Four Ways to Get Tax Money Back
POSTED: 3:02 pm PST February 15, 2007
UPDATED: 4:35 pm PST February 15, 2007
BAKERSFIELD, Calif. -- Fast Facts: Telephone Excise Tax Refund
- The federal excise tax on telephone service was established in 1898 to help finance the Spanish American War. It was considered a ‘luxury’ tax on wealthy Americans who were then the only ones who could afford a telephone.
- Federal courts have ruled that the three percent excise tax on long-distance telephone service is no longer applicable. As of August 1, 2006, the tax was no longer collected.
- People who paid the federal excise tax on long-distance telephone service can request a refund using their 2006 income tax returns.
- There are two methods to request a refund:
- Taxpayers can request a refund for the actual amount of long-distance excise tax paid by gathering their telephone bills for the 41-month period from March 1, 2003 through July 31, 2006. To use this method, they must complete Form 8913 and attach it to their income tax returns.
- Or, they can request the standard amount the IRS developed to save them the effort of trying to dig up 41 months of old telephone bills. If they choose this method, taxpayers need only enter the amount on the “credit for federal telephone excise tax paid” line on their income tax returns.
- The standard amounts are based on the number of exemptions taxpayers claim. The standard amounts are $30 for a person filing a return with one exemption, $40 for two exemptions, $50 for three exemptions and $60 for four or more exemptions.
- A person who does not have an obligation to file a tax return can request a refund by completing Form 1040EZ-T.
- An estimated 10 million to 30 million people – more than half of them older Americans – are believed to be eligible for the refund but do not have an obligation to file a return because their incomes are below the filing threshold. The IRS is conducting a special outreach campaign to encourage these taxpayers to request their refunds.
- People who use Form 1040EZ-T and request the standard amounts can have their forms completed for free at a volunteer tax preparation site.
- Created in 1975, the Earned Income Tax Credit is a tax credit for people who work but do not earn high incomes. The EITC helps offset Social Security taxes and provides an incentive for work. It is a valuable tool helping eligible taxpayers to lower their taxes or claim a refund.
- More than 60 percent of all tax returns claiming EITC are filed in the month of February.
- For TY 2005, 22.2 million tax returns claimed $41.4 billion in EITC.
- In California last year, over 2.2 million taxpayers received over $4.2 billion in EITC. Included in those total numbers are the over 68,000 claimants from KERN COUNTY who received over $147 million in EITC. The IRS estimates that another 20 percent to 25 percent more people may qualify for EITC but not be aware of it.
- The underserved include people with limited English skills, rural residents, and nontraditional families such as a grandparent raising a grandchild.
- For the 2006 tax year, the maximum credit is $4,536 for a family with two or more children; $2,747 for a family with one child; and $412 if there are no children.
- For 2006 tax year, the income limits are $36,348 ($38,348 if married filing jointly) for families with two or more children; $32,001 ($34,001 if married filing jointly) for families with one child; or $12,120 ($14,120 if married filing jointly) if there are no children. Investment income must be $2,800 or less. Children must meet certain relationship and residency requirements.
- Free tax assistance is available nationwide at volunteer tax preparation sites and at www.irs.gov through Free File.
- The IRS works with over 300 partners nationwide to ensure that free assistance is available and to promote EITC. The goal is to maximize participation while minimizing errors.
- There are 12,000 free tax preparation sites nationwide. Approximately 3,000 sites are Volunteer Income Tax Assistance sites that provide free services to people who make $39,000 a year or less. About 9,000 sites are Tax Counseling for the Elderly locations operated by AARP and free for people who are age 60 or older.
- During the tax filing season, free Volunteer Income Tax Assistance and AARP Tax Aide sites operate throughout California. Some serve taxpayers on a walk-in basis while others require an appointment. To find a site close to you, call the AARP at 888-227-7669 or the IRS at 800-829-1040. Also visit www.irs.gov for more information.
- The IRS is offering taxpayers more options for direct deposit of their refund.
- Taxpayers have the option of having their refund directly deposited in up to 3 financial accounts, such as a checking, savings, and retirement account.
- Previously, taxpayers could have their refund electronically deposited in only one financial account.
- To take advantage of the split refund option, taxpayers must use Form 8888, Direct Deposit of Refund.
- The idea behind the split refund is to give taxpayers more options to start or add to their savings accounts.
- Advocates for low-income families say the split refund option is one way to help build assets and financial security.
- A test in Tulsa, Oklahoma found 27 percent of the low-income families involved in the Community Action Program wanted to participate in the split-refund project, the participants saved an average 47 percent of their refund and 76 percent of the participants said the service helped them save money that otherwise would have been spent.
- Taxpayers visiting volunteer tax preparation sites should ask about the split refund option and Form 8888.
- The split refund service is free, as is direct deposit.
- Taxpayers can continue to use the direct deposit line on Form 1040 to electronically send their refunds to one account.
- The Free File program provides free tax preparation and free electronic filing to taxpayers whose adjusted gross income is $52,000 or less. Free File is available only through the IRS web site at www.irs.gov and is a partnership between the IRS and the Free File Alliance, a group of tax preparation software companies.
- California had the largest number of users last year at over 292,000 out of the 3.9 million Free File users nationwide. But many more California households qualify to use Free File since about half of the households in the state have incomes below $52,000.
- Changes in Free File as it begins its fifth year include:
- Taxpayers can use Free File to request the Telephone Excise Tax Refund, either the standard amount, which ranges from $30-$60, or the actual amount. Some Free File Alliance members will provide free access to Form 1040EZ-T for those people who have no legal obligation to file a tax return, but who can request the one-time telephone excise tax refund. Some alliance members also will offer free access to Form 8913 to request the actual amount.
- Two companies will offer Free File in Spanish.
- Participants will no longer offer refund anticipation loans (RALs) and other ancillary products.
- Some alliance members are offering the state return for free. All alliance members’ Web sites display whether state online tax preparation and filing services are available and the associated fees, if any.
- Taxpayers can use Free File to file a Form 4868, Application for Automatic Extension of Time to File.
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