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Consultant says refund 'shortcut' shortchanges businesses owed money
The Denver Business Journal - December 15, 2006
Local businesses could leave lots of money unclaimed if they use the
Internal Revenue Service's "shortcut option" for an excise tax refund on
long-distance services, a Denver-based telecommunications consultant says.
Bruce Minor, senior consultant for Denver-based DSI LLC, said companies
may lose 33 percent to 67 percent of what they are entitled to get if
they use a formula that lets businesses and tax-exempt organizations
estimate refunds themselves.
But those who take the time to investigate their long-distance bills of
the last three years potentially could recover big bucks -- especially
if long-distance costs factor highly into a company's operating
expenses, Minor said.
Minor, who specializes in finding telecom savings for businesses,
claimed he already has recovered refunds of up to $60,000 for several
dozen clients. DSI's customers include Vail Resorts, RTD and Peerless
But getting a full refund requires recipients to gather up to 41 months
of old phone records, according to IRS Commissioner Mark Everson.
In mid-November, the IRS announced a formula that allows individuals and
organizations to estimate their refunds, using their April 2006 and
September 2006 phone bills. The agency said it developed the formula
after receiving public input and discussing the issue with business
organizations, including the Small Business Administration and
representatives from tax-exempt organizations.
The difference between the bills then is applied to the quarterly or
annual telephone expenses to determine the refund, which is capped at 2
percent of the total telephone expenses for businesses and tax-exempt
organizations with 250 or fewer employees.
"We believe we have developed a reasonable method for estimating
telephone excise tax refund amounts while reducing burden," Everson said.
But Minor contended the formula "cuts a lot of people out of a lot of
money." He said small businesses that are willing to invest some effort
into retrieving their records can recover more. He recommends a complete
inventory of phone records for any business that spends more than $5,000
a month on telephone services.
Andrew Lee, a tax partner with the Denver office of Ernst & Young, said
the formula might save some clients time and money, depending on how
much their long-distance usage has changed in the last three years.
"A large number of businesses are not going to be able to obtain such
detailed information without going through a lot of brain damage," he said.
Minor said businesses and individuals should apply for the refund in
their 2006 tax returns.
"If you wait until 2007, you could lose a third of your potential
recover," he said.
Lee said the refund is discussed in accounting circles, but may not be
as well-known to the public. However, that may change at the beginning
of next year as business periodicals publish their annual tax tips.
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