Offers Tax News for Small Businesses

In her weekly feature "Memos," Wall Street Journal columnist Kelly Spors reports that the government is giving businesses a tax refund on 2006 federal income tax returns for all federal excise taxes they paid on long-distance phone service between March 1, 2003 and July 31, 2006. "Even if you've already shredded your phone bills, you're not necessarily out of luck," says Ms. Spors. he Internal Revenue Service devised a special formula that lets businesses with gross receipts of more than $25,000 estimate the long-distance taxes they paid. The IRS says firms need long-distance bills from April and September 2006 in order to use the formula. Otherwise, businesses can use the actual total telephone expenses for the 41-month period to calculate their refund. The refund is capped at 2% of total phone expenses in the period for businesses with 250 or fewer employees and 1% for businesses with more employees.

Gas tax could have mileage for small business In another tax-related "Memos" tidbit, a possible tax of $1 per gallon of gas would not only make energy costs more predictable for businesses and encourage them to save more energy, but some of the extra revenue from the tax could be refunded to businesses to reduce federal payroll taxes. For example, an employee making $30,000 a year could save $434 on payroll taxes -- or about one-fifth the current costs -- with a rebate from the gas tax.

States tax policy affects entrepreneurial activity Spors' "Memos" column also reports on a Small Business Administration's Office of Advocacy study that found a state's tax policy can modestly affect the number of entrepreneurs in that state. A one-percentage-point increase in state sales taxes, for instance, boosted the number of entrepreneurs in the state by 1.2%. A similar increase in the state's top personal-income tax rate reduced that state's entrepreneurial stock by 0.8%. Though the actual effects of state taxes seem pretty unsubstantial, the SBA concludes that states can use this information to help small businesses.

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