2008 Stimulus Package

By now everyone is aware of congressional efforts to stimulate the U.S. economy. The major centerpiece of the legislation just signed into law is a provision to send many Americans a rebate check. The hope is that taxpayers will spend the money they receive and stimulate the economy. Rebate checks should start going out by late spring.

 

The rebate amount, based on tax liability, will be up to $600 for individuals and $1,200 for married couples filing jointly and an additional $300 for each qualifying child (dependent children under age 17). There is no cap on the amount of qualifying children that may be eligible for the rebate.

 

The rebate amount will begin to phase out for taxpayers with adjusted gross incomes above $75,000 or $150,000 for married couples filing jointly. The rebate is reduced by 5% of the amount of a taxpayer's AGI that exceeds the threshold amounts. Therefore, for an individual with no children, the rebate will be zero if that person's AGI is $87,000 or above. We can discuss what rebate amount you can expect once your 2007 tax return is prepared and filed. In order to be eligible for the rebate, a 2007 tax return must be filed. The earlier your return is filed, the earlier you could receive your rebate. Therefore, we should make sure your return is filed by the due date, including extensions, as the government is not authorized to send out any checks after December 31, 2008.

 

A $300 ($600 for joint filers) rebate will also go to low-income taxpayers with little or no tax liability if the individual has: (1) qualifying income of at least $3,000; or (2) net income tax liability of at least $1 and gross income greater than the sum of the applicable basic standard deduction amount and personal exemption (twice the exemption amount for joint returns). Qualifying income includes earned income, social security benefits, and veteran disability benefits.

 

The rebate check will not lower your 2008 refund, if any. However, the 2007 rebate check will be reconciled on your 2008 return. The actual credit will be calculated on your 2008 return. If you are due a higher credit, you will get the remainder; if you should have received a lower credit/rebate, you will not have to pay back such amount. Thus, some taxpayers may be eligible for a higher credit in 2008 due to a change in circumstances. For example, an AGI below the threshold amount or having a child.

 

Nonresident aliens, estates or trusts, or individuals claimed as a dependent on another taxpayer's return cannot qualify for the rebate. In order to receive a rebate, the taxpayer's, the taxpayer's spouses and the taxpayer's children's social security number must be included on the tax return. ITINs issued by the IRS are not eligible identification numbers for this purpose. Payment of the credit (or the check) is treated, for all purposes, as a payment of tax. Any resulting overpayment under this provision is subject to the refund offset provisions, such as those applicable to past-due child support.

 

If you have, any questions please feel free to contact us.

 

Very truly yours,

 

Zehnder & Associates, P.C.