Feds Poised To Short-Change Public On Phone Tax Refund

New York, NY (PRWEB) September 7, 2006

The federal government announced last week that they're planning to give just about everybody a refund of $30-$60 next April for a telephone tax that they should have stopped collecting years ago. But they may be trying to get away with paying out much less than they owe.

Yosef Rabinowitz is the Managing Director of TBRC Cost Recovery, LLC, (http://www.tbrc.com) a New York-based Telecom Expense Management firm that helps businesses and non-profits reduce their phone bills and recover money for past billing errors. He has been in the industry since 1994. The company is affiliated with Shanholt Glassman Klein Kramer & Co, CPA's, a 70-year-old public accounting firm (http://www.shanholt.com).

After evaluating the proposed "safe harbor" refund amounts, Mr. Rabinowitz believes that they are much too small, given the nation's spending habits. The IRS is trying to pass off their numbers as reasonable, but anyone who spends more than $40 per month on regional, long distance, international and wireless calls will be severely shortchanged unless they dig through their old bills to determine the actual amount they are due.

In Mr. Rabinowitz' estimation, a more appropriate safe harbor, or "no-questions-asked," refund amount would be closer to $125, which would reflect a monthly long distance and wireless bill of about $80-$85.

Even if the government were to raise the safe-harbor amounts, Rabinowitz feels that they can still go much further in helping individuals, as well as businesses and non-profits, determine their actual refund. He recommends that the government enlist the help of the very people who collected the tax in the first place: The phone companies. "All the info is in their computers," says Rabinowitz. "While they might have to temporarily hire extra staff to extract the information and report it to their customers, it's the right thing to do. And the government should cover their costs since they're the one's who got us into this mess."

Background: Back in May, 2006, after losing yet another court case on the matter, the Treasury department conceded that the 3% Federal Excise Tax which, until recently, appeared on every phone bill, does not apply to non-local and wireless calls. At that time, they announced that they would refund (with interest) all such taxes collected from March 1, 2003 through July 31 of this year, when carriers were instructed to remove it from their bills. The tax still applies to local phone service, though.

The court’s ruling stems from the language of the Tax Code which states that the tax only applies to non-local calls whose cost varies with “time AND distance (emphasis added).” By the early 1990’s, most US carriers switched from a distance-based pricing system to a flat or ‘postalized’ rate per minute that doesn’t vary with distance, seemingly rendering long distance calls exempt from the tax. However, the Government continued to require carriers to collect the tax anyway. Several large businesses, including Office Depot and Amtrak, applied for refunds. When the IRS denied their applications, they sued. In court arguments, the Treasury tried to convince judges that Congress intended the word “AND” to mean “OR”, but to no avail. In case after case, the courts ruled against the government. The one case that they did win, in the 11th circuit, was later overturned on appeal.

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