You’ve got rebate questions…we’ve got answers!

The Economic Stimulus Package recently signed by President George W. Bush has given many Americans reason to celebrate.  But some people are confused as to whether THEY can celebrate.  And if they can, how much will they have to celebrate with?  And when can the celebration begin?  Here are the down and dirty details:

1. When are the rebates going out?

The Treasury Department expects to begin sending out rebates in early May.

2. Is this rebate going to be considered as income next year?

No.  This is a rebate and will not be taxed.

3. Will the payment I receive in 2008 reduce my 2008 refund or increase the amount I owe for 2008?

According to the IRS, no, the stimulus payment will not reduce or increase your refund when you file your 2008 return.

4. What do I need to do to make sure I get a rebate?

You must file your income taxes for 2007.  Even if you don’t usually file taxes, either because you fall under the filing threshold or your only income is Social Security or Railroad Retirement benefits, it is well worth the time this year to file your taxes.  Come to your local PRO-TAX office and we can help you with this.

5. I hear some people will “not” receive the rebate.  How do I know if I am one of them? 
   The following scenarios :
1. If you owe IRS back taxes, your rebate will be applied to pay those.    
2. If you owe back child support, your rebate will be applied to your debt.
3. If you have outstanding student loans, your rebate will be applied to your debt.
4. Non-resident aliens (people without a legal immigration status or Social Security Number) will not receive a rebate. If your have a valid Social Security Number, but your spouse or child has an ITIN (Individual Taxpayer Identification Number), you may not qualify for the rebate
5. Individuals who are claimed as dependents on someone else’s return (usually a parent) will not receive a rebate.
6. Individuals (this includes Head of Household and Married Filing Separately filers) with 2007 AGI (adjusted gross income) over $87,000 in 2007 will not receive a rebate.
7. Married couples (who filed Married Filing Jointly) with 2007 AGI over $174,000 in 2007 will not receive a rebate.
8. Individuals who earned less than $3,000 from any combination of Social Security, Veteran Benefits and Earned Income in 2007 will not receive a rebate
9. Individuals with income taxes in 2007 that were less than $300 (for exceptions, see Item 7) will not receive a rebate.
10. Married couples with income taxes in 2007 that were less than $600 (for exceptions, see Item 7) will not receive a rebate.
    

6. How do I know if I’m eligible?
1. Most filers with net income tax liability in 2007 qualify for the rebate.
• If you filed Form 1040, your net income tax liability is the sum of Lines 52 and 57.
• If you filed Form 1040A, your net income tax liability is the sum of Lines 32 and 35
• If you filed Form 1040EZ, your net income tax liability is the amount shown on Line 10. 

7. I don’t have any income tax liability.  Does this mean I won’t receive a rebate?

That depends.  If you filed with dependents under age 17, you will generally qualify for an additional $300 for each qualifying child.  And, some folks with NO tax liability may still qualify.  Those people with no liability who will receive the rebate include:  Social Security beneficiaries, Railroad Retirement beneficiaries, low-income workers with earned income and/or benefits of at least $3,000, folks who receive certain veterans’ payments, and individuals who have a combined income of at least $3,000 from any combination of the above (Social Security, Railroad Retirement, veterans payments and earned income).

8. I have a combined income of $3,000.  I’ve never had to file, but want to get the rebate.  What form do I need to use to file my taxes?

The IRS has released a special version of Form 1040A showing the specific sections that can be filled out for recipients of Social Security, Veterans’ benefits and low-income workers. 

9. Okay, it looks like I qualify.  How can I figure out how much to expect?

Did you calculate your 2007 income tax liability from Number 6?  That’s about what you can expect – to a maximum of $600 for an individual and $1.200 for a married couple.  (Remember – “individual” means a filing status of single, head of household or married filing separately!)  If you had NO income tax liability, but had combined income of $3,000 (see number 4), you can generally expect a rebate of $300 for individual or $600 for a married couple.  THIS IS THE MINIMUM PAYMENT YOU CAN EXPECT IF YOU MEET THE QUALIFICATIONS OUTLINED IN ITEMS 6 and 7.

10. But I keep hearing about rebates up to $2,400.  Who can expect a rebate this high?

In Item 7, we mentioned filing with dependents under age 17.  This rebate allows $300 for each qualifying dependent under age 17.  So, if you filed head of household, with a tax liability of $300, you would expect a rebate check of $300.  Because you also have two dependent under age 17, you may get an additional $600.  Your total rebate check will be $900.  The addition of qualifying dependents under age 17 will increase your anticipated refund amount.

11. I keep hearing about a phase-out.  What is that and will it affect me?

A phase-out is a gradual reduction of benefits.  Beginning at certain income levels, the rebate amount will gradually “phase out”, or decrease until it reaches zero. In item Number 5, we gave a list of folks who can NOT expect to receive a rebate, and the list included:

• Individuals (this includes Head of Household and Married Filing Separately filers) with 2007 AGI (adjusted gross income) over $87,000 in 2007

• Married couples (who filed Married Filing Jointly) with 2007 AGI over $174,000 in 2007

That’s the amount of income when the rebate reaches zero.  But it begins at an individual AGI of $75,000 and a married couple AGI of $150,000.  The decrease is based on 5% of every dollar over the phase-out limit.  Here are two examples (one for an individual and one for a married couple):

a.    SINGLE:  $75,000 of AGI and federal income tax liability of $800 would qualify for a rebate of $600.  If that same person had an AGI of $77,000 the rebate will be subject to the phase-out rules.  This taxpayer will receive a rebate of $500 ($2,000 over limit x 5%=100, so $600-$100=$500)

b.    MARRIED COUPLE:  $150,000 AGI, two qualifying dependents under age 17, tax liability of $1,300 would qualify for $1,800 ($1,200 + $600 for dependents).  If the same married couple had an AGI of $165,000 the rebate will be subject to the phase-out rules.  This taxpayer will receive a rebate of $1,050 ($15,000 over limit x 5% = $750, so $1,800-$750=$1,050)

12. If I already filed my taxes and had the refund directly deposited to my checking account, will my rebate also be directly deposited to the same account, or will it be mailed?

You will receive your rebate in the same method you received your income tax refund.  Exception:  If you received a Refund Anticipation product, your check will be mailed to you, even if the refund anticipation product was directly deposited.

13. I’m filing an Extension of Time to File this year.  Will I be eligible for the rebate?

Yes, but not until after you file.  Be certain that you file your return by October 15, 2008.

14. I receive TANF (temporary assistance for needy families), food stamps and Social Security, and it looks like I’m eligible for the rebate.  But I’m worried the rebate will reduce my eligibility for these services.

No need to worry.  The stimulus payment will not affect your eligibility for federal benefits.

15. I’m a college student.  I worked in 2007 and earned $5,000.  I filed my return already.  Will I receive a rebate?

If you stated on your return that you are a dependent of another, and your parents claimed you on their return, you will not receive a rebate.

Still confused?  Stop into your local PRO-TAX office.  We’ll be glad to answer any questions and help prepare your income tax return so you receive both your refund AND your rebate as quickly as possible!

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