With the recent passage of the 2008 Bipartisan Economic Growth Package, hundreds of taxpayers have been left scratching their heads. Between the current tax season, two different versions of the package, and inaccuracies in the media, not too many people fully understand what is going on with these new “rebate checks.” Fortunately, the tax professionals at the Roni Deutch Tax Center are up to date on all tax laws and have compiled the following list of common economic stimulus FAQs.
1. How are the rebate amounts determined?
The rebates will be determined based on your 2007 federal income tax return. However, the exact amount you can expect will vary depending on every individual household. Most people who pay federal taxes can expect a rebate. The basic rebate values are as follows: $600 for individuals, $1,200 for married couples, and an additional $300 per qualifying child. However these amounts are subject to income limits and other restrictions.
2. How will the reduced rebate work?
Payments to higher income taxpayers will be reduced by 5% of the amount of AGI above $75,000 for individuals and $150,000 for those filing jointly. Thus, for every $1.00 earned above those thresholds, individuals and married couples will lose $0.05 of the maximum rebate amount.
3. Who will qualify to receive a “reduced rebate”?
Individuals with 2007 AGI between $75,000 and $87,000
Individuals with 2007 income taxes of $300 to $599
Married couples with 2007 AGI between $150,000 and $174,000
Married couples with 2007 income taxes of $600 to $1,199
Individuals who received at least $3,000 from the combination of Social Security, Veteran benefits, and Earned Income in 2007
4. Who will NOT qualify to receive a rebate?
Individuals or Married Couples who owe the IRS back taxes (the rebates will be applied to their back tax liability).
Individuals who have delinquent child support payments
Individuals who have delinquent student loan payments
Individuals with 2007 adjusted gross incomes (AGI) over $87,000
Married couples with 2007 AGI over $174,000 in 2007
Individuals earning less than $3,000 from the combination of Social Security, Veteran Benefits, and Earned Income in 2007
Individuals with 2007 income taxes less than $300.00
Married couples with 2007 income taxes less than $600.00
College students claimed as a dependent on another return (i.e. parent’s return)
Non-resident aliens (i.e. individuals without a legal immigration status or Social Security Number)
5. Do I need to apply for the rebate?
No. The IRS will automatically send out the rebate checks this Spring based on your 2007 income tax returns. As long as you file a return and qualify for the rebate, you will get a check in your mailbox. However, it is essential to file a return this tax season because you will not get a check if you do not file.
6. What if I only have Social Security income and no tax liability?
You will still need to file a 2007 income tax return to get your rebate. However, if you do not have a tax liability then you will not have to pay any taxes.
7. When will I get my check?
Rebates are expected to be sent out in early May 2008. However, there is no guarantee on when you can expect to have the check in your mail. To receive it early, file your 2007 income tax return early.
8. What if I filed as Head of Household or Married Filing Separately?
For the purpose of the rebate check, persons filing as Head of Household or Married Filing Separately will be treated the same as Individuals.
9. Will the rebate delay or impact my 2007 tax refund?
No. You will still receive your refund as usual if you qualified for one.
10. Will I be taxed on my rebate check?
No. According to the U.S. Department of Treasury, you will not be taxed on these payments.
11. Will this rebate cut into my 2008 refund?
No. Numerous media outlets have wrongly reported the answer to this question. The rebates are not an advancement on your 2008 tax refund.