Can You Hear Me Now?

So now that we've gotten over our puzzlement at the PMI Deduction (sounds like the PMS deduction - now THAT would be a tax break), we can turn our to attention to the telephone tax credit. You have to be a little leery of any tax credit that comes under the scrutiny of Snopes.com. But in fact: Snopes confirms that the crazy urban legend circulating these days, the one alleging that on 2006 tax returns the US government will give at least $30 to every household that files an individual (non-dependent) tax return, no questions asked, even if the filer had no tax taken out of his or her paycheck....Yeah, that rumor. It's absolutely true!

But suppose you have been lying awake at night, mentally totting up the amount you have unfairly paid out in federal telephone excise taxes between February 28, 2003 and August 1, 2006 and, dang it, you're sure you paid more than $30 (or $40 if you're married filing jointly, or $60 if you have 2+ teenagers yacking on the phone all the time). Well yes, you can claim a refund for the actual excise tax paid. Just follow the rules, using the simplified method, which is anything but simple. Or just take your $30 (or $40, or $60) and shut up.

But (and this is actually causing me problems), for businesses we don't have a $30 safe harbor, which means we have no choice but to follow the simplified method. Well, we have a choice, which is to use the regular method, which is (not surprisingly) more complex than the simplified method. Which is simple, because you only have to look at your April 2006 and your September 2006 phone bills. Oh wait, that is just to calculate an estimated average refund percentage. Don't Mess With Taxes, who has given this concept way more thought than I have, concludes that just figuring out your refund percentage is a brain-bender in itself. Then you need to apply that percentage to the total phone expenses on each of your phone bills dated from February 2003 through July 2006. Then you have to look at all of the phone bills in between to determine the actual telephone charges on which this average refund percentage applies. Oh, but you are allowed to use the telephone expense on a prior year return. But you need to prorate it for the months in question, so you actually need to look at more than once calendar year of tax returns. And this assumes your tax preparer didn't get sloppy and put telephone expense under "utilities" or didn't go the other direction and lump internet service fees under "telephone".

My brain hurts.