There’s a windfall in your future
by Candace Bahr and  Ginita Wall, CPA, CFP^®

Pick up the phone, I’ve got good news for you! There is $15 billion coming your way that you can claim on your 2006 tax return. But before you begin spending, let us clarify. We’ll all be sharing the $15 billion – that’s the estimated amount that is being refunded to consumers for long-distance telephone service tax paid over the past three years.

The tax was part of the infamous group of luxury taxes imposed on items such as jewelry and expensive cars. Luxury taxes have been levied frequently, especially in wartime, to raise revenue and discourage consumption of items not related to the national effort. The government originally enacted the tax to help finance the Spanish-American War of 1898.

 How can a telephone, which is a necessity, have a luxury tax on it? Telephones were only owned by the rich when the tax was enacted in 1898, just 22 years after the telephone was invented. Over the 108 years since then, the government collected $300 billion of taxes, even though the entire Spanish-American War took only six months and cost only $6 billion or so, in today’s dollars. So why are we getting a refund of only $15 billion? Simple – the statute of limitations is just three years, so the government gets to keep the rest.

Claiming a refund is simple – sort of. If you opt to claim the standard amount the IRS allows, ranging from $30 to $60 based on the number of exemptions on your tax return, there are no additional forms to file – just fill out one extra line on your 2006 tax return.

But you may have paid far more than that, especially if you have several land lines and cell phones. To claim a higher refund, go back through your telephone bills for the period February 28, 2003 through August 1, 2006, and add up the amounts labeled Federal Excise Tax. Then fill out Form 8913 and attach it to your 2006 income tax return. Businesses and non-profit organizations are also eligible to claim the refund on Form 8913 attached to their normal tax return.
The IRS says that the standard refund includes interest. If you are claiming the actual amounts paid, consult the instructions for Form 8913 regarding computation of interest.

Now if you could just get back all the Monopoly money you’ve paid over the years each time you played the game and landed on the Luxury Tax square.