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2006 Federal Excise Tax Credit Truth or Fiction
A Tax Credit on 2006 Forms For Excise Taxes on Phone Calls-Truth! Details from Truth or Fiction
Summary of the eRumor: The IRS is offering a tax credit on 2006 tax forms for money paid in excise taxes on telephone calls.
The Truth: The eRumor is long, detailed, and complicated but it is true that on your tax forms for the 2006 tax year in the U.S. you can claim a tax credit because of a change in the collection of Federal excise taxes on telephone calls. This is because of federal court decisions ruling that the tax no longer applies to long distance calls the way they are billed today. It applies to land-line, cellular, and even Internet calls.
Here are some of the details:
-Excise taxes on long-distance telephone service was halted beginning August 1, 2006.
-Refunds are being offered to individuals, businesses, and non-profit organizations for excise taxes paid on long-distance service between February 28, 2003 and August 1, 2006.
-If you want to go to the trouble of actually assembling all the telephone bills for that period, you can do it and get a refund on the actual taxes you paid, but for convenience there is a simpler way to do it.
If you claim one exemption, the refund is $30
If you claim two exemptions, the refund is $40
If you claim three exemptions, the refund is $50
If you claim four exemptions or more, the refund is $60.
-You do not need to itemize deductions. The tax credit will be offered on all individual tax forms for 2006 taxes.
-For businesses and non-profits, the IRS has come up with a formula for a refund. Check with your tax preparer for details.
Historically, the long-distance excise tax was based on the time and distance of a call. But in the 1990s more telephone companies started charging for long-distance calls without regard to distance and court challenges argued that the tax should not longer be levied.
A real example of the eRumor as it has appeared on the Internet: When it comes time to prepare and file your 2006 tax return, make sure you do not overlook the federal excise tax refund credit. You claim the credit on line 71 of your form 1040. A similar line will be available if you file the short form 1040A. If you have family or friends who no longer file a tax return AND they have their own land phone in their home and have been paying a phone bill for years, make sure they know about this form 1040EZ-T.
What is this all about? Well the federal excise tax has been charge to you on your phone bill for years. It is an old tax that was assessed on your toll calls based on how far the call was being made and how much time you talked on that call when phone companies began to offer flat fee phone service, challenges to the excise tax ended up in federal courts in several districts of the country. The challenges pointed out that flat fee/rate phone service had nothing to do with the distance and the length of the phone call. Therefore, the excise tax should/could not be assessed.
The IRS has now conceded this argument. Phone companies have been given notice to stop assessing the federal excise tax as of Aug 30, 2006. You will most likely see the tax on your September cutoff statement, but it should NOT be on your October bill.
But the challengers of the old law also demanded restitution. So the IRS has announced tat a one time credit will be available when you and I file our 2006 tax return as I explained above. However, the IRS also established limits on how BIG a credit you can get. He re how it works.
If you file your return as a single person with just you as a dependent, you get to claim a $30 credit on line 71 of your 1040.
If you file with a child or a parent as your dependent, you claim $40.
If you file your return as a married couple with no children, you claim $40.
If you file as married with children, you claim $50 if one child, $60 if two children.
In all cases, the most you get to claim is $60 - UNLESS you have all your phone bills starting AFTER Feb 28, 2003 through July 31, 2006 (do not use any bills starting Aug 1, 2006.), then you can add up the ACTUAL TAX AS IT APPEARS ON YOUR BILLS AND CLAIM THAT FOR A CREDIT.
Now if you have your actual phone bills and come up with an ACTUAL TAX AMOUNT, you cannot use line 71 on your tax return. You have to complete a special form number 8913 and attach it to your tax return.
Individuals using the special from 1040EZ-T will have to attach this form 8913 also.
One final point - this credit is a refundable credit. That means you get this money, no matter how your tax return works out. If you would end up owing the IRS a balance, the refund will reduce that balance you owe. If you end up getting a refund, the credit will be added and you get a bigger refund by that $30 to $60, depending on how many dependents are on your return.
Feel free to pass this on or make copies for family and friends who do not have computers.
