IRS grounds tax refunds for airline passengers
by AccountingWEB on
By Ken Berry
Despite earlier reports, passengers who booked flights before certain excise taxes for airline travel expired won't be entitled to tax refunds after all.
The federal excise taxes were suspended after a stand-off in Congress on July 22, 2011 regarding Federal Aviation Association (FAA) operations. Almost 4,000 FAA employees were furloughed and over 200 projects were immediately put on hold. However, the Senate approved legislation ending the shutdown on August 5, 2011 and airlines were authorized to reinstate the taxes on August 8, 2011. The measure was also signed by President Obama on August 5, 2011, providing temporary funding of the FAA until September 26, 2011.
Initially, the Internal Revenue Service indicated that passengers who purchased their tickets before July 23, 2011 for travel scheduled after July 22, 2011 would be reimbursed for taxes collected by the airlines. The airlines were instructed to remain on stand-by while the IRS worked out the refund procedures. But the IRS now says that passengers who took flights during the two-week shutdown aren't eligible for any refunds. The IRS also indicated that it intends to provide relief to passengers and airlines relating to ticket taxes that were not paid or collected because of the suspended services.
Typically, airline passengers are charged federal excise taxes, which are included in the standard cost of the air fare. The airlines collect these taxes and remit them to the IRS. This includes the following taxes which were suspended during the shutdown:
- 7.5 percent tax on the base ticket price;
- $3.70 per person per trip segment;
- International travel facilities tax of $16.30 per person for flights that begin or end in the U.S. or $8.20 per person for flights that begin or end in Alaska or Hawaii; and
- 6.25 percent on the amount paid for transporting property by air.
When you add it all up, it comes out to much more than spare change for airline travelers. The taxes can be as high as 15 percent of the ticket price.
Strategy: Don't let your clients be misled by incomplete news reports or misinformation on this matter. They may be expecting a big tax refund that won't be coming their way. It's no fun being the bearer of bad news, but it's important to keep your clients completely up-to-date and informed about the latest tax developments.
You may like these other stories...
Lois Lerner isn’t a Superwoman, but she’s showing at least as much resilience as Lois Lane.A new report released on March 11 by the House Committee on Oversight and Government Reform, one of several government...
Each tax-filing season poses different challenges for small business owners – from understanding the new tax laws and regulations to preparing new forms and disclosures.But according to Kevin Anderson and Doug Bekker,...
In Denver, state legislators are probably thinking, "Why didn't we think of this earlier?" The state of Colorado's retail marijuana sales (separate from medical marijuana sales) in January alone generated...
Upcoming CPE Webinars
BAR is an acronym for: Boundaries, Authority and Role. This simple tool will provide participants with a solid understanding of leadership essentials to improve their performance.
This material is designed to provide a start-to-finish overview of how to plan and complete high-quality small audits efficiently.
In this session Excel expert David H. Ringstrom, CPA shares numerous techniques that you can use to work with charts more efficiently.
Key Accounting and Reporting Issues for Nonprofits No. 1: Overview and Statement of Financial Position
This material focuses on non-profit organizations organization, accounting and reporting.