Tax Talk with Jim

By James A. Horchak, Esq., CPA

This year, taxpayers who were billed in March 2003 through July 2006 for federal telephone excise taxes on long distance calls may be eligible to claim the Telephone Excise Tax Refund Credit on their federal income tax return. This is a one-time credit available for the 2006 tax year only and is designed to refund taxes previously collected on federal long distance telephone calls.

Taxpayers have a choice of either claiming a standard credit amount or the actual costs of federal long distance taxes they were assessed from March 2003 through July 2006. The standard credit amount is based on the number of exemptions claimed by a taxpayer. The standard credit for a taxpayer with one exemption is $30; two exemptions is $40, three exemptions is $50 and four or more exemptions is $60.

Businesses, including sole proprietorships, partnerships and corporations, can also claim the credit; however, a business entity must claim the actual amount of federal long distance telephone taxes paid on telephone bills for the business from February 28, 2003 through July 31, 2006. If all bills for that time period cannot be located, the IRS has approved a special formula to enable businesses to compute the credit.

Please note that you cannot request this credit if you have already received a refund of the federal excise taxes from the telephone service provider. Likewise, if you claim the credit on your federal tax return, you cannot then request a refund from the telephone service provider.

Keep this credit in mind as you prepare your 2006 federal income tax return. As always, please contact our office at 724-552-2745 if we can help you with your tax returns.