Tax Rebate–A Complete Guide to the Economic Stimulus Package

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Starting tomorrow, the Treasury will begin sending a tax rebate check to more than 130 million households. These payments are being sent as part of the Economic Stimulus Package Congress passed earlier this year. To receive a tax rebate, you must have a valid Social Security number, $3,000 of income and file a 2007 federal tax return. Eligible people will receive up to $600 ($1,200 for married couples), and parents will receive an additional $300 for each eligible child younger than 17. If you are a retiree, disabled veteran or low-wage worker who is exempt from filing a tax return, you must do so this year in order to receive a stimulus payment. Here are the details.

Tax Rebate Payments–The Basics

The economic stimulus payments will go to more than 130 million households starting tomorrow. The payments are not taxable and won’t reduce your 2007 or 2008 refund or increase the amount you owe when you file your 2008 return.

Are you eligible for a tax rebate?

Most people who file a 2007 tax return will qualify for a tax rebate, although not everybody will. You must have a valid social security number, you can’t be claimed as a dependent on a tax return, and you must have either an income tax liability or “qualifying income” of at least $3,000.

The stimulus payment begins to phase out for individuals with adjusted gross incomes (AGI) over $75,000 and married couples who file a joint return with AGI over $150,000. The combined payment is reduced by 5 percent of the income above the AGI thresholds.

Here are two examples of how the phase out works according to the IRS:

An individual with AGI of $80,000 and federal income tax liability in excess of $600 would qualify for a basic rebate of $600. Because this individual’s AGI exceeds $75,000, however, her rebate is reduced by $250 (the credit is reduced by multiplying the amount of AGI over $75,000 by 5%). The taxpayer receives an economic stimulus payment of $350.

A married couple with two children, AGI of $160,000 and federal income tax liability before the child tax credit exceeding $1,200 qualifies for a basic rebate of $1,200 and an additional qualifying child credit of $600 for a total rebate of $1,800. But because the couple’s AGI exceeds $150,000, their rebate is reduced by $500 (the amount of AGI over $150,000 multiplied by 5%). The couple receives an economic stimulus payment of $1,300.

Note that if you are not eligible for a tax rebate now, but become eligible next year, you can claim the economic stimulus payment next year on your 2008 tax return.

When will you get your tax rebate?

As noted above, the Treasury will begin sending out direct deposits tomorrow. But the ultimate timing of an individual’s payment depends on the last two digits of their social security number. Here is a schedule of the payments as reported by the IRS:

stimulus-payment-schedule-for-tax-returns-processed-by-april-15_1209350202486.png

Scam Artists Are Calling Taxpayers about the Stimulus Payments

You should be aware that the IRS is reporting that scam artists are calling taxpayers about their tax rebate checks. Here is the notice published by the IRS:

If someone claiming to be from the IRS calls or e-mails you about the payments and asks you for a Social Security, bank account or credit card number, it’s a scam. The scammers are trying to get your personal and financial information so they can empty your bank account, run up charges on your credit card and more. Find out more — see IR-2008-11, IRS Warns of New E-Mail and Telephone Scams Using the IRS Name; Advance Payment Scams Starting.

Here are some other great articles about the tax rebate and economic stimulus package:

Published or Updated: October 28, 2012
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Comments

  1. Patrick says:

    Excellent write-up, and thanks for the link. :)

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