The Internal Revenue Service today advised taxpayers that recovery rebates reaching as high as $600 for individuals and $1,200 for married couples, will soon be deposited or mailed to an estimated 130 million Americans. The rebates are the centerpiece of a $152 billion package in the Economic Stimulus Act of 2008 designed to jumpstart the U.S. economy.
In most cases taxpayers will not have to do anything extra this year to get the economic stimulus payments beginning in May, after the current tax season concludes, and will largely be completed by mid-summer.
What do I need to do?
Most taxpayers just need to file a 2007 tax return as usual. No other action, extra form or call is necessary. The IRS Web site (www.irs.gov) will be the best information source for all updates and taxpayer questions. The IRS will use information on the 2007 tax return filed by the taxpayer to determine eligibility and calculate the amount of the stimulus payments. Until the taxpayer's 2007 tax return is filed and processed, no rebate check will be issued.
Child Credit
Individuals who qualify for the basic rebate credit amount are also eligible to receive an additional rebate credit amount equal to $300 per qualifying child.
1. Qualifying child must not have attained the age of 17 as of the close of the calendar year
2. Qualifying child must be the taxpayer's qualifying child for purposes of the dependency exemption
3. Qualifying child must be a son, daughter, stepson, stepdaughter, or descendant of such child, or a brother, sister, stepbrother, stepsister
or a descendant of such relative.
There is no cap on the number of child bonus payments.
No Tax Liability - Social Security & VA Disability Recipients
As the result of intense lobbying by advocates for senior citizens, the new law treats Social Security and VA disability benefits as qualifying income for purposes of the $300 minimum rebate. As with traditional earned income, however, to qualify for the $300 minimum rebate exception, a Social Security or VA recipient must receive at least $3,000 in benefits.
Example: Dave is retired and receives $18,000 a year in Social Security benefits and he has no other income. Dave's Social Security benefits are excludible from his gross income and his other income for the year is insufficient to cover his standard deduction and personal exemption. As a result, he pays no federal income tax for 2007. Nevertheless, because the new law treats the $18,000 in SSA benefits as "qualifying income", he will receive a $300 rebate.
Without any tax liability you are not required to file a tax return, but our position is you should file for 2007. The IRS has indicated they are setting up a system for you to receive your stimulus check without filing, but the details have yet to be released. The information provided so far about the process though looks like it will require more work then simply filing a 1040.
Recipients of Social Security, certain Railroad Retirement and certain veterans' benefits should report their 2007 benefits on Line 14a of Form 1040A or Line 20a of Form 1040. Taxpayers who already have filed but failed to report these benefits can file an amended return by using Form 1040X.
Phase Out Limits
Payments to higher income taxpayers will be reduced by 5 percent of the amount of adjusted gross income above $75,000 for individuals and $150,000 for those filing jointly.
Identification Requirements
Taxpayers must have valid Social Security Numbers, if married filing jointly, both taxpayers must have a valid Social Security Number and all qualifying children must have valid Social Security Numbers to be eligible.
Other Points to Keep in Mind
Although determined based on the 2007 tax year, the rebate technically remains a credit against 2008 tax, made in the form of an advance payment. As such, a taxpayer filing a 2007 return in 2008 cannot claim the rebate as an offset to his or her 2007 tax liability reported on that return in lieu of waiting to receive a rebate check. Nor can the taxpayer choose instead to count the rebate as part of an estimated tax installment for either 2007 or 2008.
Rebates are subject to offsets for any federal debts owed by the taxpayer, including back taxes and unpaid child support. However, they will not prevent eligibility in any federally-funded relief program.
This time, the government wants to utilize direct deposit on a larger scale than in 2001. Treasury officials have indicated that direct deposit will get refunds in taxpayers' hands more quickly than mailing paper checks. They will have your direct deposit information by what you provide on your 2007 tax return. If you did not request direct deposit on your tax return then a paper check will be mailed to you.
Please Beware
The IRS will mail two informational notices to taxpayers advising them of the stimulus payments. However, taxpayers should be alert for tax rebate scams such as telephone calls or e-mails claiming to be from the IRS and asking for sensitive financial information. The IRS will not call or e-mail taxpayers about these payments nor will it ask for financial information.
