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Telephone Tax Refund Questions and Answers for Individuals

Last updated Jan. 29, 2008

What is the telephone tax refund?

The telephone tax refund is a one-time payment available on your 2006 federal income tax return, designed to refund previously collected federal excise taxes on long-distance or bundled service. It is available to anyone who paid such taxes on landline, wireless, or Voice over Internet Protocol (VoIP) service.

Why is the government refunding these taxes?

Several recent federal court decisions have held that the tax does not apply to long-distance service as it is billed today. The IRS is following these decisions and refunding the portion of the tax charged on long-distance calls. The IRS is also refunding taxes collected on telephone service under plans that do not differentiate between long distance and local calls including bundled service.

The telephone tax continues to apply to local-only service, and the IRS is not refunding taxes charged on local-only service.

The IRS will refund the taxes paid on long-distance or bundled service billed to taxpayers for the period after Feb. 28, 2003, and before Aug. 1, 2006. Taxpayers should request this refund when they file their 2006 tax returns.

Who is eligible to request the telephone tax refund?

In general, any individual, business or nonprofit organization that paid the tax for long distance or bundled service billed after Feb. 28, 2003, and before Aug. 1, 2006, is eligible to request the refund.

What is a refund-eligible bundled service?

Bundled service is local and long distance service provided under a plan that does not separately state the charge for the local telephone service. Bundled service includes plans that provide both local and long distance service for either a flat monthly fee or a charge that varies with the elapsed transmission time for which the service is used. Telecommunications companies provide bundled service for both landline and wireless (cellular) service. If Voice over Internet Protocol service (VoIP) provides both local and long distance service and the charges are not separately stated, such service is bundled service.

The method of sending or receiving a call, such as on a landline telephone, wireless (cellular), or some other method, does not affect whether a service is local-only or bundled.

I made all my long-distance calls using prepaid telephone cards. Can I request the telephone tax refund?

Usually, no. In most cases, when you buy a prepaid phone card from a retailer, that business pays the tax. Because the business was liable for the tax, it, not you, would be entitled to request the refund.

Phone cards have been marketed in various ways. So, in some cases, you may have been charged the tax. If you bought prepaid phone cards, and you have a bill or receipt separately listing the three-percent federal excise tax on long-distance or bundled service, you are eligible to request the telephone tax refund.

If you "recharged" your prepaid phone card by purchasing additional minutes directly from the phone company, you are eligible to request the telephone tax refund. Generally, the phone company charges will show up on your credit card bill. The excise tax would be 3 percent of the amount shown on the credit card bill.

I made all my long-distance calls using a prepaid cell phone. Can I request the telephone tax refund?

Usually, no. The same rules that apply to prepaid phone cards also apply to prepaid cell phones.

In most cases, when you buy a prepaid cell phone from a retailer, that business pays the tax. Because the business was liable for the tax, it, not you, would be entitled to request the refund.

Prepaid cell phones have been marketed in various ways. So, in some cases, you may have been charged the tax. If you bought a prepaid cell phone, and you have a bill or receipt separately listing the three-percent federal excise tax on long-distance or bundled service, you are eligible to request the telephone tax refund.

As in the case of prepaid phone cards, if you "recharged" a prepaid cell phone by purchasing additional minutes from the phone company, you are eligible to request the telephone tax refund. Generally, the phone company charges will show up on your credit card bill. The excise tax would be 3 percent of the amount shown on the credit card bill.

Can I still request the refund?

If you were one of the people who did not request the refund on your tax year 2006 return, you can file an amended tax return for 2006. Individuals who did not have a filing requirement in 2006 can still use a special short form, Form 1040EZ-T, to request the refund. Individuals with low income, including many senior citizens not required to file a regular tax return, may qualify to use Form 1040EZ-T. You cannot request a refund of telephone excise taxes on your 2007 tax return.  

To amend your individual 2006 tax return, you must file a Form 1040X. If the only change to your return is a request for a refund of the federal telephone excise tax, do the following:

  • Fill in the top portion of Form 1040X through line B.
  • On line 15, enter the amount being requested in columns B and C, and write “FTET” on the dotted line next to line 15.
  • Write “Federal Telephone Excise Tax” in Part II, Explanation of Changes.
  • Sign the Form 1040X (both spouses must sign if filing jointly) and mail it to the IRS processing center servicing your state. You can find the address on the Form 1040X instructions.
  • If you are requesting a refund of the actual amount of telephone excise taxes paid rather than the standard amount, you must complete and attach Form 8913, Credit for Federal Telephone Excise Tax Paid.

If you are making multiple changes to your 2006 tax return, you must fill the form out completely according to the instructions. 

