Early returns of Federal Income Taxes have indicated that many tax payers are not completing the line on the various income tax forms to receive the Federal Excise Tax Credit or Refund. This is like “free money” since a credit reduces taxes dollar for dollar. The refund is for the 3% federal excise tax on long-distance telephone service billed after February 28, 2003. Individuals may either use a safe harbor method, without documentation, or claim the actual tax paid as substantiated by telephone bills and proof of payment and filed on Form 8913. Business entities must use the Form 8913 to claim the actual tax paid. Most individuals will use the safe harbor or standard amounts on their 2006 federal income tax return, based upon the number of exemptions claimed in 2006. These are: $30 for one exemption, $40 for two exemptions, $50 for three exemptions and $60 for four or more exemptions. If a person is not required to file an income tax return, a new form 1040EZ-T will be used to claim the refund of the telephone excise tax.
It is my understanding that the Long Distance Telephone Excise Tax came about in 1898 to help fund the Spanish American War. It is nice to have that bill finally paid!