- The Washington Times - Tuesday, March 6, 2007

Many taxpayers are overlooking the one-time-only federal refund for long-distance telephone calls, while others are exploiting it.

About 30 percent of taxpayers who have filed returns, or 10 million, have not claimed the refund, although filling in one line — line 71 — could land them an easy $30, the Internal Revenue Service says.

The refund represents an effort by the government to pay taxpayers back after overcharging them taxes on their long-distance calls.

A federal court ruled last year that the tax — created in 1898 to fund the Spanish-American War — no longer applies. As a result, the federal government decided to refund long-distance taxes collected after Feb. 28, 2003. Telephone companies stopped collecting the tax in August.

Anyone filing alone can claim a standard $30 refund on long-distance land-line phone calls, but only this year. Joint filers can claim a standard $60. The refund is not available for cell-phone calls.

Larger refunds are available, but only if the taxpayers claiming them can prove they paid more in long-distance phone-call taxes during the 41 months of the overcharge than would be reimbursed by the standard refunds.

The roughly 30 percent of taxpayers who do not claim the refund are most likely overlooking it, the IRS says. The IRS received about 37.8 million returns by Feb. 16, the last date for which the agency has reported records.

“As a general rule, it is true when the laws change or there’s something unusual or out of the ordinary, there are some gaps like this,” said IRS spokesman Eric Smith. “It appears that is at least a factor.”

Accountants say anyone who claims more than the standard telephone refund not only needs years of records, but also should be a finance professional.

The IRS instructions on the refunds are tedious, said Leo Bruette, a tax partner in the Washington office of accounting firm BDO Seidman.

“It’s about four pages of instruction, which can glaze you over and put you to sleep,” Mr. Bruette said. “For folks who are aware of it, they generally say, ‘It looks pretty complicated, just take the standard amount.’ ”

One of his few clients that could claim more than the standard amount was a law firm with $5 million a year in revenue and its own accounting department. The firm qualified for a roughly $2,000 telephone-tax refund by calculating its average phone bill during the 41 months of government overcharges.

A few people do not bother to review records, they just exaggerate their bills, the IRS says.

“We’ve had several that have requested refunds in the $30,000 range, some even higher than that,” Mr. Smith said. “It’s only a 3 percent tax. It would suggest that they had paid a million dollars or more for long-distance service during the period covered by the refund.”

Last month, the IRS served search warrants on tax preparers claiming suspiciously large telephone-tax refunds for their customers in California, Texas, Louisiana, Georgia and Florida.

“When they request a refund that is greater than the amount … they claim in income, it would make one believe that it might be improper,” Mr. Smith said.

So far, no one has been arrested in the Washington area for tax fraud related to the refunds, he said.

“Most people who claim it are doing so properly,” Mr. Smith said. “About 99 percent of them thus far have taken the standard amount.”

The few passersby at Union Station yesterday who knew about the refund said they would claim the standard amounts.

“I wouldn’t go to all the trouble” to calculate a different amount, said K.T. Johnson, a retired Defense Department worker from Alexandria.

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