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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 Tires.

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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