Law Articles And Legal Issues

IRS Owes Billions of Dollars in Federal Excise Tax Refunds

Landrum, SC (PRWEB) August 24, 2006 -- Effective August 1, 2006, long-distance and cellular phone service carriers stopped charging businesses, organizations and individuals a mandatory three percent Federal Excise Tax (FET) that dates back to 1898 and the Spanish American War. In addition, the IRS will issue refunds of FET paid over the last three years, which it estimates at $15 billion owed to taxpayers.

After a long legal dispute over FET between the U.S. Treasury Department and the U.S. Congress, the U.S. Treasury finally conceded on May 25, 2006, leaving companies, tax-exempt organizations and individuals wondering how to file for their tax refund and claim money owed to them.

“Many believe that the manner in which the IRS has handled this situation is not only confusing, but unfair and unlawful,” commented Byron Horner, President of the Utility Audit Company, Inc., a company specializing in tax recovery. “It’s important that businesses and individuals are aware of their rights, what action they need to take and deadlines they need to meet in order to collect their refund.”

Whereas individual taxpayers can claim a standard ‘opt out’ amount offered by the IRS for their FET refund, organizations may only request the actual amount of tax paid and must back up their claim with accurate records and phone bills for the past three years.

“For even small organizations with several phone lines and cellular phones, this process required by the IRS will be extremely tedious and time consuming,” Horner stated.

Horner, a tax recovery expert with 14 years’ experience in utility audits, estimates that the process of compiling, reviewing and identifying the information required to determine the accurate amount to claim will take an average-sized organization 20 hours or more.

“Each telecom carrier identifies FET differently on their bills, making it very difficult for someone who is not familiar with the various phone bills to find the necessary information,” Horner said. “Making it even more difficult for for-profit organizations, the refundable tax is only on long-distance service, not local phone service, meaning the two have to be separated in order to calculate the exact amount of FET they paid and can claim.”

A refund of the three percent tax over a three-year period results in a one to one ratio in determining the amount an organization can expect for its refund. For example, if an organization spends an average of $10,000 a month on long-distance service, they can expect a $10,000 refund.

“Smaller organizations may think that it’s not worth the time and hassle to compile the information for a refund the way the IRS has set this process up,” Horner explained. “They need to know that there are tax experts and companies available to review and calculate refunds in a fraction of the time it would take them to do it internally, making sure that they get their money back from the IRS,” he added.

Horner offers the following tips for organizations to claim the full FET refund their organization is eligible for:

1. Start Now. Deadline for FET refund claims is October 15, 2006 for non-profit organizations. After October 15, tax-exempt organizations will no longer be eligible to claim a full 36-month refund – the refund period begins to shorten. In addition, there’s a chance FET could be repealed, ending the opportunity of reclaiming FET at all. For-profit organizations need to compile information and prepare documentation now before the hectic tax season arrives and this one-time opportunity is missed.

2. Gather Phone Bills. Begin compiling past billing data including all phone records and telecom service bills for the period between February 28, 2003 and August 1, 2006.

3. Carefully Evaluate Each Bill. The Federal Excise Tax is identified differently on each carrier’s bill. For-profit organizations must separate long-distance and local service federal excise tax, as the refund for them only applies to FET paid on long-distance service.

4. Recruit Professional Assistance. Contact a tax recovery expert to save you time and ensure that your organization is getting the tax refund money it is owed by the IRS.

“Organizations will have to dedicate one or two people from their accounting department to complete the refund claim process, meaning hours of manpower lost on other productive work to be spent filing this claim,” Horner explains. “And for small organizations who do not have a dedicated accounting staff, this task seems even more difficult and expensive.”

Utility Audit Company (UAC) specializes in helping organizations, both for-profit and non-profit, recover taxes incorrectly paid as well as identify exemptible taxes and have them immediately stopped on current accounts. As experts in utility taxes, UAC has the knowledge to quickly and effectively file FET refund claims and help organizations get the refund that is legally owed to them by the IRS.

For more information and comments on the Federal Excise Tax refund process, visit www.utilityauditco.com or call Byron Horner at (866) 457-4262. Horner and his staff have started a blog on the topic, which may be found at www.utilityauditco.blogspot.com and encourage questions and comments from businesses and individuals.

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