Q: I heard something about the taxes on my phone bill and that they would be changing. What’s happening?
A: You probably heard about a recent news release from the IRS – issued May 25 -- where they said the government would stop collecting the federal excise tax on long-distance calling. The IRS said it would refund taxpayers for all excise tax they have paid on long-distance service billed after Feb. 28, 2003.
Q: How much is the tax?
A: The federal excise tax on long distance services is 3%. This means that a household with average long distance charges of $10 a month would have paid about $0.30 a month in federal excise taxes on long distance calling. The tax will vary, of course, depending on a household’s calling patterns.
Q: Will I see the tax credit on my phone bill?
A: No, you will need to claim the tax credit on your 2006 Federal Income tax return. That return, of course, will be filed in 2007.
Q: I want to claim my credit. Can you provide me with all the long distance charges I’ve paid since Feb. 28, 2003?
A: The IRS has developed a Safe Harbor calculation for individuals and an Estimation Method for Businesses and Tax Exempt organizations which will not require that you have all your LD charges. To find out more information on this, please see “IRS.Gov”.
Q: What is the Safe Harbor Method?
A: For more details, you should visit the IRS web-site. However, basically it is a simplified method which allows residential customers to compute their tax refund without reviewing bills. Your standard amount is based on actual long distance taxes paid by similarly sized families or households. For example, if you have one exemption on your tax return, the IRS would refund $30. For 2 exemptions, the refund would be $40. For 3, the amount would be $50. And for 4+, the amount is $60.
Q: What is the Estimation Method?
A: For more details, you should visit the IRS web-site. Basically, it is a simplified method that avoids the need for a complex review of 41 months of bills. Otherwise, you will need the following: Phone bills for April 2006 (includes FET on LD) and September 2006 (excludes FET on LD); your total telephone expenses for the 41-month period; (You can obtain this from your books and records such as your general ledger, check register, cancelled checks.) and Number of employees reported on the federal withholding tax return (Form 941) for the second quarter of 2006.
Q: I used HT only for my local services, but my bill included another non-HT LD carrier, can you provide me copies of my bill to claim the credit?
A: You would have to go to your LD carrier for this information if we did not charge you the FET for this service.
Q: What if I want a copy of all my bills back to Feb, 2003?
A: Hawaiian Telcom has been issuing its own invoices since April 1, 2006. Prior to that, Verizon produced invoices on behalf of Hawaiian Telcom. If you wish to receive copies of all invoices going back to 2003, we cannot assure you that all invoices prior to April 1, 2006 can be obtained or that they can be provided to you in a timely manner. The charge for residential customers will be $6.50 per invoice and $7.50 per invoice for businesses and tax exempt organizations. Given the considerable cost, time, burden and effort to obtain this information, it may not be economically beneficial for you to file for the tax refund based on the actual FET amounts you paid for LD. The simple and practical alternative, which we highly recommend, is that you take advantage of the IRS Safe Harbor calculation for individuals or Estimation Method for Businesses and Tax Exempt organizations to calculate your refund. For more details, you should visit the IRS web-site.
Q: Can I obtain my own copies of my bills on-line?
A: You can obtain copies of your Hawaiian Telcom bills if you have access to NetBill. This would only be for the period March 2005 – present. There is no cost for this. Prior to this period, you would have to make a request to HT. We’ll have to place the request with Verizon and charge residential customers $6.50 per Verizon invoice and charge businesses and tax exempt organizations $7.50 per Verizon invoice. Importantly, we cannot assure you Verizon will be able to produce all such invoices or provide them to you in a timely manner.
Q: Can I go direct to Verizon for copies of my bills?
A: Verizon has requested that all requests from HT customers go through HT. Because of this, we cannot assure the timeliness of responses.
Q: Does this mean that I will no longer see any taxes on my bill?
A: No, this only affects the Federal Excise Tax on LONG-DISTANCE calls. All other taxes and surcharges will continue to apply.
Q: Why was I still seeing FET on LD on bills through 7/31/06?
A: We were required to bill and collect these taxes until July 31, 2006.
Q: If I forget to claim it on my 2006 tax return, can I claim it on my 2007 tax return?
A: You would have to check with the IRS.
Q: Why did you charge me the tax to begin with?
A: We were simply collecting this excise tax on long distance on behalf of the IRS, as required by law. All the money was passed along to the Federal Government. After a number of Circuit Court case losses, the Government conceded the FET collection on LD calls by issuing Notice 2006-50 and stopped collecting for LD calls as of 8/1/06.
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