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May 25, 2006

After a long series of court defeats, the Treasury today conceded defeat and will accept that the excise tax on long distance phone service is invalid. From the Treasury press release:

WASHINGTON, DC The U.S. Treasury Department today announced it is conceding the legal dispute over the federal excise tax on long-distance telephone service. The Department of Justice will no longer pursue litigation and the Internal Revenue Service (IRS) will issue refunds of tax on long-distance service for the past three years. Taxpayers will be able to apply for refunds on their 2006 tax forms, to be filed in 2007...

 Key Facts Regarding Tax Refunds:

  •   No immediate action is required by taxpayers. 

  • Refunds will be a part of 2006 tax returns filed in 2007. 

  • Refund claims will cover all excise tax paid on long-distance service over the last three years (time allowed given statute of limitations). Interest will be paid on refunds.

  • The IRS is working on a simplified method for individuals to use to claim a refund on their 2006 tax returns.  

  •  Refunds will not include tax paid on local telephone service, which was not involved in the litigation.

  • Originally established in 1898 as a "luxury" tax on wealthy Americans who owned telephones, the federal excise tax on telephone calls is not compatible with today's modern information-age society.

I hope you've saved your phone bills...

UPDATE: Taxable Talk has more, and the TaxProf has a roundup, with links to the IRS Circuit Court defeats.

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