By Tonya Fennell: CNJ staff writer
As a working mother, Candace Montgomery uses her cell phone frequently to maintain contact with her two teenage daughters.
And the teenagers use their phones to talk for hours, text message, and download music and ringtones.
“Their cell phones are like an extra appendage,” Montgomery said. “I swear it is like the phones never leave their hands.”
So, including Montgomery’s husband, Brad, who uses his cell phone for business, there are four cell phones and a land line in the household.
“We pay over $200 a month in phone bills,” Montgomery said. “So, it can get pretty expensive.”
This year, the Montgomery family and all federal taxpayers are eligible to receive a telephone tax refund between $30 and $60.
The telephone tax refund is a one-time payment available on 2006 federal income tax returns. The refund is the by-product of a recent federal court decision finding that federal excise taxes should not apply to long-distance or bundle phone service.
According to www.irs.gov, any individual, business or nonprofit organization that paid the tax for long distance is eligible for the refund.
Clovis Certified Public Accountant John Schonberger said the refund applies to land lines and cell phone long distance bills from March 2003 through July 2006. According to Schonberger, he is advising everyone to take advantage of the refund.
“It is a tax credit,” he said, “which means it reduces taxes dollar for dollar.”
—One exemption — $30
—Two exemptions — $40
—Three exemptions — $50
—Four exemptions — $60
How to get Telephone Excise Tax Refund
— Individual taxpayers may choose the standard refund and should fill out the appropriate line on their tax return. There are no additional forms to file.
—Individual taxpayers, businesses and tax-exempts can figure the actual amount of tax paid for refund by calculating the tax from old phone bills. Complete Form 8913, “Credit for Federal Telephone Excise Tax,” and attach it to your tax return.
—Businesses and tax-exempt organizations can also use a special formula to figure the refund based on bills for two months. Form 8913 must be filled out and attached to the income tax return.
For more information
— Instructions for requesting the refund will be included with tax forms
The National Society of Accountants has highlighted tax changes for
—Charitable contributions, such as clothing and household items, donated after Aug. 17, 2006, must be in good used condition or better. However, a
taxpayer may claim a deduction of more than $500 for any single item, regardless of its condition, if the taxpayer includes a qualified appraisal of the item with the return.
—The value of each personal and dependency exemption is $3,300, which is up $100 from 2005. The standard deduction is $10,300 for married couples filing a joint return and qualifying widow(er)s, a $300 increase over 2005; $5,150 for singles and married individuals filing separate returns, up $150; and $7,550 for heads of household, up $250.
—The contribution limit for Roth and traditional IRAs rose to $5,000, up from $4,500 in 2005, for those age 50 or over. For those under 50, the limit remains unchanged at $4,000.
—A 10 percent credit is allowed for various energy-saving improvements made to a taxpayer’s main home. The credit is based on the cost of new energy-efficient improvements including insulation, exterior windows, exterior doors, water heaters, heat pumps, central air conditioners, furnaces and hot water boilers. The overall credit is limited to $500.
—Dependent exemption has increased from $3,300 to $3,400.
—Cash contributions to charity must now be supported by a dated bank record or a dated receipt.
—Hope and Lifetime Learning education credits will be phased out ratably for taxpayers with modified adjusted gross income of $47,000 to $57,000 ($94,000 to $110,000 for joint filers).
—Business mileage goes from 44.5 cents per mile to 48.5 cents. Medical mileage goes from 18 cents per mile to 20 cents.
—Social Security wage base rises from $94,200 in 2006 to $97,200 in 2007.