This is March 2007, a month yet before the end of the 2006 tax season, and audit letters from the IRS are already going out, some private tax offices have been closed and some people have been charged with fraud. All because of abuse of this years one time Federal Excise Tax Credit.
The government is refunding the Excise Tax because federal courts ruled that it is an improper tax. The IRS in response must refund the tax to all individuals who can prove they paid the tax. The refund is only for taxes charged as excise tax on long-distance, nothing on local is being refunded. This tax credit is a one time refund.
When examining your past phone bills look for the itemized part of the bill that states Federal Excise Tax. It can be as little as a few cents to a couple dollars. Anything more than that and you may not be looking at the right billing item.
The rule has two ways of filling. The most popular and the one I suggest is to use the standard deduction, where individuals can claim from $30 to $60.
One exemption, the standard refund amount is $30;
Two exemptions, the standard refund amount is $40;
Three exemptions, the standard refund amount is $50;
Four exemptions or more, the standard refund amount is $60.
If you are considering itemizing the tax credit to get the maximum credit, the first and most important rule, you MUST have a copies of the bills that you use to add up your total credit. These bills are from February 28, 2003 to August 1, 2006.
There is a rule that is getting many people into a lot of trouble. The rule is about listing the bundle service tax charges if the Federal Excise Tax in not individually listed out. If you do this you can just about bet you will get your very own nasty-gram from the IRS. Individuals with multiple phones over the three year period may pay some where between $100 to $200 dollars in Federal Excise Tax, yours could be more or less this is meant just as a broad example. If you add the bundled taxes it can get to be more than $1500. If you dare to think the IRS will let that go by, you will be sadly mistaken.
Finally if you have the records, by all means do your home work and take the credit. For a family, this bit of record keeping could change your $60 credit to $200 credit. If you do not have the records, do not fake it.
eBizNewbee is a new blogger and is a professional tax preparer. His new blog, Free Tax Help, is accepting articles that are specific and correct and help tax payers get the most out of their tax returns. http://freetaxhelp.blogspot.com