"There are significant problems with this highly-restrictive method," according to Utility Audit Company, Inc, president Byron Horner. The IRS has allowed businesses to estimate the amount of FET paid based on a comparison between the April and September 2006 phone bills, and "capturing a truly representative usage sample from just two months isn't very likely," Horner adds. "If your long-distance usage was higher than local usage in the past but was not in April or September (the sample months), it is doubtful that this method will return the full amount of FET you're owed." Horner feels that another problem with this method is the cap on the total phone expenses that businesses can claim: 1-2 percent, depending on the number of employees. "If your differential equation comes out to be more than 2%, the excess percentage will represent lost refund dollars." Larger businesses that are capped at 1 percent do not have much choice, other than spending time and resources to "calculate the exact figures and claim the amount of FET they actually paid." The business must provide accurate records and phone bills for the 41 months to substantiate their claims for cellular accounts and multiple phone lines, a time-consuming process. If this is not done, Horner says they may well "be leaving money on the table." Although the IRS does admit that the phone bill usage of businesses is more varied than individuals, the estimation method offers only two indicated months to use as a basis to calculate the entire 41 month refund. Horner notes these months represent one month that is immediately before the tax ended and the other month is immediately after, so any big usage shifts between those two months would "tilt the differential equation." which can result in a lower refund for the entire period. If companies use the IRS' method "they'll leave billions of dollars on the table." Utility Audit Company specializes in aiding tax-exempt organizations and businesses recover taxes. More questions on FET and information is available at http://www.utilityauditco.com or 866-457-4262. AccountingWEB.com Jan-9-2007 Categories: Accounting (General), News Archives Times read: 2452
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