Business owners and individuals will have a little extra cash in their pockets, thanks to court rulings that overturned the 3% telephone tax collected after February 28, 2003. The courts say the Internal Revenue Service must return taxes charged on long-distance calls.
Jackson CPA Mike Carraway says the tax return is long overdue and that he thinks everyone is glad to see it happen. “The long distance tax has been around a long time. It came off the books and then went back on,” he said. “The government enacted it to increase revenues. It’s unfair and not based on ability to pay. I’m personally excited for the equity of it. It’s not as much about the money as it is the equity of it.”
He’s with the newly formed Johnson, Bruce and Host accounting firm and says it does affect clients because it applies to everyone who has paid on long distance and bundled services. The refund can be claimed for 2006 with individuals electing to use a standard amount of $30 to $60, depending on the number of exemptions. The IRS has modified the form by adding a line for this deduction.
That is, the standard amount can be claimed unless a taxpayer chooses to itemize the amount spent on long distance calls, going back 41 months. Carraway predicts not many individuals will choose to do that, but he may be one of the few.
“I will look and see what we’ve been paying and look at old bills, but I’m an accountant married to an accountant,” he said with a laugh. “Going through 41 old phone bills is our idea of a good time. We may order pizza.”
However, the situation is totally different for businesses and Carraway says many may choose to outsource this task.
“They have no choice but to go through their phone bills and should seriously consider getting help,” he said.
“Businesses must be able to back up what they claim they’re owed and I think we’ll see accounting firms providing that service. It’s a place to start. Or, it could be done through non traditional manpower services.”
He hasn’t seen anyone yet who’s outsourcing, but feels accounting firms must stay on top of this issue and that there might be some cross pollination to provide this service.
In determining whether or not to outsource this work, Carraway suggests businesses consider the state of their records, the size of the business and the number of offices or branches in operation. Although he has heard some general talk about how businesses plan to handle the matter, Carraway says businesses have to get their arms around it somehow.
“The IRS is talking about the process for businesses, and it depends on the businesses’ willingness to go back through their records,” he said. “The bigger the business, it will make sense to outsource it to make sure they’re not leaving money on the table. It may not make sense for small businesses. They may be able to use an estimate.”
Contact MBJ contributing Lynn Lofton at email@example.com.
BEFORE YOU GO…
… we’d like to ask for your support. More people are reading the Mississippi Business Journal than ever before, but advertising revenues for all conventional media are falling fast. Unlike many, we do not use a pay wall, because we want to continue providing Mississippi’s most comprehensive business news each and every day. But that takes time, money and hard work. We do it because it is important to us … and equally important to you, if you value the flow of trustworthy news and information which have always kept America strong and free for more than 200 years.
If those who read our content will help fund it, we can continue to bring you the very best in news and information. Please consider joining us as a valued member, or if you prefer, make a one-time contribution.Click for more info