Are your clients using the standard formula for their refund of federal excise tax (FET) on long-distance phone service? The IRS made it easy: Just compare the FET rates on phone bills for April and September 2006—before and after phone companies quit collecting the tax on anything other than local service—and multiply the difference by the total spent on phone bills for the 41 months the refund covers.
Maybe that’s a little too easy, say consultants offering “FET recovery” services. For many enterprises, the actual excise tax paid is more than double the amount the formula allows, says John Manickam of Wingspread Business Support Services of Raleigh, N.C. (www.wingspreadbss.com). Details are available in The Handbook for Telecommunication Federal Excise Tax Refund, by Manickam and Michael S. Plude, CPA, which is available for $65.99 as a book or download from www.fet-refundhandbook.com . Telecommunications expense management companies also offer the service. Although the refund can be claimed only on 2006 returns, businesses that used the formula may find it worthwhile to file an amended return with actual tax paid, Manickam said.