Requesting the standard amount is optional. It may be the easiest way to request a refund. A married couple filing a joint return with two dependent children, for example, will be eligible for the maximum standard amount of $60.

Individuals who decide not to use the standard amount must figure their refund using the actual amount of tax they paid. In some cases, choosing this option may result in a larger refund. To choose this option, individuals can fill out Form 8913 and attach it to their amended returns. Individuals can base their refund requests on phone bills and other records. Individuals need not have bills and records covering the entire 41-month period (March 2003 through July 2006), but they must have records adequate to support the refund amount they are requesting.

The standard amount is not available to businesses and nonprofits. Accordingly, businesses and nonprofits must fill out Form 8913 and base their refund requests on the actual amount of tax they paid. Businesses should attach this form to their amended income-tax returns — Form 1120, 1120S, 1065 or 1041. Nonprofits, including churches, charities and other tax-exempt organizations, should attach it to their amended Form 990-T.

Alternatively, businesses and tax-exempts can review their bills for 2 months (April and September 2006 bills) and use a special formula to figure the refund. For more information, see Telephone Tax Refunds: Questions and Answers for Businesses and Tax-Exempt Organizations.

I don’t have to file an income-tax return. How do I get the telephone tax refund?

For those people who do not otherwise have to file a tax return, there is a new simple form (1040EZ-T) that can be used to get this refund. Beginning in mid-January, this form can also be filed electronically for free via the Free File Web site.

If you choose the standard amount, all you need to do is fill out the 1040EZ-T using the number of exemptions you are eligible to claim. For example, a married couple with two dependent children (for a total of four exemptions) will be eligible for the maximum standard amount of $60.

If you decide not to use the standard amount, you must figure your refund using the actual amount of tax paid. In some cases, choosing this option may result in a larger refund. To choose this option, you must fill out an additional form (Form 8913) and attach it to Form 1040EZ-T. You can base your refund request on phone bills and other records. You need not have bills and records covering the entire 41-month period (March 2003 through July 2006), but you must have records adequate to support the refund amount you are requesting.

Can people who live outside the United States or in a U.S. territory request the telephone tax refund?

Usually, no. To request the refund, an individual must have paid the tax. Typically, only telecommunications service providers located in the fifty states or the District of Columbia are authorized to collect the tax. Thus, in most cases, people who live in Puerto Rico or a U.S. territory or possession did not pay the tax. Similarly, people living in foreign countries typically did not pay the tax to the U.S. government.

In some cases, a U.S. citizen living abroad or a foreign national may have paid the tax, because they purchased long-distance or bundled service from a U.S.-based service provider. If, under these circumstances, the service provider collected the tax, the customer may request the telephone tax refund.

What is the standard amount?

Individual taxpayers can take a standard amount from $30 to $60 based on the number of exemptions they are eligible to claim on their 2006 tax return. For those who can claim:

  • One exemption, the standard refund amount is $30;
  • Two exemptions, the standard refund amount is $40;
  • Three exemptions, the standard refund amount is $50;
  • Four exemptions or more, the standard refund amount is $60.

The instructions to the 2006 1040 tax forms provide more information on how to determine the correct number of exemptions. (Because the term “exemptions” does not appear on Form 1040EZ, people who fill out this form should follow the instructions carefully.)

How did the government come up with the standard amounts?

The standard amount is based on actual telephone usage data, and the amount applicable to a family or other household reflects taxes paid on long-distance or bundled service by similarly sized families or households. Using this amount may be the easiest way for taxpayers to request their refund and avoid gathering months of old phone records.

Telephone industry and IRS data were used to determine the refundable standard amounts. The data showed that spending on long distance correlated directly with the number of persons in a household; therefore, a scaled refund structure was selected based on the number of exemptions a taxpayer is eligible to claim on their 2006 tax return.

How do I find the telephone excise tax charges on my old telephone bills?

Be sure that you are looking at the portion of your telephone bill that relates to long-distance or bundled service. Only the federal excise tax on long-distance or bundled service is eligible for refund.

For this purpose, bundled service is local and long-distance service provided under a plan that does not separately list the charge for local service. Bundled service includes, for example, phone plans that provide both local and long-distance service for either a flat monthly fee or a charge that varies with the time for which the service is used.

Once you locate the right section of the bill, here are some of the phrases to look for:

English-language phone bills

  • Federal
  • Federal Excise 3%
  • Federal Excise @ 3%
  • Federal Excise Tax
  • Federal Tax
  • Fed Excise Tax
  • FET

Spanish-language phone bills

  • Impuesto Indirecto Federal
  • Impuesto federal

Typically, this federal tax amount is not commingled with any other tax or surcharge on a customer's bill. In other words, it is normally shown as a separate line item. In some cases, phone companies stopped charging the tax on bills dated between May 25, 2006, and Aug. 1, 2006.

