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Good news for taxpayers!

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May 26, 2006 

Albany-- It's not often that you hear of the government actually returning money to you, but this time it's true. Your tax refund check could be a little fatter next year.  The United States Treasury department is set to refund billions of dollars to taxpayers. 

It's because of a century-old tax that several big businesses have been fighting in federal court for years.  That's because the federal excise tax dates all the way back to 1898, a time when phones were just for the rich and lawmakers taxed them to help pay for the Spanish-American war.  107 years later, that tax is now invalid.

While Mack Harrison spends his time in the garage with his music, his wife Judy focuses on the money, namely the bills. "I go over them every month to pay them. He has no idea," laughs Judy Harrison.

But Judy, like most people has no idea what a whole list of charges are on her phone bill. "On standard bills like utilities and the phone bill, I just look at the dollar amount and pay it," says Judy.

So I asked her to put on her glasses and take a closer look. I asked, "Lots of taxes?" "Yup," said Judy. The Harrisons pay about 40 dollars per month for long distance.  On their bill is also a federal excise tax, a charge of $1.20.  That's 3 percent of their bill.

"I've heard the old saying. There's only two certain things, that's death and taxes," says Mack. But one of those certainties will soon change for the Harrisons and other consumers.

"As of yesterday, the government did away with what they call the federal excise tax," says Clifton Bush of H&R Block. Which means three years worth of taxes will be returned to taxpayers, all on one tax return in 2007.

"If you look back over the history to think about how much money has been collected with this particular method," says Bush. That federal excise tax brought in more than 5 billion dollars for the government in 2005 but news that more money is headed his way is enough for Mack to drop his guitar pick for just a minute.

"Shocked, because it's the first time ever in my lifetime I've heard of a tax being dropped," says Mack. "Usually when it says tax, you just pay it," says Judy.

Judy says she'll pay more attention to her bills from now on and will definitely head to the tax office come next year. "If there's a refund involved, sure," laughs Judy.  Because money coming in instead of out is music to everyone's ears.

Since the Harrisons pay $1.20 per month, their 3 year refund would be about 43 dollars. There will be two methods to claim that money back.  The safe harbor method will give you a refund amount set by the government.  That amount has not been set yet.

The actual method allows you to add up how much you've paid over the past three years and get that amount back. Businesses and corporations would have to use the actual method. 

More good news, taxpayers will be able to also get interest on those paid taxes, but that interest has to be reported as income in 2007.

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