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IRS asks airlines to refund taxes

The IRS has asked the airlines to process tax refunds to eligible customers, but many airlines are referring customers back to the IRS.

By Karen Datko Jul 28, 2011 2:52PM

Oh, what a tangled web Congress weaves when it can't find a way to get things done.


Because Congress has let funding lapse for the FAA, it now can't collect airline ticket taxes. Thus, travelers who bought a ticket for travel on or after Saturday, July 23, and already paid the taxes are entitled to a tax refund, according to the IRS.


The IRS wants the airlines to process the refunds, but most airlines don't want to.


The IRS website says:

Passengers who paid for tickets on or before July 22, 2011, for travel beginning on or after July 23, 2011, may be entitled to a refund of the tax. … Because the airlines and travel service providers already have the information about passenger ticket purchases and travel, and in many cases have payment card information that may facilitate streamlined refunds, the IRS has asked the airlines to provide refunds to eligible passengers when requested.

The refund on a $240 round-trip ticket would be about $28, well worth taking the time to ask for if you're entitled.

The IRS request seems like a bit of karma, considering that most airlines raised their fares after the FAA had to stop collecting the taxes Friday night and are thus pocketing the difference -- which has drawn a scolding from some U.S. senators and members of Congress.


That's about an extra $30 million a day going to the airlines that would otherwise have gone to the FAA. So let the airlines have the hassle of processing the refunds, rather than the government. Post continues after video.

Bloomberg added:

"There is absolutely no loss" to the airlines, (IRS spokesman Frank) Keith said. They would be able to reduce the amount of taxes they owe in their next quarterly filing by the amount of repayments they make, he said.

But the airlines want no part of it. "We believe it's the IRS' responsibility because ultimately it's the Treasury that has the tax money, not the airlines," Steve Lott, a spokesman for the Air Transport Association, told USA Today.


The newspaper said Southwest is directing travelers to the IRS "since the tax funds are allocated to the IRS at the time of purchase, not travel," an airline spokeswoman said.


According to The Seattle Times, American, Virgin America, United and Continental are also referring passengers to the government.


That's OK, the IRS says, but it will cause more headaches for the affected travelers. The website says:

Because the IRS has no information about passenger ticket purchases or travel dates, travelers who are unable to obtain a refund from the airline will be required to submit proof of taxes paid and travel dates to the IRS under procedures that are under development. The IRS will provide additional guidance at a later date.

More on MSN Money:

Jul 28, 2011 4:10PM
OK. For all of you blaming the government....obviously, you know nothing about the process. I am an accountant and a business analyst having worked for Wells Fargo, SunTrust, etc. This time I am actually supporting the government. Don't speak about things you know nothing about. Businesses required to collect Sales and Use Tax do so for an entire month (quarterly or annually for some smaller businesses) before they have to actually stroke the check to the IRS for what they have collected. So, what the fed is saying is that the airlines are still collecting tax for tickets purchased when the fed no longer requires it is paid. So, the airlines have no intent to pay the money back to unknowing ticket purchasers and think they can use the money however they want. In essence, that is STEALING (fraud). Any moneys collected as sales and use is required to go back to the original purchaser if it is no longer required to be paid by the government. The airlines have NOT paid this money to the government yet since they are still within a month of the new law stating it is no longer required, and even if they had the government would refund it back to the airlines so it goes back to the original purchaser. The airlines are attempting to keep money that doesn't belong to them. The Fed is correct for requiring the airlines to return the money.
Jul 28, 2011 4:14PM
The airlines should HAVE to refund the taxes paid to them by customers at time of purchase, since THEY are still in possession & control of the funds. The lady from Southwest states "tax funds are allocated to the IRS at the time of purchase, not travel" - great sound bite, BUT NOT RELEVANT TO THEIR CLAIM.

The reason the airlines need to refund the taxes is actually explained by the above quote. Allocated IS NOT the same thing as PAID; therefore, since the airlines still HAVE THE TAX FUNDS, and have only made an accounting computation as to the amount of the taxes owed to the IRS, THEY need to be the ones doing the refunding.

Think of allocation this way... you know how much your rent/mortgage will be each month and make a note of it, knowing that next month you will have to actually pay that amount - You just
allocated your rent (from your income). But until you pay your rent, you still have the funds.

As much as I am not a fan of the IRS, they need to call out the airlines on this one!!! Allocated tax funds to the IRS is not the same as tax funds PAID to the IRS, and vice-versa.
Jul 28, 2011 3:58PM
When I go to the store and buy an item, the store collects the tax.  If I get an adjustment on an item or get it refunded, the store adjusts the tax.  WHY DO THE AIRLINES THINK THEY ARE EXEMPT?  They ALSO keep taxes and FED/airport fees on NON-REFUNDABLE TICKETS.  IRS, stand your ground do not get bullied by the airlines on this one! (Can't believe I am supporting the IRS!!!)
Jul 28, 2011 4:46PM

Go to your airline. No go to the IRS. Wow, this is a true fleecing of the consumer. I am owed $112 for a flight that they knew they should not have collected. So now it is up to the consumer to fight for their money back. How many are not going to be aware that they are due a refund? That is a huge bonus for the airlines that they didn't earn.


