The telephone tax has been in place for more than a century. In 1898, when the tax was established, only the well-to-do had telephones and this was meant to be a “luxury” tax. Due to a recent court ruling that determined that this tax does not apply to long-distance services as they exist today, taxpayers will be eligible for a refund.

The refund applies to all excise tax paid on long-distance service billed after February 28, 2003. This refund may be claimed only on your 2006 income tax return and is being refunded for only three years due to the legal statute of limitations.

The IRS will refund a “safe harbor amount” to taxpayers without requiring documentation of long-distance taxes paid or the taxpayer can request the actual amount of taxes paid and the goverment will refund that amount plus interest. Be aware though that the interest paid is taxable income that must be reported on your 2007 tax return.