So how many returns does the IRS expect to claim the telephone tax refund?
First, The IRS expects to process about 136 million individual income tax returns for 2006. The telephone tax refund can be claimed on those individual income tax returns as well as on a 1040EZ-T which is provided for individuals that are eligible for the telephone tax refund but are not required and don’t want to file an income tax return.
The IRS expects about 146 million individual taxpayers to request the telephone tax refund. They have also estimated that about 22 million 1040EZ-T’s are to be filed. The math says they are expecting about 124 million of the income tax returns filed to claim the telephone tax refund, about 90%. And some of those income tax returns not claiming the telephone refund will be children who have jobs but are claimed as dependents on their parents return and are not eligible for the standard amount (because they cannot claim an exemption for themselves).
What is being refunded is the 3% excise tax charged on long distance calls from March 2003 through July 2006. They also charge the tax on local calls but that is not being refunded.
There are two approaches to claiming the refund.
The first is a "safe harbor" amount. It is based on the number of exemptions you claim on your return (unless one of the dependents being claimed is filing their own refund claim).
The amounts are:
- 1 exemption = $30
- 2 exemption =$40
- 3 exemption =$50
- 4 or more exemptions = $60
The second method is actual. If you use actual (except for some businesses discussed below) you will need to gather up your phone records for the period of March 2003 through July 2006 and have them available to provide the amounts for TurboTax to calculate the actual amount.
However, for those business people among you, if your gross receipts are greater than $25,000 there is a formula that the IRS will allow you to use to calculate your actual amount. They take your April 2006 phone bill, when the tax was still being charged and compare it to your September 2006 phone bill, after the tax was no longer charged. They allow you to use the difference between the two rates of tax to estimate a percentage to apply against the phone expenses you had for the period involved.
This will only be available this year 2006, so pay attention.
The IRS information release, IR-2007-01, has a lot of this information