Lewes CPA
officeProgar & Company, P.A.
Certified Public Accounting services for businesses and individuals
Rebate provisions in the Economic Stimulus Act of 2008 Article (MS Word)
Rebate provisions in the Economic Stimulus Act of 2008 Article (.pdf)
Rebate provisions in the Economic Stimulus Act of 2008
Dear Reader,
You've probably heard that the government is going to be sending
rebate checks to most Americans in an effort to stimulate the
economy. This letter explains, among other items, who gets rebates,
how they are calculated, how higher income can reduce or eliminate a
rebate, and what, if anything, you'll need to do to get one.
Who gets a rebate?
Only individuals get rebates. Business entities don't get them, nor
do estates and trusts.
Not all individuals get rebates, however. You won't get one if you
are or can be claimed as someone else's dependent. Also, nonresident
aliens and illegal immigrants won't get rebates.
Does that mean all other individuals get rebates?
No. To get a rebate, in general, for 2007, you must either (1) owe
tax as computed in a special way or (2) have at least $3,000 of
qualifying income—earned income generally, social security benefits,
and veterans' disability payments (including payments to survivors
of disabled veterans).
How much do you get?
A single person with no qualifying children gets a maximum rebate of
$600 or a minimum rebate of $300. A married couple filing jointly
with no qualifying children gets a maximum rebate of $1,200 or a
minimum rebate of $600.
To get the maximum, your 2007 tax (figured in a special way) must be
$600 or more for a single person and $1,200 or more for a married
couple filing jointly.
To get the minimum, you must have at least $3,000 of qualifying
income (explained above) or owe tax (figured in a special way) of at
least $1.
Your rebate amount will fall in between the minimum and maximum if
your tax is more than $300 but less than the maximum rebate for your
filing status. In that case, your rebate will be equal to your tax.
For example, say you are single and your tax is $500. You will get a
rebate of $500.
Do you get a bigger rebate if you have children?
Anyone who qualifies for a rebate in any amount gets an additional
$300 for each qualifying child. Thus, for example, a married couple
filing jointly with two qualifying children could be eligible for a
maximum rebate of $1,800.
To qualify, a child must be under the age of 17, live with you for
more than half of the year, and be your son, daughter, stepson,
stepdaughter, brother, sister, stepbrother, stepsister, or
descendant of any such individual. In addition, the child must not
have provided more than half of his or her own support.
How does higher income affect a potential rebate?
The amount of the rebate (both the basic and the child amount) is
reduced by 5% of a taxpayer's adjusted gross income (AGI) above
$75,000 ($150,000 for joint returns).
For example, a married couple filing jointly with no children has
AGI of $160,000, and net tax liability of more than $1,200. They
start out with a $1,200 basic rebate. But they must subtract a $500
phase-out [5% × ($160,000 − $150,000)]. This leaves them with a
final rebate of $700.
What do I have to do to get the rebate check?
Nothing, if you file a 2007 federal income tax return. The IRS will
automatically figure your rebate based on your 2007 tax return. IRS
will start sending rebate checks out in May to those who filed
before the due date of April 15, 2008.
What if you don't have to file?
Here's where it gets tricky. You can't get a rebate unless you file
a 2007 return. Therefore, many people who normally don't have to
file a return will have to do so in order to get a rebate check.
For example, an individual whose only income is $3,000 of earnings
normally would not be required to file a return. Likewise, an
individual whose entire income consists of $8,000 of social security
benefits normally would not have to file a return.
These individuals should file Form 1040A to show the IRS that they
meet the $3,000 qualifying income threshold. IRS will compute the
rebate based on the information on the form. No income tax will be
owed as a result of this filing.
When completing the Form 1040A, write the words “Stimulus Payment”
on top of the form. Only a few lines on the form need to be filled
in. Wages and other compensation are entered on Line 7. Social
security benefits, Tier 1 railroad retirement benefits, and
veterans' disability or survivor benefits are entered on Line 14a.
Do rebates affect 2008 taxes?
The rebate that the IRS will send you after you file your 2007
return usually won't affect your 2008 taxes on the return that you
file in 2009. If it does affect your 2008 taxes, it can only be in a
good way.
When you do your 2008 taxes, you will figure what the rebate would
have been based on your 2008 taxes. It could be higher or lower than
the check that you received from the IRS in 2007.
If it is higher, you will get a credit against your 2008 taxes for
the difference. It if is lower, you won't have to pay the difference
back.
I hope this information is helpful. If you would like more details
about this, please do not hesitate to call.