Federal Excise Tax Credit
The Federal Excise Tax Credit was the result of a long standing court case against the IRS concerning the Excise Tax on long distance telephone service.
Federal Excise Tax Credit
The Excise Tax has a long history. It was started in response to the Spanish American War and although it is commonly considered to have been in force since that time, the truth is that it has been repealed and reinstated several times. It has been closely associated with various wars. In other words, it is reinstated to raise revenue during time of war and then was repealed when peace returned.
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The tax was levied in part on communication services. It was imposed in recent years on telephone bills and was based in some part on the length of a call and the distance between callers. The tax was added to a person’s telephone bill and paid by the telephone company to the Government using Form 720 which was a quarterly Excise Tax return. For the most part, people were unaware of the tax. It was just another small item on their telephone bill month after month.
The objection came when telephone service providers began to change how they charged for telephone service. Distance between callers and length of the call was not always the determining factor in telephone billing. The Excise Tax was considered to no longer apply. It took several years of debate in the Courts before the IRS eventually gave in and the Excise Tax on telephone bills was stopped as of the summer of 2006. This led to a one time Federal Excise Tax Credit in 2006.
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The Credit could be claimed in two ways. The easy and more common method was to just take a standard credit. This credit could be taken on line 71 of Form 1040 and a similar line was available on Form 1040A. The Credit was determined by the number of exemptions that the taxpayer was entitled to claim. A single person with no exemptions could claim $30. This went up in $10 increments. Two exemptions could claim $40. A taxpayer with two children could claim $60, but this was the limit. The maximum credit taken in this manner was $60 no matter how many exemptions were claimed.
The other method was to take every one of your phone bills from Feb.8, 2003 to July 31, 2006 and add up the actual tax paid. It is easy to see why most taxpayers would be unable to use this method. The real serious record keepers might be able to gather up all those old phone bills. If they do, they would have to file a special form #8913 to claim the credit. Short form users would have to use Form 8913 also. The credit is a refundable credit which means that it can be taken regardless of the amount of tax owed. If the credit resulted in money owed to you, it would be refunded.