tax,” and failing to show a refund amount on line 1a. The form is designed exclusively for requesting the telephone-tax refund, for people who don’t need to file a regular income-tax return.
  • Failing to request the telephone tax refund on a regular federal income-tax return in situations where the taxpayer appears to qualify. More than one-third of early filers did not request the refund.
  • Filing duplicate requests. Usually, this involves filing both Form 1040EZ-T and a regular income-tax return.
  • Requesting a refund that appears to be based on the entire amount of the taxpayer’s phone bills, rather than just the 3 percent tax on long-distance and bundled service.
  • Requesting a refund in the thousands of dollars, suggesting that the taxpayer paid more for telephone service than they received in income.

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access