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Newsletter Archive |
The people who make a difference in our lives are not the ones with the most credentials, the most
money or the most awards. They are the ones who care.
Something to remember if you’re feeling down in the dumps – every one of us has others who include us
on their “People Who Really Matter” list!
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 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 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 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. 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 has also established limits on how BIG a credit you can get.
Here 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.
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