Dial M for Mistake
Millions of taxpayers are throwing money away by failing to claim the telephone tax refund. A quick do-over can put cash in your pocket.
By Kevin McCormally, Editorial Director, Kiplinger.com
March 2, 2007
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Alfred Hitchcock's 1954 thriller, Dial M for Murder, still keeps audiences on the edge of their seats. Grace Kelly's lovely Margot seems so vulnerable ... until she gets hold of that pair of scissors. Too bad we can't transfer some of her self-preservation motivation to taxpayers.
Millions of them seem to be sitting on their hands rather than accept the government's offer to add $30 to $60 to their income tax refund. The IRS reports that nearly one-in-three early filers failed to claim a telephone tax refund credit that's available for the first -- and only -- time this year.
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Because nearly every taxpayer deserves the credit, more than 10 million Americans already have missed the boat, costing them a total of $300 million to $600 million ... or maybe more. If taxpayers continue to turn their backs on this break at the same pace through the April 17 tax deadline, they'll lose billions of dollars. Yes, billions!
There's no shortage of reports that taxpayers are messing up. We'll go one better. This story will tell you how to fix things if you're among those who goofed. You can demand a do-over to claim your share of the cash.
Before explaining how that's done, first a note to those of you who are still working on your 2006 returns. Check out Ring Up Tax Savings on Your 2006 Tax Return for all you need to know about the telephone tax refund and how to claim it in the first place.
A 15-minute fix
Now, for those of you who missed this tax break on the first go 'round. (And don't smugly assume your safe if you paid someone to do your return. The IRS reports that paid preparers are responsible for about half of the returns received so far that fail to claim the credit.) If you need another bite at this apple, start by getting a copy of Form 1040X and the instructions.
The seven pages of instructions ominously warn that it will take three and a half hours to do the form. Don't be put off. With these tips, we bet you can knock it off in no more than half an hour, maybe in 15 minutes or fewer. You might want to use the extra time watching Dial M for Murder.
For a simple fix like this, you can skip most of the 1040X. More good news: Because the IRS apparently expected a lot of folks to miss the telephone tax refund, there's a special line on the 1040X -- line 15 to be precise -- for claiming the credit.
Ready, set, do-over
First, grab a copy of the 2006 return you filed. It has almost all the info you need to complete the 1040X. Here's what to do:
Fill in your name and filing status.
Skip to line 10 and enter the total tax bill from the return you filed. (You'll find that on line 63 if you filed a long form 1040, on line 28 of the 1040A, or line 6 of the Form 1040EZ.) Enter the amount in column A, skip column B since you're not making a change and enter the original amount again in Column C.
Follow the same procedure for lines 11 through 14 of the 1040X, entering the original number (if any) for various payments or credits in column A, a zero in column B and repeating the original number in column C.
On line 15, enter $0 in column A because you forgot to claim the credit on your original return. Then enter your credit in column B and column C. The IRS's standard credit is based on the number of exemptions claim on the return. As explained in Ring Up Tax Savings on Your 2006 Tax Return, you get $30 if you claim one exemption, $40 if you claim two, $50 if you claim three or $60 if you claim four or more. If you feel you'd get a bigger credit by figuring the actual tax paid during the refund period, fill out a copy of Form 8913 and attach it to your 1040X.
Lines 16, 17 and 18 are self explanatory.
On line 19, enter the amount of the refund you claimed on your original return . . . or enter zero if you owned tax. (The refund amount is on line 73 of the Form 1040, line 44 of the 1040A, or line 12 of the 1040EZ).
Do the math on line 20 and skip line 21.
Enter your credit on line 22 and again on line 23.
Flip to the back of the form and, in the area for a reason for changes write "Line 15. Taxpayer failed to claim telephone refund credit on original return."
Flip the form over again, sign and date it.
Watch your mail for a check from the IRS.
One final point: If you owed money when you sent in your original return, file your 1040X as soon as possible. If your return called for a refund, however, wait until you get that check (or the money is deposited in your bank account) before filing the amended return. Having two returns calling for refunds in the system at the same time can set the computers a twitter and slow down both refunds.
Enjoy your money.