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ot: excise tax credit on

updated sun 26 nov 06


L. P. Skeen on fri 24 nov 06

If you keep up with your telephone bills as part of your business
expenses (or even if you don't), it appears that there is a one-time tax
break waiting for you. I quote the following from the SNOPES.COM urban
legend verification website:


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 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.

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

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.

Origins: In November 2006, the inbox began filling with
forwards about a tax credit available in 2006 for overpayment of a
federal tax charged on phone calls. For once, an Internet forward is on
the up-and-up; there really is such a credit available to taxpayers
filing their federal 2006 returns (which most people will submit to the
IRS in 2007).

The tax in question, the Federal Excise Tax, was first imposed in 1898
to help fund the Spanish-American War. One of the things it taxed was
telephone service, which at that time was something only the very
wealthy had, so this levy served as a luxury tax charged only to those
who could easily afford it.

The war ended and the bills for it were settled up, but the tax stayed
in place. Over time, as telephone use spread to the masses, what had
begun as a charge against the very wealthy for a frippery they could
easily have done without became a charge against just about everyone for
a service that had come to be regarded as vital.

The tax was levied against charges accruing to long distance calls,
which until recently were primarily determined by a formula based on
call length and the distance between conversing parties. That mode of
establishing the price of calls has mostly been supplanted by the
practice of basing long distance charges on minutes alone, with no
regard to the physical distance the calls travel. Opponents to the tax
asserted that that shift made the tax invalid, and the courts finally
agreed with them.

In May 2006, after losing a series of federal court cases, the Internal
Revenue Service said it would no longer collect the 3 percent tax and
ordered telephone companies to stop charging it by 1 August 2006.

Taxpayers are eligible to claim a refund of the long-distance tax billed
for any phone service (cell, fax, computer or land line) in the 41-month
period from 28 February 2003 through 31 July 2006.

On its web site, the IRS explains the refund and how to apply for it.
Additional information can be found by following the links offered on
its Telephone Excise Tax page.

In a nutshell, rather than ask everyone to comb through their phone
bills for that 41-month period to add up all the tax collected
and then submit claims for those amounts, the IRS will offer taxpayers
standard refunds of between $30 and $60 (the amount depends on the
composition of the household) that they can apply for simply by entering
the refund amount appropriate to them on a particular line on their 2006
tax returns. Those who wish to go it the long way by adding everything
up to emerge with the precise figure owed them may do so, but in their
case applying for the refund will require them to complete and file Form
8913 with their returns.

This is a one-time tax credit, so those who fail to file for it on their
2006 returns will likely lose their shot at claiming it. It therefore
makes very good sense to let your friends, neighbors, and co-workers
know about this opportunity, lest they otherwise miss it. The only
mystery in all this lies in the question of why the Internet drums only
started to beat about this in November 2006, when the refund was
announced in May 2006, a full six months earlier.

Barbara "in one half year and out the other, I guess" Mikkelson

Last updated: 22 November 2006

The URL for this page is

Sources Sources:

Day, Kathleen. "Call It the Teddy Roosevelt Refund."
The Washington Post. 1 September 2006 (p. D3). "Treasury: Telephone Tax Refund for Everyone."
26 May 2006.

Reuters. "U.S. to Repeal Long-Distance Phone Tax."
The New York Times. 25 May 2006. "