MEMO #6

Public Announcement: IRS Moves to Prevent Telephone Tax Refund Abuse; Helps Taxpayers Make Accurate Requests

(Based on the advice of the professor, Black, I switched this week's memo topic from international telecom. investment and business strategies to public annoucement)

On February 7^th in 2007, the IRS (Internal Revenue Service) announced that it is starting investigation into prevent abuse by tax preparers and is helping taxpayers make accurate requests for the one-time telephone excise tax refund. In fact, the IRS has started to do special site visits with tax preparers across the nation this month and is planning to visit twenty two different tax prepares who have handled more than 1,500 tax returns.

Since the IRS authorized a one-time refund of the federal excise tax colleted on the long-distance service billed from the beginning of March 2003 to the end of July 2006, the IRS has monitored telephone excise tax refund requests for potential problems. By monitoring the requests, problems with returns from tax preparers who have criminal intent were found. In other words, some tax-return preparers are requesting thousands of dollars of refunds for their clients although their clients have the right to request only a tiny fraction of that amount. According to the IRS, the problems with returns from tax preparers are as follows:

· Some tax-return preparers requested an inappropriate amount the taxpayer’s phone bill instead of just the three-percent long-distance tax.

· Some tax-return preparers requested a refund in the thousands of dollars, suggesting that the taxpayer paid more for telephone service than they received in income.

The IRS is seriously warning tax-return preparers and of course taxpayers. According to the IRS, if tax preparers do not prepare accurate tax returns, civil penalties and criminal sanctions can be imposed. In addition, “taxpayers who request more of a refund than they are entitled to receive will have their refunds held, and they may be subject to an audit.”

Finally, to make for an easy and accurate refund, the IRS prepared several refund policies to respond to various cases. According to the IRS, it has prepared a standard refund amount policy, based on personal exemptions, ranging from $30 to $60, to estimate the reasonable amount for most individual taxpayers. However, “If taxpayers have phone bills and other records, they can request the actual amount of excise tax paid.”

The most correct information on this refund issue can be accessed in the Telephone Excise Tax Refund section on the website of the IRS. (http://www.irs.gov/newsroom/article/0,,id=164032,00.html)

Reference:

• Internal Revenue Service. “IRS Moves to Prevent Telephone Tax Refund Abuse; Help Taxpayers Make Accurate Requests” Internet: http://www.irs.gov/newsroom/article/0,,id=167622,00.html, Feb. 7, 2007 [Feb. 21, 2007]