Tax on talk – US IRS to refund tax collected illegally – biggest refund in IRS history

By Vijay Kumar

Last year, the U.S. Treasury Department announced that the 3% Federal Excise Tax (FET) would no longer be applied to long-distance telephone service, including wireless. This is a huge win for wireless consumers who will no longer be forced to pay this outdated and unfair tax! Additionally, the Internal Revenue Service (IRS) will be issuing refunds on long-distance services, including wireless, for the past three years. According to the Treasury Department’s announcement, eligible taxpayers will be able to apply for this refund with the IRS during the 2006 federal tax form filing season. The official start of the tax season began on Tuesday, January 2, 2007, with electronic filing beginning on Friday, January 12, 2007. The official deadline for the tax season will fall on Monday, April 16, 2007.

The Telephone Excise Tax Refund (TETR) is a one-time payment available on the 2006 federal income tax return. It is designed to refund previously collected long distance telephone taxes. Individuals, businesses and tax-exempt organizations are eligible to request it.

Refunds will be a part of 2006 tax returns filed in 2007 – claims will cover all excise taxes paid on long-distance services over the last three years

The IRS has completed a simplified method for individuals to claim a refund on their 2006 tax returns.

Interest will be paid on such refunds.

Refunds will not include tax paid on local telephone service, which was not part of the litigation.

Initially imposed by President William McKinley in 1898 to help fund the Spanish-American War, the Federal Excise Tax (FET) was originally a luxury tax, at a time when only wealthy Americans had telephones. The war lasted only four months, but unfortunately the “Tax on Talk” remained for 108 years.

Prior to this pro-consumer decision made by the U.S. Treasury Department, every person in the United States who made a phone call paid an extra 3% for this outdated tax. Unlike other excise taxes, the money raised through the “Tax on Talk” was not “earmarked” for any specific purpose – not even to improve service or support for the very telecom services that were being singled out for this discriminatory tax! In fact, the “Tax on Talk” made access to wireless services less affordable for many Americans.

The refund amount could be between 10 to 15 billion dollars.