I only have records covering part of the 41-month period. Can I still request a telephone tax refund, based on the records I have?

Yes. You need not have bills and records covering the entire period, but you must have records adequate to support the refund amount you are requesting.

How do I determine how much federal excise tax I have paid on my long-distance service?

Taxpayers who choose to base their refund requests on the actual amount of tax paid should review their phone bills from March 2003 through July 2006. You need not have bills and records covering the entire refund period, but you must have records adequate to support the refund amount you are requesting.

Taxes paid on local-only service are not eligible for the refund. In general, federal excise taxes paid on other types of service qualify. Federal access charges and state or local taxes and charges are not eligible for the refund.

If you do not understand the billing codes used by your telecommunications provider for various amounts, contact your provider for an explanation.

Taxpayers may request the standard amount. The standard amount is based on actual telephone usage data, and the amount applicable to a family or other household reflects the phone tax on long-distance or bundled service paid by similarly sized families or households. Using this amount may be the easiest way for taxpayers to get their refund and avoid gathering up to 41 months of old phone records. However, for some taxpayers, requesting a refund based on the actual amount of tax paid may be more beneficial

Do internet long-distance plans qualify for the refund?

Yes. If you paid the federal excise tax on your long-distance internet plan, you can request the telephone tax refund. Internet long distance plans include broadband VoIP long-distance plans. If you are not sure you paid or were charged the telephone excise tax on your internet plan, review your old bills before requesting the refund.

Why do I only get a refund for the past few years?

Under the applicable statute of limitations in the Internal Revenue Code, the IRS is generally not permitted to refund taxes that were paid more than three years before the date on which the refund program was announced. Accordingly, the telephone tax refund is available for long-distance taxes billed after Feb. 28, 2003, and before Aug. 1, 2006.

What if I don’t know whether I paid this tax?

Your phone service providers were required to include the federal excise tax on your monthly telephone bills. So if you had long distance or bundled service and received a monthly bill from your phone service provider, and you paid the bill including the tax amounts, then you should be eligible to request the refund. 

Where do I go for more information?

Instructions for requesting this refund will be included with your tax forms and on this Web site. Therefore, most people will not need to call the IRS. If you decide to figure the actual amount of the refund rather than the standard refund, you will need copies of your phone bills or other records. You need not have bills and records covering the entire refund period, but you must have records adequate to support the refund amount you are requesting.

Telephone companies have already provided their customers with copies of their bills during the original billing periods and may charge for replacement copies of past bills, if they are available. Before contacting your telephone company, should you need to obtain replacement copies of past bills, you may want to check the company’s Web site.

What do I have to do now?

The only decision you have to make is whether to use the standard amount or to request a refund of actual tax paid. To request the standard amount, you don’t need to do anything other than fill in the appropriate line when completing your 2006 return.

If you are considering requesting a refund of actual tax paid, you may want to start gathering your phone bills from Feb. 28, 2003, through Aug. 1, 2006. You need not have bills and records covering the entire refund period, but you must have records adequate to support the refund amount you are requesting. As with any other line item on your return, starting early and keeping good records always makes the tax-preparation process easier.

Will the IRS pay interest on the refunded telephone tax?

Yes. The standard amount includes interest. For those basing their request on the actual amount of tax paid, the instructions for Form 8913 explain how to figure the interest amount.

Do I have to report this interest on my tax return?

The tax impact of a telephone tax refund was incorporated in the calculation of the standard amount. Therefore, if you request the standard amount, you do not need to report on your income tax return 1) the excise taxes refunded or 2) the interest included in the standard amount. The imputed interest in the standard amounts is:

 

  Standard Amount 

  Federal Telephone Excise Tax   

  Interest   

$30

$25.61

$4.39

$40

$34.15

$5.85

$50

$42.69

$7.31

$60

$51.23

$8.77

Taxpayers who request the standard amount may exclude the appropriate interest amount above.

If you base your refund request on the actual   amount of tax paid, the interest you receive is taxable. The taxable interest amount is shown in Column (e) of Form 8913.

How do I decide if it’s better for me to use the actual or take the standard amount?

You can use whichever method gives you the larger refund. The standard amount is based on actual telephone usage data. It is an amount applicable to a family or other household and reflects the tax on long-distance or bundled service paid by similarly sized families or households. Using this amount may be the easiest way for taxpayers to request their refund and avoid gathering old phone records. However, for some taxpayers, requesting a refund based on the actual amount of tax paid may be more beneficial.

