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This year, taxpayers will find an extra line on
their tax return for a one-time payment available by the IRS.
Individuals, businesses, and tax-exempt organizations are eligible
for the Telephone Excise Tax Refund (TETR) which is designed to
credit or refund the tax paid for long-distance telephone service
between March 1, 2003 and July 31, 2006. Any not-for-profit wishing
to request a refund will have to file IRS Form 8913 “Credit for
Federal Telephone Excise Tax Paid” as well as IRS Form 990-T “Exempt
Organization Business Income Tax Return.” Form 990-T needs to be
filed since the refund is claimed on line 44(f) of that form.
Before preparing the necessary refund tax
forms, a not-for-profit organization may want to estimate the amount
of their refund. In some instances, the time or cost to prepare the
required tax forms may exceed the estimated benefit (refund). A
not-for-profit organization that does not normally file a 990-T may
find that it is not beneficial to file for a return.
The excise tax refund has two components. A
tax component and an interest component. The tax component is
either the actual amount of the excise taxes paid during the 41
month period of March 1, 2003 through July 31, 2006 or an estimate
of the excise taxes paid using an IRS formula. A not-for-profit
organization has the option to compute the tax portion of the refund
using either method. The interest component is computed using the
IRS formula. Whether the tax component is actual or estimated, the
interest formula always remains the same.
A not-for-profit organization that has received
any State, Federal or other funds (such as grants) will also need to
consider the effect of any potential refund. If a not-for-profit
organization has previously claimed the excise tax as an allowable
cost, it may have to backpay some portion of the refund it receives
to the funding agency.
The following website addresses are for the IRS
Form 8913 (http://www.irs.gov/pub/irs-pdf/f8913.pdf) and the related
instructions (http://www.irs.gov/instructions/i8913/ch01.html). You
can use these documents to calculate your organization’s estimated
excise tax refund. Knowing the estimated amount of the refund
should aid you in determining whether or not it makes economic sense
for your organization to file for the refund.
If you have any questions about the excise tax
refund or would like assistance in calculating the estimated refund,
please contact either James E. Traester LLC, CPA or Russel Olver,
CPA at (203) 932-2931.
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