The airlines have the means to easily identify who is due a refund and should be forced to automatically issue the refunds. Since they are the ones who were greedy and collected the money and continue to hold it and make extra income, they should use their time and resources to make it right.

Jul 28, 2011 4:34PM
Before anyone blindly claims the IRS needs to do the refunds, based on the quote from the Southwest lady, please understand one simple truth..

allocating taxes is not the same as paying taxes

You can allocate all you want, but until you actually pay you haven't given any money to anyone. So, just because Southwest says they have allocated tax funds to the IRS just means they know how much they've collected and need to be paid to the IRS. But, until they actually pay the IRS, they still have the money, so they need to do the refunds.

Jul 28, 2011 4:08PM
The airlines scammed ther customers.  They should have to repay the CONSUMERS.  It was an underhanded tactic, and the government can make them repay the customers.  If Ford Motor Company did that, you bet the government could stop them abnd make them give out checks. 
Jul 28, 2011 3:44PM
When the airlines ask for bailout money I'm sure that they won't take a  sorry from congress.
Jul 28, 2011 3:43PM

The only screw up is the airlines collecting the amount of the tax when the government isn't able to collect that tax from them!

This is just the airlines being greedy again & again & again & again!

Jul 28, 2011 4:50PM

It’s nice to see the IRS picking on multi million dollar companies instead of the average tax payer – like they usually do.

Jul 28, 2011 3:35PM
Sounds like another government screw up to me.
Jul 28, 2011 4:21PM

If the airline sent the $$$$ to the IRS @ time of purchase then the IRS must refund,other wise the airline must refund or they are cheating the people(IRS or airline) Spirit air was the only airline that stopped charging the fees (KUDOS to them) 

Jul 28, 2011 4:11PM
could one of the agency's be talked into giving a KISS along with the screwing
Jul 28, 2011 4:18PM
talk about village idiots.have no faith in any of them either side
Jul 28, 2011 5:55PM
To Mr. John Satterfield
Its people like you on both sides of the fence causing problems.  We should be able to fire Congress both Dems and Repubs. I always read something that has nothing to do with the article from both sides how the other is destroying the U.S. It is both parties doing the damage.
This article is about airline taxes and refunds.
Jul 28, 2011 5:30PM
Best idea re-regulate the airlines. They have misbehaved very badly since deregulation. No rules & regulations - they screw their passengers.
Jul 28, 2011 5:06PM
I purchased tickets a couple of weeks ago at SW Airlines for $59 each way, 4 round trip tickets.  Heard the tax had expired.  Checked SW over the weekend and the same $59 fares were now $63.  SW was doing exactly what the article mentions, adding the price of the fee to the tickets and keeping the money.  I even told my husband while watching TV on Monday, when a SW commercial came on promoting fares for $59, they didn't exist!  As of last night, they had lowered the tickets back to $59.  $32 would but supper at the airport while waiting to catch their plane!        
Jul 28, 2011 5:46PM
Oh yeah,the airlines will give back money the same day congress enacts term-limits. Wake up! they don't care about consumers anymore than the people in washington care about their ,
Jul 28, 2011 5:39PM

We should ASK the airlines for a refund?? Hell, no.  If the airline is (now) ILLEGALLY collecting a tax, they should be prosecuted for doing so...   If I was any other business in any state trying this (collecting a tax), I would not get far.. so why should the airlines?  One would think that the airlines could gain a ton of kudos for advertising the significantly cheaper rates... and then it's back on the Feds again when (and we all know it will happen soon enough) they are "allowed" to charge the tax again.

Jul 28, 2011 6:16PM

ROTF!!! Ask the airlines to refund paid taxes???? Here we go. Bail them out and let them keep stealing from the consumer.

Who in the freak is running this country?

Corp. America, BIG OIL, Wallsteet and the banksters. The gangs are all there.

This country is doing a slow death. Corruption is going to turn it into a third world country in a less then 10 years. You don't believe research it. Look around.

We have turned our back on the morals that made us a great country. All we have become is self centered, greed on wheels. Justified by the ol "Well, everyone else does it".

I did two tours in Washington as a Naval officer. Over hearing various conversations at times during the course of my tours. You know what most upper government thinks about the average American? Whiny, selfish, dumbed down and very uneducated. Knowing all that. They know how far to push the American public as they know most just don't give a rats. Most don't even vote any more.

Washington. The never, never land to get your way if you have a blank check or unlimited visa card.

Jul 28, 2011 4:04PM
I purchased a ticket last saturday, how can I find out whether the airline increased the price of the ticket rather than let me save the amount of the federal tax?
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