Sunday, January 07, 2007

2006 Excise Tax Credit for Everyone

(click here for source)

When it comes time to prepare and file your 2006
tax return, make sure you don't 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 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's 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

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.

1 comment:

Anonymous said...

Your article was great, I passed it on to all of my friends and family. Few people (I didn't) know about this tax credit.
Thanks, Steve Holcomb
Tampa, Fl. 33606