Phone tax ruse gets cool eye

January 26, 2007|By Eileen Ambrose | Eileen Ambrose,Sun reporter

Long-distance calls cost a lot less than they used to. But that's not exactly the story some people are trying to pull over on the IRS.

In claiming the one-time credit for taxes paid on long-distance calls over the past three years, some people are requesting refunds of thousands of dollars - saying they made more than $100,000 worth of calls. That's more than those people earned, the Internal Revenue Service says.

The feds don't think that's funny. Their warning yesterday: Knock it off.

The IRS is quick to say that most filers have accurately claimed the phone tax refund. But a sampling of early returns shows some taxpayers and tax preparers are being creative.

The credit came about after the Treasury abolished a tax that was adopted to finance the Spanish-American War but never went away. You can opt for a standard credit worth $30 to $60 - or the amount you actually paid if you have the old bills.

That's where confusion, or greed, comes in.

"Some are claiming the entire amount of phone bills," says IRS spokesman Terry Lemons. The phone tax was only 3 percent on long-distance calls.

And the IRS suspects some tax preparers are purposely inflating phone refunds. "Those preparers are going to hear from us in the very near future," Lemons says.

If your intent is to pad your refund, be warned: The IRS says it might criminally prosecute cheats. And fudging your phone refund also could trigger an audit of your entire return.

"We can freeze the telephone tax refund portion of the return" or the entire refund, Lemons says. And an IRS freeze can last longer than a winter in Maine.,

eileen.ambrose@baltsun.com

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