IRS nabs phone tax abusers in seven cities

IRS criminal investigators this week conducted raids in seven cities to shut down tax preparation businesses suspected of abusing a one-time telephone tax refund.

The Internal Revenue Service, in a statement Friday, said some tax-return preparers are requesting thousands of dollars of refunds for clients despite IRS pronouncements that the tax break should be in the $30 to $60 range.

"We have seen limited but serious instances of abuse, and we've sent in criminal investigators to pursue the matter accordingly," IRS Commissioner Mark W. Everson said.

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Investigators served search warrants at tax preparation businesses in Atlanta; Dallas, Tyler and Athens, Texas; Riverside, Calif.; Miami, Fla.; and Baton Rouge, La. Agents temporarily closed businesses, seizing computers and documents to be used as evidence.

The tax agency said that IRS auditors also are visiting tax preparers across the nation who are seeking questionable telephone tax refunds. The agency is advising taxpayers to stay away from preparers making exaggerated claims about refunds.

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In several instances, it said, taxpayers have put in for a refund of $30,000, while others are requesting refunds for the entire amount of the taxpayer's phone bill, rather than just the 3 percent long-distance tax.

The government stopped collecting the long-distance excise tax last August, and 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, requiring no documentation and ranging from $30 to $60, depending on exemptions claimed. Those basing refunds on actual taxes paid must have documentation available if the IRS questions the claim.