Eva Rosenberg, MBA, EA - Did you overlook the 2007 Telephone Tax Rebate when you filed any of your clients' personal or business returns - or your own? About 30% of eligible taxpayers didn't take advantage of this credit.
Were your clients among of them?
We all know how hard it can be to pin clients down and to have them provide documents in the ordinary course of business. But last year's telephone excise credit required documents they don't normally need to provide to their tax professionals. So some clients got lost in the shuffle - and the deadline.
You and your clients can still get your money back from IRS by filing an amended personal and/or business tax return for 2006. IRS provides instructions for 1040s and (scroll down) for business returns specifically for the telephone excise tax credit. click here
Now that you have some time to see which of you clients didn't provide information last years, the question is - should you amend their tax return?
TaxMama's rule of thumb: Don't amend unless you get a worthwhile benefit - one that exceeds the risk of extending the statute of limitations for IRS audits.
When you amend the 2006 tax return, you start the three-year audit window running again. The good news is, the audit window only opens up on the issues for which you're amending. The bad news is, when you file the amended return, the live IRS examiner handling the file can look at anything in that tax return and decide to call for a larger audit. You've seen that happen.
So, if you think your client has any sensitive issues, or there's something you're not comfortable having IRS notice, skip this opportunity for that client.
But most of your clients have no issues. So scour your files to see who could benefit!
~~ The standard amounts for the personal Telephone Credits range from $30 - $60. That may not be worth your time - or fee.
If the actual Federal excise taxes are higher, and they have the receipts to prove it, encourage your clients to gather the receipts together and make copies of the monthly summary page showing the federal taxes charged. Attach these copies to the 1040X.
Do NOT attach copies of the complete bill. Aside from the volume of paper, do you really want IRS to see all your client's calls? What's if they were mostly personal?
~~ There is no standard for businesses.
The actual amounts are based on your client's telephone bills between Feb. 28, 2003 and before Aug. 1, 2006.
For businesses, the credit applies to the long-distance excise taxes on all the phones - cell phones, faxes, business phones, toll-free services, etc.
IRS suggests the credit request should not be more than 3% of their total phone bill. If their phone/communications expenses were over $5,000 per year, their credit is over $150.
For companies with phones bills of $5,000 per month, the credit can be nearly $2,000.
There was a good tool to help you with the calculations, developed by Yosef Rabinowitz. It's no longer available on the website. But if you have a complex situation, get in touch with him for the software. http://www.tbrc.com/ptrc/
Incidentally, his firm may also be able to analyze your client's phone bill and help you reduce it.
For some clients, the benefit may not be more than your fee. But for others...you could be quite a hero - by getting them a refund AND by cutting their communications costs.