Telephone Tax Rebate
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
landline phone, not a cell 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 charged 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 the phone. 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. However, the
challengers of the old law also demanded restitution. Therefore, the IRS has
announced that 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.
Here is 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.