If you decide not to use the standard amount, you must figure your refund using the actual amount of tax paid, based on your phone bills and other records. You need not have bills and records covering the entire 41-month period (March 2003 through July 2006), but you must have records adequate to support the refund amount you are requesting.

Note that the following examples are simplified and assume that the phone charges are fixed and do not vary each month. In reality, phone charges usually vary on a monthly basis and taxpayers should determine the portion of telephone excise tax charged on long distance or bundled service each month and add up the charges to determine the refund amount.

Simplified Example A: If a couple filing jointly, with no dependents, had $20 in local service and $15 in long distance service each month (separately stated on the phone bill) over the 41 month period, their telephone tax refund based on their actual billing would be $15/month X 0.03 X 41 months = $18.45 (not including interest) in comparison to the standard refund amount of $40. Three percent (3%) is the standard federal excise tax rate. The telephone tax paid on the local portion of their service is not eligible for the refund.

Simplified Example B: If a single taxpayer, who is a sole proprietor with less than $25,000 in gross receipts, had $20 in local service, $50 per month personal long distance plan and $150 in bundled service cellular phone charges for each month over the 41 month period, the telephone tax refund based on actual tax paid would be $200/month (50 +150) X 0.03 X 41 months = $246.00 plus interest, in comparison to the standard refund amount of $30 (which would cover both personal and business expenses). The telephone tax paid on the local portion of service is not eligible for the refund. The sole proprietor determines that they would benefit from requesting a refund of the actual tax paid versus requesting the standard refund amount of $30. The taxpayer must maintain supporting documentation for their tax records.

Do I have to itemize to request this refund?

No. Because this is a refund of taxes previously paid, it does not matter whether or not you itemize deductions.

Will I get a separate check?

No. The telephone tax refund will be treated as a one-time payment on your 2006 return. Accordingly, it will reduce the amount you owe on your return or increase the amount of your refund.

May residents of a U.S. Possession or Territory request a telephone excise tax refund from their local Tax Agency?

No. Telephone tax refund requests should NOT be filed with the local Possession or Territory Tax Agencies in American Samoa, Northern Marianas Islands (CNMI), Guam, U.S. Virgin Islands or Puerto Rico. These local Tax Agencies will neither process nor pay these refund requests. All eligible telephone tax refund requests will only be processed by the IRS.

Is a resident of a U.S. Possession or Territory eligible to request a telephone tax refund from the IRS?

Generally, most residents of U.S. Possessions or Territories are NOT eligible to request a telephone tax refund. The telephone toll service providers in these locations did not collect the telephone excise tax on landline, wireless, or Voice over Internet Protocol (VoIP) services.

However, individuals and businesses from a U.S. Possession or Territory are eligible to request a refund if they paid the telephone excise tax on their U.S. landline, wireless, or Voice over Internet Protocol (VoIP) service that was billed during the 41-month period, stretching from the beginning of March 2003 to the end of July 2006. Examples include a person who was a resident, a property owner, or a business operator within the 50 states and the District of Columbia for any part of this 41-month period. These taxpayers must first determine whether or not they paid the tax by reviewing their telephone bills for the covered period.

Can 1040EZ-T filers request an extension?

Form 1040EZ-T is solely for people who don’t need to file a return but want to request the telephone tax refund. There is no need for taxpayers without a filing requirement, such as those who qualify to use Form 1040EZ-T, to request an extension. This means that Form 1040EZ-T may be filed after April 17. However, to be timely, it must be filed within three years.

What is the total amount the government expects to refund?

Economists at the U.S. Department of the Treasury estimate the amount refunded to individuals will be about $10 billion.

I’m a sole proprietor and I file a Schedule C with my Form 1040. I have over $25,000 in business income. I want to use the estimation method to calculate my refund amount. Can I use this method for both my personal and business telephone expenses?

No. The estimation formula can be used to determine the refund amount for business expenses only. If you use the estimation formula for business expenses, you must request actual tax paid for personal phone charges. You cannot request the standard amount in combination with any other method.

Who do I contact for more assistance?

Call the IRS customer service line at 1-800-829-1040. If you press 7, you will get a recording that explains how to request the telephone excise tax refund; or press 8 if you want to continue in Spanish.

If you want to talk with a tax assistor, call the customer service line and follow these menu prompts.

First, press 1: “For questions about preparing or filing your individual tax return, or tax related rules and regulations.”

Next, press 6: “If you have questions about the telephone excise tax refund.”

Finally, press 1: “Individuals who file a Form 1040 series return, or if you are not required to file a return but want to know how to request this refund.”

 

 

 

 

 

 

 

 

 

 

 

 

Page Last Reviewed or Updated: 17-Apr-2014