Phone bills may mean tax deduction|[01/22/07]

Published 12:00 am Monday, January 22, 2007

Taxpayers rummaging through their records in search of every deduction possible for this year’s federal tax return can now grab their phone bills.

The Internal Revenue Service has decided telephone companies should stop collecting a 3 percent excise tax on bundled local and long distance service billed after July 31, 2006.

The change applies only to wired lines, not cell phones.

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A result of court orders directing the IRS to refund money collected from phone customers who filed suit to recover the funds, taxpayers can now claim the Telephone Excise Tax Refund, or the TETR, on this year’s return.

Available for individuals, businesses and tax-exempt organizations to request, the refund can be claimed by gathering old phone bills and totaling taxes paid from after Feb. 28, 2003, to Aug. 1, 2006. Form 8913 must be used if filing a paper return.

Taxpayers may also take the standard refund available, which ranges from $30 for those claiming a single exemption to $60 for those claiming four exemptions.

Those who do not need to file a federal income tax return for 2006 can still claim the refund, using Form 1040-EZ-T to claim the standard refund.

Congress imposed the tax in 1898 and applied it to the time and distance of the communication, which at the time was via telegraph and slowly evolved into telephone.

Long distance calling plans that based charges solely on the length of calls, not the distance, grew more prevalent. The growth of wireless and cellular telephone communication also helped deem the tax unnecessary.

Businesses stand to reap more benefits from the refund than individual taxpayers. However, the IRS expects claims for it on 160 million returns, making it the widest-ranging single deduction in history.