Tax Rebate Followup

Amidst yesterday’s discussion of the new tax rebate plan, a reader named Randy asked:

Will this work the same as the last Bush rebate? Meaning it reduces he amount of my tax refund by the amount of the rebate I receive? For some reason, I think this is how it worked in 2001. The down side is that if you are managing your taxes to break even, you have to pay it back then, right?

This is a great question, and the answer wasn’t entirely clear based on what I had read yesterday. After a bit more digging, however, I’ve found the answer…

Unlike a similar stimulus program in 2001, the money is an outright payment, not an advance or offset against the next year’s tax filing.

So… The money will be yours, free and clear.

While I touched on the structure of the plan, I thought I’d revisit it here again:

The rebate checks would be increased by $300 for each dependent child, without limit. That means a couple with four children and taxable income of $100, 000 after deductions would receive $2, 400. The rebates are not taxable.

Payments would be phased out for individuals with more than $75, 000 in taxable income, and joint filers earning more than $150, 000.

I still haven’t seen details on exactly how the phase out would work, though it appears that the calculations will be based on 2007 numbers.

Update: I’m running a poll on what you’re planning on doing with your ‘economic stimulus’ check.

Source: Baltimore Sun

40 Responses to “Tax Rebate Followup”

  1. Anonymous

    Ken…you’re right. The Economic Stimulus Payment–fancy words meaning give back part of our tax money suddenly so we’ll blow it instead of wisely using it–is a 2008 rebate. But it is estimated using 2007 tax data.

    You should get a refundable credit on your 2008 tax return when you file in early 2009.

    The decent thing the government did this time is give the Taxpayer the best of both worlds. If you file a 2007 tax return by October 15th, 2008, you will get your “rebate” check.

    If your rebate check should be more, this is corrected when you file your 2008 return in 2009.

    But (and this is the decent part), if based on your 2008 tax return your rebate should be LESS than what you receive based on your 2007 data, you get to keep the higher number without penalty or payback!

    For example, Let’s say your rebate is $1500 based on your 2007 facts. Now let’s say you make quite a bit more in 2008 than in 2007. Maybe you take an IRA distribtion in 2008 or win a lot of money or get a promotion. Woo Hoo! Good for you!

    Let’s say it puts you enough over $75,000 single or $150,000 so that you shouldn’t get ANY rebate dollars. The decent thing here is that you don’t have to pay it back!

  2. Anonymous

    I changed jobs in 2007 and had a 401K distribution (~80K) which made my 2007 income above the limit for the rebate. However, my 2008 income will be within the guidelines for a full rebate. It appears to be estimated using 2007 income, but based on 2008 income. If this is the case, will I receive a credit next year on my tax return?

  3. Anonymous

    I just have a quick question. I don’t know anyone who has actually gotten this rebate according to the promise they would be out by May 2 for DD. Does anyone know if there was some sort of hold up on the governments side??

  4. Anonymous

    Garnishment – I suspect your rebate check will be garnished or rather captured to recoup what you owe. But I definitely do not know for sure. Probably also depends if any prior refunds have been withheld.

    Parents claim you – Your parents will probably receive $300 on your behalf since you are a dependent for income tax filing purposes.

  5. Anonymous

    I have a question if I make roughly $6000 a year but am claimed on my parents taxes, do I get a check or no. I have done research on line but I see no reference to this. I am 18 years old if that makes a difference

  6. Anonymous

    This tax rebate will be similar to the one for 2001. Checks mailed out in 2008 will be an advance payment of the tax rebate that will be on the 2008 tax year forms which are due next April 2009. Advance payments will be based on 2007 tax year returns due this April 2008. If you don’t get a check mailed to you then you may be entitled to that credit on your 2008 tax return filed next year, if you qualify. It’s that simple. So, if you have don’t have a kid at the end of 2007 you won’t see the additional $300 until you file taxes for 2008 tax year.

  7. Anonymous

    How much would we get if my spouse only made $1000 in income last year but I made $60,000? If she was single she would not be eligible for the tax rebate because she did not make $3000. But as a couple because we file as a married couple, they may pay us a full $1200. Or maybe not. Anyone know? (we have no kids)

  8. Anonymous

    Nickle, here is a scenario I’d love your thoughts on.

    My wife an I are both in school. Given the way our taxes are looking we WILL have a tax bill, but it will be less than the Education Credit of $2,0000 we will be eligible to take.

    If we take the full credit and reduce our tax liability to $0, we will (as I understand the current Congressional scheme) receive $600.

    If we don’t take the full credit (and it is my understanding that you do not HAVE to take the full amount you could) and end up paying, say, $1 in tax, wouldn’t that end up making us eligible for the $1,200 rebate?

    Also, not that I’m that worried since everything would be legit, is this the kind of thing that is likely to trigger an audit?

    Honestly, it feels kind of slimy, but I have a hard time feeling bad about getting money back from the govt.

  9. Anonymous

    The details of the whole deal seem to change daily as it’s being put together. Ron Hunt’s quote from the White House fact sheet corroborates an MSNBC article, which states: “Under the deal, individuals who pay income taxes would get an advance of up to $600 on next year’s refund, and working couples would get up to $1,200. Those with children would receive $300 in additional tax credits for each dependent.”

    After all, the money has to come from somewhere.

    Ron’s quote further clarifies in my mind that a working couple can be construed as a couple with one working and one non-working person because the figures are based on tax rates and dollars.

    However, I look forward to getting all of the facts in stone once everyone’s signed off on it.

