As you probably know by now, courts have ruled the IRS incorrectly collected a certain long-distance telephone tax. The IRS has implemented a refund program for people to recover the tax.
To make things simple, the IRS has created a standard refund deduction where most people can mark a button to get a $30 or $60 refund for the previous taxes. Alternatively, taxpayers can go through and figure out the amount of tax they actually paid from March of 2003 through July 2006. Many businesses are choosing to do the monthly calculation, but are grossly claiming excessive refund amounts. The IRS is not amused.
In an unprecedented move, the IRS is proactively going after tax prepares and taxpayers that are abusing the telephone tax refund program. The agency is sending IRS agents to the business and tax preparers for a little one on one time to check the figures. For blatantly excessive claims, the IRS is threatening potential criminal prosecution for fraud.
What would bring on such aggression from the IRS? Well, the agency is reporting that it is seeing continual outlandish deduction amounts. In one case, a business claimed a telephone tax refund in excess of the total income it collected during the period. In another, individual taxpayers requested more than $30,000 in refunds. Keep in mind, this is not for a business. It is a single person sitting on the phone calling friends and family! A $30,000 refund would equate to a telephone bill of around $300,000 for three years! Now, that is reaching out and talking to someone.
The Agency has surprisingly given some details on its current audit actions. It has sent agents to the offices of 22 tax preparers and is auditing over 1,500 tax returns. That may not sound like a lot, but keep in mind most people have not even begun to file tax returns yet. In short, the IRS is dealing with problems now and letting everyone know it is not going to put up with abuse in this program.
So, what should you do given the hostile IRS reaction? Nothing really. Determine your tax refund from the telephone tax and claim it when you file the tax returns. Just make absolutely sure you have the paperwork to back it up.
