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US Taxpayers Missing Out On Phone Credits, Says NATP

by Leroy Baker,, New York

16 March 2007

The US National Association of Tax Professionals says that many taxpayers are inexplicably failing to take at least the standard deductions allowed for excess federal telephone excise tax they paid on their phone bills.

Three in every ten taxpayers are not taking the standard credit – offered in 2006 only – for telephone excise tax, according to IRS Commissioner Mark W. Everson.

"I recently took on a new client who is an engineer for a national oil production company," states Michael Womack, an NATP member operating Zero Degrees Notary and Tax Service in Oklahoma City, OK. "His wife has a small sideline business producing piece work for an electronics firm and works out of their home. Being the busy professional that he is, he was content to take the standard TET deduction; but his wife took the time to run a tape of the amounts they had actually paid from March 2003 through July 2006. Wow! What a difference. Because she took the time to 'do the math' they are now looking at a deduction of $153.24."

NATP says that it won't be tax preparers who miss the deduction. “Most tax preparers use professional-grade tax software that has diagnostic tools that alert a preparer if they did not claim the credit,” explains tax researcher Sara Turner, an attorney, CPA, and enrolled agent (EA) with the National Association of Tax Professionals (NATP). “As a practical matter, it’s not really possible to ‘forget’ to claim the credit.” Turner adds that if tax preparers don’t claim the credit for their clients, it’s likely that either the client does not qualify or has chosen not to claim it due to the cost of calculating vs. benefit. While that rationale may make sense for corporations, partnerships, tax-exempt organizations, and other businesses that cannot use a standard deduction and must calculate their actual amounts or use a formula, it’s hard to understand why individuals who have the option to choose the standard credit amount would elect to forego the credit altogether.

So, why are taxpayers not claiming the credit? “I suspect people are not claiming the refund because they don’t know about it and are not using a tax professional,” says W. Thomas Curtis, CPA, EA, CFP, an NATP member in Gaithersburg, MD. “Except for children, we are claiming it on all our returns as a default. In fact, some clients have actually gone back over their old phone bills and have come up with larger amounts.”

Unlike some of the other deductions and credits that were extended too late to be included on tax forms, there is a line for claiming the telephone excess tax on federal Form 1040’s. The IRS also devised a simple Form 1040EZ-T for those taxpayers who do not have to file a tax return for other reasons, but wish to receive this tax credit. Claiming the standard amount telephone excise tax credit realistically couldn’t be much easier. To use actual expenses, “Form 8913 is a 16-line, four column monster to complete if you want to maximize your credit,” shares NATP member Louise Gritmon, EA, of Medford, NY. “Maybe this is why people choose the standard credit rather than full amount to which they are entitled.”

A majority of taxpayers have paid federal excise tax on their long-distance phone calls between March 1, 2003, and July 31, 2006, the time period to which the refund applies. If you have already filed and missed out on the credit, you can file an amended tax return until April 15, 2010. Based on feedback from taxpayers who have chosen to request their telephone records to calculate actual amounts paid, the majority of phone service providers are gladly providing copies of past invoices at no charge, and often within only a few days of the request. Claim your credit! And to reduce your preparer expenses, request the copies and add up the amounts paid ahead of your appointment.

NATP says it maintains a listing of professionals by area at Members of the NATP work at offices that assist over 11 million taxpayers with tax preparation and planning. The average NATP member has been in the tax business for over 20 years and holds a tax/financial designation and/or a college degree. NATP has more than 18,000 members nationwide. Members include individual tax preparers, enrolled agents, certified public accountants, accountants, attorneys, and financial planners.

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