A SPECIAL ONE TIME TAX CREDIT ON YOUR 2006 TAX RETURN
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 he 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 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 don’t have computers. Below is a link to the IRS website that explains this in more detail.
Related Link: http://www.irs.gov/newsroom/article/0,,id=161506,00.html
Replies
Businesses can also get a refund.
Somewhere, I thought I read that this tax was originally imposed to finance or pay for the Spainish-American war.... anyone else hear see that, or am I dreaming things up?
bump
I heard the same thing. I just thought the refund would be bigger.
It can be bigger provided you've kept all your phone receipts since about forever...
You are not dreaming, it is true.
Yup
Isn't it just amazing that the gov would continue to collect a tax long after it's original purpose.“It so happens that everything that is stupid is not unconstitutional.” —Supreme Court Justice Antonin Scalia
Amazing, but certainly not suprising.
Seems that back in the early seventies I heard that . Had friends who opposed the VietNam involvment ( revenue was being used to pay for that war then supposedly) and refused to pay that portion of the bill .. IRS raided their bank account for what was owed.
Probably not. The federal income tax didn't start until 1913, the Spanish American war ended eleven years earlier, 1898 - 1902. Here's a good site for telephone history:
http://www.privateline.com/TelephoneHistory2/HistoryA2.html
-- J.S.
Actually it is relatedd to the Spanish American war. But there was a gap between that and WWI and then after WWI.http://en.wikipedia.org/wiki/Telephone_federal_excise_tax"Although in popular belief the telephone excise tax has been in place continuously since the Spanish-American War, it has actually been repealed and reinstated several times, usually in times of war or economic crisis. Because of this connection to war, the tax has been a frequent target of war tax resisters.[edit] Spanish-American WarIn late April 1898, Congress passed a resolution declaring that a state of war had existed since April 21, 1898, between the United States and Spain. Although the Spanish-American War was short, its financing needs resulted in a federal budget deficit. In the landmark case of Pollock v. Farmers' Loan and Trust Co. the Supreme Court had nullified the income tax of 1894. Many in Congress felt that tariff increases could create too much disturbance with industry. As a result, the leaders in Congress felt that the revenues required for military expenditures either should come from increases in existing domestic taxes or supplements of new taxes of the same type. Thus, an excise tax on telephone service was introduced for the first time in 1898. [1] The tax remained in place until it was repealed in 1902.[edit] Prelude to World War IIn August 1914, war broke out in Europe resulting in a precipitous fall in imports to the United States from Europe. One result from the fall in imports was that business profits were reduced, and revenues from the corporation income tax declined. This fall in imports also reduced the federal government’s customs receipts. On September 4, 1914, President Wilson called upon Congress to raise an additional $100 million through “internal” taxes (in contrast to customs duties). These revenues were needed not only because of the loss of revenues but also because of added federal spending related to the war being fought in Europe.[2] In response, Congress passed the Emergency Internal Revenue Tax Act of 1914. [3] The Act was mostly a renewal of the excises contained in the Spanish-American War Revenue Act. It included a tax of 1 cent for telephone calls costing more than 15 cents. The taxes instituted under this Act were initially set to expire on December 31, 1915. However, on December 17, 1915, Congress passed a joint resolution that continued the taxes instituted in 1914 through December 31, 1916. [4] After that time, while revenue needs continued (for “preparedness”), the Revenue Act of September 1916 [5] did not extend the tax on telephone service.[edit] World War IWith the entrance of the United States into World War I, revenue needs were greatly increased. Both parties worked together to produce a tax bill. Included in the War Revenue Act of October 3, 1917 was a tax of “5 cents upon each telegraph, telephone, or radio, dispatch, message, or conversation, which originates within the United States, and for the transmission of which a charge of 15 cents or more is imposed.”[6] Work on the Revenue Act of 1918 [7] had nearly been completed when the Armistice was signed on November 11, 1918. Although World War I had ended, Congress recognized budget expenditures could be expected to decline in the long term but that reductions in expenditures would not occur in the short term. Pay for our military forces could be expected to continue for some time and there was a need to provide capital for reconstruction to our allies in Europe. Thus, this tax measure was redrafted. The redrafted Act not only continued the telephone excise tax but did so at increased rates that were graduated for the first time. While this Act is referred to as the Revenue Act of 1918, it was not passed until early in 1919. The tax continued until it was repealed in 1924.[edit] Great DepressionToday's telephone excise tax derives from the Revenue Bill of 1932. Since then, it has been reauthorized 29 times. The 1932 Act was passed in response to a federal budget deficit brought about because of a decline in income tax receipts caused by an economic depression rather than as a result of war. Initially the tax was levied only on interstate (long-distance) service. The telephone excise tax was extended five times (between 1933 and 1941) before the tax was first applied to local telephone service."What the refund is about is the taxes being the "toll" portion of the phone charges. The definition of toll charges in the law is that they are distance based. And most LD charges today or either flat or by time and thus aren't taxable in that law.
Sweet, thanks.
Semper Fi
I got a forward of this in email a couple days ago, so i snopesed it and found it was legit. Thanks for posting it; i intended to and forgot.
Hopefully, TurboTax will have this programmed into the 'interview'.
Another credit of interest to many homeowners this year will be the 2006/07 Homeowners Energy Credit, which will allow a 10% credit (not deduction) for upgrades to their primary residences for up to $500, that improve energy efficiency of the home. This will include everything from caulk to windows to central air handlers, exterior doors, weather strip, all forms of insulation (batts, blow-in, rigid, foam, etc), certain exterior siding, solar panels and so forth.
Some of the expenses must meet Energy Star ratings....others do not.
As though the tax code isn't complicated enough! Can you imagine being a tax preparer and getting a basket of receipts from Home Depot, and trying to figure out what qualifies for the credit and what doesn't? Most accountants I know don't know the difference between a sill plate and a dinner plate.
BruceM