The IRS, in cooperation with the U.S. Chamber and other organizations, has established a formula for estimating the federal telephone excise tax refund that businesses and nonprofits are eligible to receive on their 2006 tax returns.

"The Chamber had substantial input in helping the IRS fashion the final result, which is an equitable and easy-to-follow formula that doesn't force businesses to audit years of phone records," says Giovanni Coratolo, executive director of the U.S. Chamber Small Business Council. "We're also pleased with the generous definition of small business-those with 250 employees or fewer -which encompasses more than 99% of all small firms."

Businesses need to produce just two phone records-those with statement dates of April 2006 and September 2006-to determine the refunds they will receive for 41 months of phone bills. They must first figure the telephone tax as a percentage of their April 2006 telephone bill (which includes the excise tax for both local and long-distance service) and their September 2006 telephone bill (which includes the tax on local service). The difference between these two percentages is then applied to quarterly or annual telephone expenses to determine refund amounts.

Businesses also have the option of using the actual federal excise tax amounts from each month's bill to determine their refunds. The refund for businesses with 250 employees or fewer is capped at 2% of total telephone expenses for the refund period; businesses with more than 250 employees face a 1% cap.

To learn more about the refund formula, visit http://www.irs.gov/.