AAF NewsFlash

Dear Friend,

Alexander, Aronson, Finning & Co., P.C. (AAF) is committed to keeping you informed of laws benefiting your organization. Most recently, a federal court ruling highlights excise tax refunds that you may be entitled to and, therefore, should actively pursue. A one-time refund of the 3% telephone excise tax is available to individuals, businesses and tax-exempt organizations who meet certain guidelines. Please review the below guidelines and contact Femi Ojeikere at TETR@aafcpa.com or 508-366-9100, x4019 if you would like assistance in taking the appropriate steps to request a refund.

The Telephone Excise Tax Refund (TETR) was developed to refund long distance telephone taxes billed after February 28, 2003 and before August 1, 2006 . It pertains to long distance and bundled service taxes paid on land line, cell phone, fax and Voice over Internet Protocol services billed. Taxes paid for a bundled service agreement are included since the local charges are not separated. If the local telephone service is specifically stated, the excise tax refund is not applicable for those local charges.

The IRS has determined two ways to determine a refund. An organization may use either of the below methods, but not a combination of both.

1. Calculate the actual amount of the long-distance telephone excise tax paid after February 28, 2003 and before August 1, 2006 by examining the telephone bills for the 41 month period.

2. Use the IRS formula if eligible. To use the formula, eligible organizations need only review their phone bills for 2 months (April 2006 and September 2006) instead of all 41 months included in the refund period.

The IRS formula method was designed to be utilized by tax-exempt organizations and businesses that were operating from March 1, 2003 through July 31, 2006 and continued to incur phone expenses from April 2006 through September 2006. This method requires an organization to look at their April and September 2006 phone bills to determine their refund. In addition, you will need to identify the number of employees reported for the second quarter on your 2006 federal withholding tax return listed on Form 941 (Employer's Quarterly Federal Tax Return) and the total telephone expenses incurred after February 28, 2003 and before August 1, 2006.

The federal government requires specified forms to be timely submitted in order to be eligible for the refund. Tax-exempt organizations will need to file both Form 990-T (Exempt Organization Business Income Tax Return) and Form 8913 (Credit for Federal Telephone Excise Tax Paid) to request the refund.

Please keep the appropriate records on hand to support all claims. If you choose the actual amount paid method, please keep a copy of all telephone bills the refund is based on. If you select the IRS estimated method, please keep a copy of your April and September 2006 phone bills, your business related telephone expenses billed after February 28, 2003 and before August 1, 2006 , and Form 941 for the second quarter of 2006 to confirm the number of employees during the respective pay period.

Rest assured - We are here to help! To discuss the related intricacies, minimal processing costs or to further discuss any questions you may have, please contact Femi at your earliest convenience. If you plan on processing this in-house, please be sure to follow all the Telephone Excise Tax Refund (TETR CREDIT) procedures established by the IRS.

Sincerely,

Your Friends at Alexander, Aronson, Finning & Co.