WASHINGTON-Low-income consumers will be harmed by the government’s plan to refund the 3-percent federal excise tax on long-distance communications because the rules require them to file income-tax returns, according to a class-action lawsuit filed in federal court.
“After years of `nickel and diming’ everyone on their phone bills, now the IRS plans to shortchange everyone,” said Jonathan Cuneo of Cuneo Gilbert & LaDuca L.L.P., which filed the class-action lawsuit known as Sloan v. USA. “Behind closed doors, the IRS by fiat made demographic choices in designing the tax-refund rules that will effectively deny the less affluent the ability to recover their own money.”
Those who do not file income-tax returns will not file to receive a refund, according to a study commissioned by Sloan’s law team. For example, when a food sales tax refund was offered in Kansas, two-thirds failed to claim the rebate.
The Sloan complaint also says the IRS should refund more than just the last three years because the tax was “illegally” collected for the last eight years.
In addition to consumers who now have to file a return to receive the refund, small businesses are hurt, according to the Sloan complaint.
“It is simply unfair to exclude millions of non-filers from the payback and force small `mom and pop’ businesses to expend hours and hours collecting and analyzing years of records in order to receive money they never should have paid,” said Nicholas Chimicles of Chimicles & Tikellis L.L.P.
The IRS has yet to announce the safe-harbor amount. However, the agency in May suggested that the safe-harbor amount for a customer whose monthly bill is $50 would be approximately $55.
Roger Topp, vice president of business development at Wireless Watchdogs L.L.C., thinks the safe-harbor amount will be a fair shake. Topp also believes most people will choose the safe-harbor route.
“Do you want to pay us a 20-percent fee or a per-unit charge to determine whether or not you get the safe harbor?” asked Topp. “This is a nightmare for consumers, nightmare for carriers, nightmares for small-business consumers.”
Wireless Watchdogs, which manages mobile-phone accounts for clients ranging from a few dozen phones to several hundred phones, has developed an extraction technique that uses multiple billing formats to calculate the amount of the tax paid and the interest owed. It has completed the work for its current business customers and believes it will process more than 250,000 phone records by the end of the process.
Carriers’ records policies differ
Nationwide carriers have different policies on how their customers can get past records, should they choose to file an individual claim with the IRS instead of using the safe harbor amount.
Cingular Wireless L.L.C. customers can access bills back to January 2005.
Verizon Wireless allows customers to view bills online for free for six months, but charges for older bills.
T-Mobile USA Inc. does not charge to get copies of back bills.
Sprint Nextel Corp. spokesman Travis Sowders said the carrier is waiting for more information.
