You may have heard that IRS, after losses in courts around the country, finally conceded that long-distance telephone service, as it's billed today, isn't subject to federal excise tax.

That was good news for taxpayers because, in addition to ending the collection of the tax on those services, IRS announced that taxpayers could claim a one-time refund as a credit on their 2006 tax returns. The credit is for federal telephone excise tax paid on "nontaxable services," i.e., long distance and certain bundled services (certain combined long-distance and local telephone service plans), for services billed over the 41-month period after Feb. 28, 2003 and before Aug. 1, 2006.

Since making its initial announcement, IRS has issued a steady stream of guidance on how to make this refund/credit claim. The refund is claimed on your 2006 federal income tax return. But for individuals not otherwise required to file a return (e.g., an elderly person or student whose taxable income isn't high enough to require him or her to file), IRS has issued new Form 1040EZ-T, to be filed just to claim the telephone excise tax refund.

Individuals, generally, have two options for figuring their telephone excise tax refund/credit claim amount; they may:

(1) calculate and document the amount of federal telephone excise tax they actually paid on nontaxable services over the 41-month refund period, or

(2) claim a standard ("safe harbor") amount-ranging from $30 to $60 based on the number of exemptions they're entitled to claim on the 2006 return-which won't require any documentation.

For some heavy-use, long-distance customers, and individuals who have multiple phone services (e.g., a landline and a cell phone), computing actual taxes paid may produce a larger refund. But to make the claim based on actual taxes paid, you'll have to review 41-months of old phone bills. You're looking for only the federal excise tax paid on nontaxable services; ignore tax paid on local-only service, federal access charges, and state and local taxes, none of which are eligible for refund. For actual-taxes-paid claims, you'll also have to complete new Form 8913 and attach it to your return (or, to the Form 1040EZ-T).

Certain independent contractors, sole proprietors, farmers, and individual owners of rental property may be entitled to claim an estimated telephone excise tax refund/credit for their business expenses, computed based on a special estimation formula (available only to businesses and tax exempt organizations).