    MSNBC article:

  10. Anonymous

    This whole discussion has become so convoluted it’s insane!
    Send all the rebates to our troops in Iraq and Afghanistan to fortify their armor. They need the support, we don’t need a useless handout.

  11. Anonymous

    If the rebate is based on 2007 income, is there any provision for those above the threshold based on 2007 income but below based on 2008 income to get a refund after filing 2008 taxes.



  12. Anonymous

    If so, then it is useless to file a 2007 tax if I didn’t file in 2006. Then I get nothing anyway you look at it.

    That figures.

    The IRS can take my rebate and shove it!
    I don’t need their lousy $300 or $600 anyway.

    The tax laws are a crock of **** anyway.
    The gov. has been pulling this off for so long that they have everyone brainwashed that it is a legit law when in fact it isn’t and never has been.

  13. Anonymous

    After further research, it appears that this rebate is going to be the same as in 2001. The fact sheet issued by the White House dated 01-24-08 states: “In 2008, taxes would be cut from 10 percent to zero percent on the first $6,000 dollars of taxable income for individual taxpayers and the first $12,000 of taxable income for couples”. This equals $600 dollars for individuals and $1200 dollars for couples. Therefore, you will have to report the rebate on your tax year 2008 return, or you will have a double rebate. Therefore, this rebate is no different than the rebate in 2001.

    The IRS will still have to base the extract on Tax Year 2006 filers as that is the latest information they currently have on file.

  14. Anonymous

    The rebates cannot be based on 2007 tax year returns because IRS will not have all returns processed until probably July or August. In order to have the rebates out in May, it would have to be based on Tax Year 2006 data.

  15. Anonymous

    It is unclear at this time what the rebates will look like in the end. There is the version proposed by the President and a Senate version of the stimulus package that was unveiled January 28. Under the Senate version, Social Security benefits would be counted towards “qualifying income.” We can only wait patiently to learn what the final version will be.

  16. Anonymous

    I did not file a return in 2006. I was under the minimum for filing. I am still under the minimum for filing in 2007. I did not plan, once again, on sending in a return for 2007 since I was not required to. Will I miss the rebate entirely if I file or not for 2007? I only have $7800.00 in interest income to claim and none of my Social Security Disability is taxable. My adjusted taxable income is $0. Help from anyone would be welcomed.
    Thanks everyone!

  17. Anonymous

    The plan speaks of working couples. Does that mean you have to be earning a salary? Does one who is retired and all his income is from pensions and investments qualify for the rebates?

  18. Anonymous

    I’ve looked at every news story I could find, and like others, I’m wondering about the definition of ‘working couples’. Like others, we are a one-income couple, but file jointly. Is this tied to the income-W2 earner getting 600, or as we file as a couple with income we might be eligible for $1200? Many couples have one wage person. No one seems to define ‘working couples’ eligibility.

  19. Anonymous

    One thing is for sure, this will be the year that EVERYONE files a tax return. If money is based on FILED taxes, the IRS will have a lot of paper on their hands. I’d bet they are hiring.

  20. Anonymous

    Actually everything I am reading says that this is a rebate of your 2008 taxes.

    But remember this is not an early refund and I don’t believe that 2001 was either. Not everyone gets a refund, in fact a lot of people end up owing. This shouldn’t cause you to have a smaller refund or have to pay come April 2009 because this actually lowers your taxes for 2008. This plan would be even more horrible if it was just a forced refund of your taxes! Imagine what this would do to spring 2009 when people have to scrap the money together to pay back.

  21. Anonymous

    Nickel –

    What is your source for the following:

    “Unlike a similar stimulus program in 2001, the money is an outright payment, not an advance or offset against the next year’s tax filing.”

    My research has found the opposite to be true; that the rebates will work just like the 2001 rebates.

    Thanks for the great blog!

  22. Anonymous

    The way the rebate works doesn’t seem exactly clear. From the link I posted above, it sounds like the rebate will be effected by cutting out the 10% tax bracket for people within the income limits in 2008, which means that it has to be based on 2008 earnings (since it’s done based on 2008 taxes). But, maybe the checks will be issued based on 2007 earnings? My husband and I are within the limits in 2007, but we won’t be in 2008. Does that mean we’ll owe money at the end of the year? We’ll see!

  23. Anonymous

    My daughter got married July 1, 2007. Her husband’s parents are considering claiming him on their 2007 taxes as a dependent because he is a full-time student, lived with and was supported by them until they were married. Therefore, she would have to file “married filing separately”. How will this effect the amount they receive should the recent 2008 rebate stimulus package be approved? In order to receive the full $1200, would they have to file “married filing jointly” for 2007 or will it be adjusted once they file their 2008 taxes as married filing jointly?

  24. Anonymous

    That’s a good question–also does that mean we are going to be taxed on this money come 2008/09–but if it’s a rebate we already paid into it–but not those who didn’t pay any taxes even though they’ll get it so shouldn’t they be taxed?

  25. They’re planning on sending the check in May or June of this year (2008), so there’s no way they could base it on 2008 earnings. It would have to be based on 2007 taxes, which are due by April 15, 2008. If they wanted to base it on 2008 earnings, they’d have to wait until next year to do it.

  26. Anonymous

    thanks for the follow-up… While the structure is quite confusing, it appears that I will be phased out if it is on 2007 earnings (it was a good year!). Definitely hitting some phase out in 2008, but not entirely, if it is based on 2008 as the previous poster suggested.

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