Government may soon pay back a “hidden” tax most Americans pay
Pull out your telephone bill and take a look near the bottom of the bill. Buried in the bill under the label “access fee” or “federal line charge” is an excise tax you pay to the government each month. Read on to find out more about this fee and the controversy it is causing.
Currently as written or noted on your telephone bills the 3 percent tax on long-distance calls seems like a typical service charge. Further research has found it is actually an outdated war tax that was passed in 1898 to help pay for the Spanish-American war.
The tax was passed when there was no federal income tax and telephone service was something that only the rich had access to. It was designed as a luxury tax to help the government during a time of high military spending.
After that, every war in the 20th century was used as an excuse to increase or continue charging the telephone excise tax. An excise tax is any charge on an event, as opposed to property and includes income and sales taxes.
Major corporations, united only by the fact that they have large long-distance bills, are the latest opponents to take on the tax; arguing in federal court that the tax is only supposed to apply to charges based on the distance and time of the call and not to modern flat-rate plans.
The IRS is heavily pursuing this case and one can understand the reason when looking into the tax’s revenue. It brought in $5.9 billion in 2005.
Pending three class-action suits before various courts, there’s the possibility that consumers could soon be eligible for a refund from the IRS. The refund would only be for the past three years, which is the statute of limitations on taxes. It is uncertain when the tax would actually be taken off of the law books.
The IRS has had a rough time defending the tax. To date the record is a painful one lower-court win and 10 losses, three of them in circuit courts and seven in lower courts.
In 2000 Congress passed a bill ending the tax since the federal budget was running at a surplus. However, former President Clinton vetoed the bill because of concern over lost revenue.
What does this mean for you as a tax payer? Once the bill is revoked you would not incur this taxation on long-distance calls. Another advantage is that you can claim the last three years you paid this tax. Don’t get too excited. When looking it over for the average citizen it does not add up to large amounts. An example would be if your monthly bill were $40 for long-distance calls, the tax would be $1.20 each month. This comes out to about $14.40 per year. Multiply that by the three years you can claim and you will have a tax refund of $43.20. Oh, you must also find proof of the actual amount paid as evidenced by your phone bills for the last three years and fill out the appropriate IRS forms to claim the return.
Having all this data you can see why corporate customers with larger phone bills stand to gain the most from a refund.
Before you give it all up, take solace in knowing that the government also handles unclaimed property. If you feel there could be some money owed you, do a free money search. You will enter your name and a search of all state and government databases will be done. Within moments you will know if you have unclaimed money, where it is and how to claim it.
