How Much Money Are You Willing to Leave Behind?

Here are two examples of how the IRS' business estimation method will adversely affect FET refunds:

Example 1:
Total Apr. 2006 Phone Bill: $5,000 = $144 paid FET = 2.8% of total bill
($3,120 local taxable & $1,680 LD/cell taxable)

Total Sep. 2006 Phone Bill: $5,000 = $ 24 paid FET = .4% of total bill
($800 local taxable & $4,000 LD/cell non-taxable)

percentage difference = 2.4%

This is the percentage difference to be applied to every month's total bill for the entire 41- month period. However, the IRS has placed a 2% cap on the differential percentage. Therefore your business will lose .4% of the monthly tax amount to which you are entitled for each of the 41 months.

Example 2:
Total Apr. 2006 Phone Bill: $6,000 = $174 paid FET = 2.9% of total bill
($2,900 local taxable & $2,900 LD/cell taxable)

Total Sep. 2006 Phone Bill: $6,000 = $ 87 paid FET = 1.4% of total bill
($2,900 local taxable & 2,900 LD/cell non-taxable)

percentage difference = 1.5%

Again, apply the 1.5% differential percentage to all bills in the 41-month refund period:

Total July 2005 Phone Bill: $8,000
($1,500 local taxable & $5,300 LD/cell taxable)
Estimation Method: $8,000 x 1.5% = $ 120
Actual LD/cell paid: $5,300 x 3% = $ 159
FET loss using Estimation Method: $ 39

If this amount were lost each month ($39 x 41 months), your business would lose $1,599 -- which represents a 25% loss of the refund you're owed.

If you use the IRS' estimation method...

...the greater your long-distance and cell usage is over local usage between April and September 2006, the more FET refund you'll lose. And, the greater the long-distance and cell usage was over local usage in the past compared to the two-month estimation period, the more FET refund you'll lose.

Looking for an alternative? UAC can help...read on.

FET Refund Estimation Method Leaves Billions on the Table

Tax recovery expert Byron Horner says IRS' method will only return a fraction of the amount owed to taxpayers.

Upstate SC---November 16, 2006--- Byron Horner, President of Utility Audit Company, Inc. (UAC), stated today that the estimation method approved by the IRS for businesses to use in figuring their Federal Excise Tax (FET) refund will not return all of the money owed. "There are significant problems with this method," Horner commented.

Although the IRS is allowing businesses to estimate the amount of FET paid based on a comparison between their April and September 2006 phone bills, "there is a cap on the total phone expenses a business can claim," Horner explains. "Businesses with 250 employees or less can claim 2% of their total phone expenses, while businesses with more than 250 employees can only claim 1% of their expenses."

Results of the estimation method will vary based on the usage pattern for each business and how consistent that pattern has been over the past 41 months. “If your long-distance usage was higher than the local usage in the past but was not in April and September, this method is unlikely to return the full amount of FET owed,” Horner states. “The IRS admits that businesses and tax-exempt organizations have more varied phone usage patterns than individuals. Yet their estimation method only offers 2 specific months as a basis for calculating the entire 41-month refund—one month immediately before the tax ended and one month immediately after. Any large shifts between those two months in local and long-distance usage will tilt the differential percentage, which can lower the refund for the entire period.”
Horner also mentions another key point: “if the differential percentage comes out to be more than 2%, the excess percentage will represent lost FET refund money. Larger businesses that are capped at the 1% differential have little choice but to invest the time and resources to do the research and claim the actual amount of FET they paid.”

In order to request the actual amount of tax paid, businesses must be able to back up their claim with accurate records and phone bills for the past 41 months. “For businesses with multiple phone lines and cellular phones, this process will be extremely tedious and time-consuming,” Horner explains. “They may not think it’s worth the time, and opt for the IRS estimation method. However, if they do, they may very well leave money on the table.” “Businesses need to know that there are tax experts and companies out there that will review and calculate their refunds in a fraction of the time, making sure they get all their money back from the IRS,” Horner adds. UAC has worked with businesses in preparing FET refund claims ranging from $4,000 to $200,000.

Utility Audit Company (UAC) specializes in helping businesses and tax-exempt organizations recover taxes. As experts in utility and phone taxes, UAC has the knowledge to quickly and effectively prepare FET refund claims and help businesses get the refund that is legally owed to them by the IRS. For more information and questions about the Federal Excise Tax refund process, visit http://utilityauditco.com or call Byron Horner at (866) 457-4262.

#####