Business Corner

Formula for businesses to calculate phone tax refund

The IRS recently determined how businesses can quanify their phone tax deductions on 2006 returns.

To request a refund, businesses, including sole proprietors, corporations and partnerships, must complete Form 8913, Credit for Federal Telephone Excise Tax Paid.

On the form, businesses can determine the actual amount of refundable long-distance telephone excise taxes they paid from March 2003 through July 2006, or use a formula to figure the refund. Businesses should attach Form 8913 to their regular 2006 income tax returns.

The formula involves comparing a business’ phone bill from April 2006 (which included the long-distance excise tax) to a bill from September 2006 (which only included a tax on local service). The difference between those two percentages should be applied to annual telephone expenses to determine the amount of the refund.

The refund is capped at two percent of the total telephone expenses for businesses with 250 or fewer employees -- which covers more than 99 percent of all businesses. The refund is capped at one percent for those with more than 250 employees.

Reprinted with permission of Small Business Tax News, Copyright 2006, 1-301-951-1240. This information is distributed with the understanding that the editor and publisher are not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought.

Reprinted from Floor Care Professional, February 2007