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Who can claim the credit?
Anyone who paid for long distance service during the 41 month period can claim the credit.
How much is the credit?
There is a standard amount available to individuals based on the number of exemptions claimed on the tax return:
- $30 for an individual filing a return with one exemption
- $40 for two exemptions
- $50 for three exemptions
- $60 for four or more exemptions
The individual may also claim the actual amount if doing so provides a greater credit or refund.
Businesses, on the other hand, may compute the refund based on actual amounts charged during the period, or take advantage of an estimation method. Although the estimation method limits the amount of credit or refund, using this method is more convenient than the actual method.
Who can use the estimation method?
All corporate, partnership and non profit filers may use the method. Individuals who file Schedules C, E or F, and whose gross receipts from these schedules total more than $25,000 may also use the estimation method.
How does it work?
Step 1 is to extract actual phone charges billed and excise tax billed in April, 2006 and in September, 2006; then, we can arrive at a percentage of excise tax. That figure is compared with either 1%, if you had more than 250 employees in the second quarter of 2006, or 2%, if you employed fewer than 250 during that period. The lower percentage is used to estimate the excise tax you paid during the 41 month period in question.
Step 2 is to accumulate your total telephone charges for the 41 months. Using the estimation method eliminates the need to resurrect the phone bills for the period. The charges should be listed month by month.
Armed with the information above, we can use the estimation method to calculate your excise tax credit or refund. If you decide to use the actual method, you need to list the phone charges in total for each month and the excise tax for each month.
