std amount teleph excise tax with interest refunded

[jklcpa]

Client filed joint return showing the standard $40 telephone excise tax refund. Total refund expected was $1300 (including the $40). Client called today saying refund was exactly the $1300 as shown on return, but refund check also indicated that $5.85 of interest was included in the check.

So is IRS refunding interest on the $40 telephone tax refund, or is a portion of the $40 std amount considered interest, or does this mean that the other part of their taxes refunded were reduced by the $5.85 of interest???

Also, the $5.85 of interest refunded will be taxable interest income in 2007.

And how many clients really look at the check that close, or would bother to notate the interest portion received?

Anyone else have a call on this yet?

[redux]

Client filed joint return showing the standard $40 telephone excise tax refund. Total refund expected was $1300 (including the $40). Client called today saying refund was exactly the $1300 as shown on return, but refund check also indicated that $5.85 of interest was included in the check.

So is IRS refunding interest on the $40 telephone tax refund, or is a portion of the $40 std amount considered interest, or does this mean that the other part of their taxes refunded were reduced by the $5.85 of interest???

Also, the $5.85 of interest refunded will be taxable interest income in 2007.

And how many clients really look at the check that close, or would bother to notate the interest portion received?

Anyone else have a call on this yet?

That's an odd one. I haven't had any calls about interest being a part of the refund. Yes, if the $5.85 will be income to report for "07" return...strange

[jklcpa]

Yes, I thought it was strange. However, on my own S corp I was due a whopping $9.00 using 8913. Filled in the 41 months actual tax paid, and each period was so small (some -0-, others $1) that no interest was calc'd on the form as filed.

I asked for direct deposit, and finally after about 5 weeks received a check in the mail for the $9.00. Again the exact amount of refund requested was received, but the face of my refund check stated that the refund included $1.26 saying an explanation notice would follow. Of course no explanation has ever been received.

I can just see the headache if each person received interest that is reportable on 2007 returns. So the one-time PITA this credit has caused for 2006 will now continue for next year. <_<

[JohnH]

What's all this talk about a "Telephone Excise Tax Refund"?

Did I miss something important this tax season?

[Janitor Bob]

What's all this talk about a "Telephone Excise Tax Refund"?

Did I miss something important this tax season?

...Funny...very funny

[Cathy]

Yes, I thought it was strange. However, on my own S corp I was due a whopping $9.00 using 8913. Filled in the 41 months actual tax paid, and each period was so small (some -0-, others $1) that no interest was calc'd on the form as filed.

I asked for direct deposit, and finally after about 5 weeks received a check in the mail for the $9.00. Again the exact amount of refund requested was received, but the face of my refund check stated that the refund included $1.26 saying an explanation notice would follow. Of course no explanation has ever been received.

I can just see the headache if each person received interest that is reportable on 2007 returns. So the one-time PITA this credit has caused for 2006 will now continue for next year.

All of the pieces of the puzzle are beginning to fit together now. Talk about a PITA in 2007! For those claiming actual expenses, the taxpayer was to have figured and added the interest. From what I remember watching a Tax Talk video several months ago, IRS people said the standard credit was based on studies, blah, blah, blah and included interest. So in other words, in jklcpa's case, she has "imputed interest" that will have to be reported in 2007 as well as interest will have to be reported for each and every taxpayer who took the standard credit...what a bummer!

Cathy

[kcjenkins]

Only the taxing arm of government could manage to so screw up such a simple thing as this 'standard' refund. Thankfully, in most every case, the amount of imputed interest will be too small to make a difference if it is left off on the 2007 return. As it will be on almost all returns.

[Gail in Virginia]

Only the taxing arm of government could manage to so screw up such a simple thing as this 'standard' refund. Thankfully, in most every case, the amount of imputed interest will be too small to make a difference if it is left off on the 2007 return. As it will be on almost all returns.

Since the refund amounts are standardized, I would assume the interest portion is also standardized and therefore as long as we have a copy of the previous year's return, we will be able to tell how much imputed interest they received. Unless these huge amounts are figured based on the very day the refund check was mailed Wouldn't that be fun?

[RitaB]

Unless these huge amounts are figured based on the very day the refund check was mailed Wouldn't that be fun?

I thought of something else that will be fun. Family has $2795 in rental income (or some other investment income), and so that $9 (or whatever it turns out to be) in interest disqualifies them for $2000 in EIC. (The maximum investment income amount to still qualify for EIC in 2006 was $2800. I know it'll change, but you see where I'm going here.) It'll happen to somebody, won't it?

[zeke]

and the only people having the tiniest clue are those that received a refund check. All those with refund deposited automatically to bank, and those with a balance due have not the least hint!

zeke