Demystifying the 2006 telephone tax refund

One really good tax CREDIT everyone can take for the 2006 tax year is the one-time telephone tax refund. It allows you to reclaim some FEDERAL tax you paid for using the telephone (landline, cell phone, and voice-over-IP) over a 41-month period after Feb. 28, 2003, and before Aug. 1, 2006. State and local taxes you paid during this period are not refundable.

You can use one of two ways to claim the refund:

• Use the standard amount.
• Calculate the actual dollar amount you paid using old bills during the 41-month period.

For those who do not have or do not want to dig through old phone bills and add up the federal tax paid, you can take the standard amounts:

• 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.

For those who have access to the old bills, look for the following independent section or line on each bill (landline, cell, or voice-over-IP):

• Federal
• Federal Excise 3%
• Federal Excise @ 3%
• Federal Excise Tax
• Federal Tax
• Fed Excise Tax
• FET

Again, state and local taxes do not apply. Federal fees also do not apply.

If you want to calculate the actual amount, you'll need a few bills from this time period. You don't need every single copy of the bill during this period. You just need enough to support your claim for the refund if you get audited.

If you have some old bills, it might be worth it go check through them. The total from adding up the actual amount can be greater than the standard amount. For example, I can claim the standard amount of $30. However, after going through some old phone bills, I found that I can claim $170. This more than double the standard amount. So I think it's worth it.

Another reason this is well worth claiming is because it is a tax CREDIT, not deduction. A tax credit means that the dollar amount you claim will be returned to you. For example, if you claim a $50 credit, you get $50 in refund. If you claim a $50 deduction, you might get a $5 refund (the actual amount can vary, depending on what you are claiming, your tax bracket, and a multitude of other factors).

For a full description of the telephone tax refund, visit the IRS website. They explain the history and reason for the refund.