Saturday, May 28, 2005

IRS pushed yet closer to paying $6 billion in telephone tax refunds.

The IRS has just taken another drubbing on the telephone tax issue -- and this one hurts.

In the last year five federal courts have ruled that the IRS is collecting telephone tax on long distance phone service illegally -- and another has ruled tax on inbound toll-free "800"-type service to be illegal too.

The gist of the matter is that the relevant Tax Code sections, dating back decades, explicitly define calls subject to tax as being those for which a toll charge is determined by "the distance and elapsed transmission time of each individual communication".

But in today's world most long-distance calls are billed otherwise: flat rate, negotiated rate, by time (but not distance), friends-and-family, whatever. In the last year businesses that incur phone charges by such alternate methods have finally started suing the IRS over the issue -- and the courts have ruled one after another that the tax doesn't apply to them and that they are entitled to tax refunds.

Nevertheless, the IRS has stonewalled, insisting that everybody keep paying the tax, and not making even the court-ordered refunds. Its strategy has been to appeal those cases and hope the federal Courts of Appeal will buy its argument that Congress intends to tax all long-distance service, whatever the law actually says, and the mere actual text of the law shouldn't defeat this intent. It's justification for this strategy has been a single victory in a district court where the judge did buy the argument and denied a refund.

Well, the IRS has now gotten its day in appeals court -- and the Eleventh Circuit has struck down its lone victory following the taxpayer's appeal, ordering a $361,000 refund.

So now the IRS is 0 for 7, with the Court of Appeals on the other side. If it barely had one leg to stand on before, it's now down to about one toe. And new cases being filed against it are piling up fast.

One thing that's quite interesting about all this is that with refunds potentially available to near everybody, estimated at a total of $6 billion or more, including five-digit, six-digit and seven-digit refunds for many businesses, there's been nary a word about this story in the mainstream press. So a lot of people are missing the chance to file for refunds that might be right there for the taking, after a little wait. There's a three-year statute of limitations on filing for tax refunds -- so as one delays filing for them potential refund amounts expire.

Think of all the pointless stuff that fills the papers and news channels every day. Whatever happened to "news you can really use"?

Well, if you want to get ready to claim your tax refund you can read more about it here!

Here's the full text (.pdf) of the new Appeals Court decision, which summarizes the holdings of all the cases to date nicely. For more details about the history and likely future politics of all this, "protective refund" strategy, plus a link to fuller professional legal analysis, check here, the original main post here on this.

Send the links to your own tax accountant or lawyer. Tell 'em to get you what you're owed!