The federal government installed a telephone excise tax in 1898 to help bankroll the Spanish-American War, best recalled for its rallying cry "Remember the Maine!"

Sinking the battleship, which ignited the conflict, proved far easier than scuttling the tax. As the USS Maine was remembered, the assessment — or, at least, its purpose — largely was forgotten. Collected funds were diverted to finance other industries.

The tariff designed to pay for an undertaking that lasted all of 113 days lingered 108 years, minus two brief periods of repeal.

A series of court rulings has put it to rest. Individual and corporate taxpayers can retrieve a small chunk but face a looming deadline: the close of the current filing season (that's April 17 for individuals this year).

The Internal Revenue Service, concerned that about one-third of individual returns filed so far have omitted the claim while others are error-prone and possibly fraudulent, is sounding an alarm through the media and tax preparers.

It's about time, some accountants say.

"I think [the IRS] has done a very poor job of making taxpayers aware of it," said Joel Pascaner, a partner in the Atlanta firm Stephen M. Berman and Associates. "I know people who are just finding out."

At Jones and Kolb in Atlanta, CPA Colin Blalock says the phone tax credit has attracted "somewhere between no and limited awareness."

Some supersized corporations sued a few years ago to overturn the tax. Plaintiffs pointed out that amounts levied for the originaltax on long-distance callscorrelated partly with the distance between phones. Distance is not a factor in calculating most fees for modern-day calls.

The IRS stopped imposing the charges last August, having tapped taxpayers for enough cash to pay for the war, by some estimates, about 230 times over.

To make partial amends, it promised a tax credit covering a 41-month period dating to March 2003, based on 3 percent tacked onto phone bills for long-distance or bundled service.

Individuals, depending on how time-crunched and resolute they are, can choose between two types of credit:

The I-Want-Every-Penny-I'm-Due filer can sort through 41 separate phone bills, add up the applicable tax and claim the sum on their returns. Though documentation need not be sent in, the IRS recommends the evidence be kept handy. Nor does it insist on a bill for each month, only a representative sampling. For good measure, interest on the amount is tossed in.
The I've-Got-Better-Things-To-Do types can register a set amount ranging from $30 for a filer claiming no other exemptions to $60 for someone with at least four exemptions.

"Most of us will say, I'll take the [30 to] 60 bucks and run," accountant Blalock says.

A different era

The IRS has labeled the simpler option a "safe harbor" return — an ironic catchphrase, given that the Maine did not find the Havana harbor safe.

When the war broke out, telephones were the province of the affluent, sort of like BlackBerrys and Treos today. Those cross-country calls to wish Cousin Jim Bob or Aunt Eleanor a happy birthday helped cover the $400 million necessary to pay combat bills.

Excise taxes tend to have a longer shelf life than the ventures they were created to endow. This one might still be nicking our wallets if not for technological advances such as cellphones and fax machines that inflated companies' phone bills. As the cost of such communication soared, so did the corporate world's distaste for the tax.

Businesses, including nonprofits, are not afforded the "safe harbor" preference. The IRS did cut those filers a break, allowing them to dig out phone bills only from last April and September, then plug the tax figures into a formula to determine the credit amount.

For Fortune 500 family members and close relatives, that can mean tens of thousands of dollars in refunds.

'Significant' windfall

Many of the middleweights on down are taking a pass on the credit, saying the time and expense required for research is not worth the payoff.

Pascaner, the accountant, said he spent nearly 45 minutes excavating and computing numbers that resulted in a $42 credit for one customer. He has identified clients "for whom it's probably uneconomical to pursue it."

The tax credit has birthed a cottage industry that includes companies such as Advocate Networks, an enterprise communications consulting firm in Norcross.

It will — for a fee — parse through stacks of phone bill pages, actual or electronic, deciphering and totaling refundable amounts.

One client is Recall Total Information Management, a document storage outfit in Norcross with 1,200 wireless communications devices alone that has ballparked a $65,000 windfall.

"Significant," says telecommunications manager Garnett Burgess. "We didn't have enough resources internally to spend enough time to go through the data and file it. It is indeed worth it" to outsource the job.

"For many companies, this is found money," says Scott Fogle, co-president of Advocate Networks.

"There are several billion dollars out there that needs to be claimed."

At least $10 billion, according to estimates. Unclaimed dollars in the pool will disappear after the tax-filing deadline of March 15 for corporations and April 17 for individuals, except for those seeking extensions or submitting amended returns.

The IRS is aiming its publicity efforts at the 10 million low-income Americans — college students and senior citizens among them — who are not required to file tax returns. They must obtain special forms to secure the standard phone refund.

Penalties for fraud

The IRS is especially distressed about incorrect returns, both inadvertent and deceitful, that seek too much credit. Some filers are mistakenly pursuing compensation for their entire phone bills, not just the excise tax. Others are listing fictitious figures, in some cases pursuing a credit larger than their claimed income.

Fraudulent returns can lead to bank accounts being frozen by the IRS and prison terms of up to five years and fines ranging to $250,000 for individuals, $500,000 for corporations.

As for innocent errors, "We would rather educate than attack with penalties or freeze accounts," says Mark Green, IRS spokesman for Georgia.

In recent days, the IRS has directed bulletins about the matter to tax preparers. Last week, the service dispatched revenue agents — accompanied by criminal investigation agents — to 22 tax preparers around the state.

If the IRS needs its own battle cry, try this: "Forget the Maine; Remember the Phone Tax Credit."

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