The IRS has decided to stop defending itself in a court case about taxes it has taken from long-distance phone services. Here's the lowdown.
If you have paid taxes on long-distance phone calls, the IRS owes you money.
We all pay for some kind of long-distance phone service. You start looking for better rates the more you use the service. No matter what you choose, though, you will always have to pay a federal tax on the bill. If you have a big long-distance phone bill, this tax can add up quickly because it is calculated as 3% of your total bill.
The federal excise tax on long-distance phone service is the name of the tax in question. It was made in the year 1898. Yes, this tax has been around for a very long time. As you might expect, some people started to wonder how a tax set up in 1898 could still apply today, especially since telephone technology has changed so much. It turns out that it's not true! When given the chance to look at the situation again, five courts of appeal have ruled that the tax is not valid.
After thinking about it, the IRS has decided not to fight the legal decisions. Instead, it has agreed on its own to give credits or refunds for the excise taxes it has paid over the past three years. In particular, you will be able to get a refund on all taxes you paid from February 28, 2003, until the date the IRS stopped collecting them.
For the 2006 tax year, the IRS will add a new box to all 1040 forms so that the money can be collected. In practise, this means that when you file your tax return for 2006 in 2007, you can check a box and get a refund. This money will earn interest for the IRS.
It's important to remember that the refund only applies to the long distance excise tax. You still have to pay local service taxes, and the refund doesn't cover taxes that states and other groups collect. Still, I think that any return is a good return.
