How to figure tax refund

how to figure tax refund

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The IRS announced in May 2006 that individuals, businesses and tax-exempt organizations who paid long-distance telephone excise tax can request the refund on their 2006 federal tax returns. The refund is capped at 2 percent of the total telephone expenses for businesses and tax-exempt organizations with less than 250 employees. Refunds for businesses having more than 250 employees are capped at 1 percent.

Businesses and tax-exempt organizations can estimate their refund amount by comparing two telephone bills from this year to determine the percentage of their telephone expenses attributable to the long-distance excise tax. The bills they should use are the bill with a statement date in April 2006 and the bill with a statement in September 2006. They must first figure the telephone tax as a percentage of their April 2006 telephone bills (which included the excise tax for both local and long-distance service) and their September 2006 telephone bills (which only included the

tax on local service). The difference between these two percentages should then be applied to the quarterly or annual telephone expenses to determine the amount of their refunds.

For example, if a business has an April 2006 telephone bill of $1,000, which includes federal telephone excise tax of $28, the tax percentage is 2.8 percent. If the September 2006 bill is $1,100, including federal telephone excise tax of $16.50, the tax percentage is 1.6 percent. The business’ long-distance excise tax percentage (April tax percentage less September tax percentage) is 1.2 percent. The business multiples the long-distance excise tax percentage (in this case 1.3 percent) by its total phone expenses over the 41-month period to arrive at the refund amount. If this business had more than 250 employees, the refund would be limited to 1 percent of its total phone expenses for the period. If the business had 250 or fewer employees, the 2 percent cap would apply.

Source: www.accountingweb.com

Category: Taxes

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