More On Tax Planningfrom The Advisor's Professional Library
- Charitable Giving Charitable giving can reduce your clients’ tax liabilities. However, the general and verification rules for the deduction of charitable gifts must be understood in order to take full tax advantage of such gifts.
- Annuities: Variable Annuities Annuities are hot. The tax rules vary with the circumstances. Advisors must be aware of these intricacies when discussing annuities with clients.
In the February 2007 Tax Advisor column in Investment Advisor from Tax Talk Today's Les Witmer, the process was described for how individuals can file on their tax returns for the Telephone Excise Tax Refund (TETR). The TETR is a one-time refund that can be requested by businesses or individuals on their 2006 federal tax returns, but it can get a little complex for businesses. In a nutshell, this is a refund of telephone excise taxes paid on long distance and bundled telephone services billed after February 28, 2003 and before August 1, 2006. The January Webcast of Tax Talk Today offered details on how businesses can go about requesting the refund:
- Actual. This option will require all phone bills for the time period that qualifies for the refund. Businesses must determine the exact amount of telephone excise taxes paid on long distance and bundled telephone services during that time period.
- Formula. For businesses unable or opting not to spend the time locating and deciphering old phone bills, the IRS offers a formula that can simplify the process. This formula requires only April and September 2006 phone bills, plus an accurate phone service expense figure for the entire period qualifying for the refund. Some tax pros expect to use the formula for most of their business clients. "I don't think that most of my clients are going to go dig out 41 months' worth of bills, and they certainly aren't going to have me going through 41 months' worth of bills," said Marianne E. Kreycik, EA, CPA, administrative manager of Jongeward Kreycik Advisors PLLC and president of Marianne E. Kreycik P.S. in WHERE? Note that caps, based on the total number of employees, can apply to the amount of the refund requested using the formula method.
- Standard. Sole proprietors (such as Schedule C, E, and F filers) with gross receipts under $25,000 cannot use the formula method to request the Telephone Excise Tax Refund. These taxpayers can request a standard, exemption-based amount allowed by the IRS, which covers both personal and business phone expenses.
Form 8913 will be used to request the refund, and includes a worksheet for those businesses choosing to use the formula method of computing the refund amount. Because traditional land lines, cell phones, and Internet phone packages can qualify for the refund, tax professionals should expect to deal with the Telephone Excise Tax Refund for virtually all of their business clients.
"Anybody who paid telephone excise tax on long distance or bundled service during the time period covered by the notice is eligible to request a refund, and that does include tax-exempt organizations," said David Williams, Director, EITC/HCTC, and executive overseeing the TET Refund at IRS.
Tax-exempt organizations which do not have a federal tax return filing requirement can still request the Telephone Excise Tax Refund by completing the Form 990T, which will require a few pieces of identifying information as well as the amount they are requesting for refund.
To view the Tax Talk Today Webcast on this topic and to view the Webcast archive, please visit www.TaxTalkToday.tv.