IRS urges taxpayer honesty on telephone-tax refunds

WASHINGTON (AP) — The Internal Revenue Service warned Thursday that it will take prompt action against taxpayers and preparers who claim improperly large refunds from a discontinued telephone tax.

The IRS said early filings indicated some taxpayers are requesting "large and apparently improper amounts" for the one-time refund from the long-distance excise tax that the government stopped collecting last August.

"People requesting an inflated amount will likely see their refunds frozen, may have their entire tax returns audited and even face criminal prosecution where warranted," IRS Commissioner Mark Everson said.

The agency said some taxpayers appeared to be asking for refunds of their entire phone bills rather than for the 3 percent tax on long-distance and bundled service they are entitled to. Others were making requests for thousands of dollars, indicating they had phone bills of more than $100,000.

The government has authorized a refund of tax collected on service billed during the period from March 2003 to July 2006. The IRS has urged taxpayers to request a standard refund amount ranging from $30 to $60, based on the number of exemptions they claim. It said no documentation is needed for the standard amount, which approximates the eligible amount for most taxpayers.

Everson said the tax agency will aggressively pursue tax preparers and promoters who make improper requests.