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IRS will refund telephone tax to you

After losing 12 cases in a row, the IRS has finally conceded that it will refund a telephone tax which was originally enacted to finance the Spanish-American War – over 100 years ago.

Individuals and businesses can claim a refund of this tax on their 2006 income tax returns. The IRS will refund the 3% excise tax on long distance service and most cell phone plans (“bundled service” plans where long distance is not separately stated).

The refunds cover the period March 1, 2003 through July 31, 2006. The tax was originally imposed on long-distance charges that were measured by both time and distance. Since those charges are no longer measured by distance, courts have uniformly ruled the IRS cannot collect them and must refund back taxes.

The IRS will allow individuals to claim a (yet unspecified) fixed amount without documentation, or more with documentation. Businesses must supply documentation. The 3% tax on separately stated local service continues.  Businesses should review their individual situations to determine if the IRS procedures provide them the maximum refund.

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