The 2007 tax filing season has barely opened, but already, the IRS has noticed that "mistakes abound" when it comes to claiming a one-time refund for overpaid telephone taxes.

Virtually everyone can claim this credit. It's a refund for taxes paid on certain long-distance telephone calls. Courts have been declaring the tax invalid, and the government eventually gave up the fight. It decided to send some money back to taxpayers, but it's up to you to claim your cash.

You do this through the 2006 income tax return that you file this year. Taxpayers have been submitting their returns for only a few weeks, but the IRS has already noticed many people getting their refund claims wrong. Here are the mistakes you should avoid:

  • Claim it! Already, more than one-third of households who have filed their returns appeared to qualify for the credit, but failed to ask for their money back. If you paid tax on your long-distance telephone calls between March 2003 and the end of July 2006, you're in line to get some money. The IRS won't automatically send you a check. Make sure you fill out the appropriate line on the tax form or answer the right question posed by your tax preparation software.
  • Don't need to file taxes? Claim it anyway! More than 10 million people don't have to file tax returns, some older retirees among them. If that's you, that doesn't mean you forfeit your right to your money. There's a special form (this is the IRS, after all) for people who don't otherwise have to submit an annual tax return. It's the 1040EZ-T. You can use this to get your telephone tax money back.
  • When you file it, make sure to put the refund amount on the first line. The IRS has noticed a lot of people leaving this line blank, which can only lead to delays or some friendly letters from your neighborhood IRS office.
  • Claim it just once. Don't file both a regular tax form and the 1040EZ-T. You only need to do one or the other to claim your money back. File both and you will just delay your refund and generate unwanted inquiries from the tax collectors.
  • Claim the right amount. If you want to make it easy, claim the standard amount set by the IRS, which varies from $30 to $60, depending on the size of your household. If you happen to have several years of phone bills lying around, you can add up the actual amount you paid. Look for the 3% federal excise tax on long-distance or bundled service. Don't count the taxes paid on local telephone calls. (That tax is still valid.) If you go this route, you will have to be able to prove that you paid the amount you're claiming. That means you need to hang onto all those bills. Don't send them to the IRS.
  • Don't claim a refund for the entire amount of your telephone bills. Just claim a refund for the long-distance tax. Although it would be nice, the IRS doesn't want to pay your phone bills for you.
  • Don't request thousands of dollars in refunds, or listen to anyone who tells you that they can get you a massive refund based off this credit. This is the IRS's way of warning you that they're not that stupid. They'll figure it out when you're claiming you paid more in telephone taxes than you made in income.

For more details about this tax refund and how to claim it, take a look at "Another Line on the Tax Return." Don't miss it. The IRS owes you money.

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