As you are preparing your taxes this year, don't overlook the federal excise tax refund credit.

What, you've never heard of it? Well the federal excise tax has been charged to you on your phone bill for years. It is an old tax that was assessed on your toll calls based on how far the call was being made and how much time you talked on that call. When phone companies began to offer flat fee phone service, challenges to the excise tax ended up in federal courts in several districts of the country. The challengers pointed out that flat fee phone service had nothing to do with the distance and the length of the phone call. Therefore, the excise tax could not be assessed.

After several trials, losses and appeals, the IRS has finally conceded this argument. Phone companies were given notice to stop assessing the federal excise tax as of Aug 30, 2006. It may have been on your September statement, but it should NOT have been on your October bill.

But, the challengers of the old law also demanded restitution. So the IRS has announced that a one time credit will be available when you and I file our 2006 tax return.  However, the IRS established limits on how BIG a credit you can get. Here is how it works.

• If you file your return as a single person with just you as a dependent, you get to claim a $30 credit on line 71 of your 1040.

• If you file with a child or a parent as your dependent, you claim $40.

• If you file your return as a married couple with no children ,you claim $40.

• If you file as married with children, you claim $50 if one child, $60 if two children.

In all cases, the most you get to claim is $60 - UNLESS you have all your phone bills starting AFTER Feb 28, 2003 through July 31, 2006 (do not use any bills starting Aug 1, 2006.), then you can add up the ACTUAL TAX AS IT APPEARS ON YOUR BILLS AND CLAIM THAT FOR A CREDIT.  So here's another reason why you should keep your records for 7 years.  Normally, it's to have them in case of an audit.  This time you can use them to get a larger credit.

One important note - this is a refundable credit. That means you get this money, no matter how your tax return works out. If you would end up owing the IRS a balance, the refund will reduce that balance you owe. If you end up getting a refund, the credit will be added and you get a bigger refund by that $30 to $60, depending on how many dependents are on your return.

If you have any questions, the IRS has set up a Frequently Asked Questions page to help you out.

This is a one time only credit so make sure that the people you know and love hear about it.