Tax Talk - Refunds for Federal Telephone Excise Tax Paid
The new year is finally upon us and my first thought is, “Darnit, when can I start my tax return?” I downloaded TaxAct 2006 and was reading about the tax changes for this year when I noticed the refund for Federal Excise Tax charges on our long-distance telephone service. I remembered reading about this six months ago and promptly forgot about it. Well, here it is, in all its glory. For anyone who, like me, forgot or never heard about this, I’ll describe what this is about and how you can claim it.
In 1898, a Federal Excise Tax was imposed to help fund the Spanish-American war. One of the things taxed was telephone service. It was a luxury tax on the wealthy because that is who had telephones at that time.
More than 100 years later, I’m guessing the Spanish-American war costs have been recovered by now and the tax on long distance phone service was finally lifted as of August 1, 2006.
Those who fought the good fight to eliminate this tax asked for restitution of our money and that time has finally come. The IRS will refund us for this tax in our 2006 Federal Income Tax Returns. Hooray! Er… well, kind of.
You will get refunded for your Federal Excise Tax for billing periods between February 28, 2003 and August 1, 2006. Fortunately for the IRS, the refund statute of limitations comes into play and they are not required to go back any further.
There are two ways to claim this refund:
- Review 41 months of phone bills, itemize out your paid excise taxes using form 8913, calculate the approved rates of interest, and add all of those together to get your tax credit.
- Use a standardized credit based on your number of exemptions:
- One exemption = $30
- Two exemptions = $40
- Three exemptions = $50
- Four+ exemptions = $60
Remember this is a tax credit, not a deduction, meaning that this amount will be directly refunded to you or offset any taxes you owe, not simply deducted from your taxable income.
This won’t make or break your tax year but, hey, a few extra dollars is a good thing, right?
Read more about it at the IRS website.
- Telephone Tax Refund Questions and Answers
- Form 8913. Used to itemize your phone bills and calculate interest on the actual taxes
- Instructions for Form 8913
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January 6th, 2007 at 10:31 am
Seems while editing before this post went live, I deleted a couple of zeros. The tax credits are $30, $40, $50 and $60, not $3, $4, $50 and $60. My bad! I updated the post to reflect the correct numbers.