March 17th, 2008 
Vijaianand If you aren’t aware of this happy news, here is a my short preview of that story and also some caveats around it.
Why Tax Rebate cheque?
Most of you all know US economy is pretty ugly and getting worse every day. There are lot of factors but the main culprit being the Sub prime mortgage crisis which infused a big credit crunch. US government has taken some drastic measure to ease up this credit crunch and one among being Stimulus package.
On Feb 13th, 2008, President Bush signed the economic stimulus bill that provides tax rebates to most low- and middle-income Americans. The Internal Revenue Service expects to begin distributing tax rebates by direct deposit on May 1 or 2 and by mail a week later. The distribution will continue through summer.
Whats the idea behind it?
Put back some money on consumers hands, so they can spend it and at the same time infuse the money back to the economy. It’s the other way of giving tax cut on your dollars. Instead they are sending rebate cheques for lump sum amount to get some fierce effect on the down trending economy.
The logic behind it is simple. The rebates represent a 2008 tax cut. But instead of getting the tax cut next year, when you file your 2008 return, you’ll get it this year.
Important Requisition:
If you want to get a rebate this year, you must file a 2007 federal tax return, even if you don’t owe federal income tax. Not everyone will qualify for one, however.
IRS urged people to file returns by April 15 and choose direct deposit for their refund. Those who choose direct deposit will have their rebate deposited directly into their bank account, separately from the refund.
Don’t worry!!!
If you owe tax for 2007, you can still get the rebate deposited into your bank account by providing the routing and account number – which can be found on your checks – on your 2007 tax return.
You cannot have your rebate applied to the amount you owe for 2007. However, the rebate will be diverted to pay certain delinquent debts including federal and state taxes, child support and student loans.
Who are qualified:
— Most people who paid federal income tax for 2007 will get a rebate equal to the amount they paid up to $600 (single) or $1,200 (married filing jointly).
— If you didn’t owe federal income tax for 2007, you can still get a rebate of $300 (single) or $600 (married filing jointly) if you and/or your spouse had at least $3,000 in what the IRS calls qualifying income.
People who don’t owe income tax but do qualify for a rebate still need to file a 2007 tax return, but they won’t have to fill it out completely. To help processing, the IRS wants people to write “Stimulus Payment” across the top of these modified returns, but failure to do so won’t jeopardize the rebate.
Extra $300
We all know the kids are fun but they come with extra expense but not during the tax time or when you are getting free dollars. That’s right, children are eligible to tax rebate as well.
Anyone eligible for a rebate will get an extra $300 for each qualifying child who was younger than 17 last Dec. 31.
Children 17 and older on that date won’t earn their parents a rebate. Nor will they earn a rebate based on their own income if their parents claim them – or could claim them – as dependents on their tax returns. The rules are kind of hairy, but in general, even college kids can be claimed as dependents if they are full-time students, younger than 24 and not providing more than half their support. Children in this category would not get their own rebate, even if they had substantial earnings from a job.
On the other hand, if you qualify in 2008 but did not in 2007, you can get the rebate when you file your 2008 taxes. For example, if you have a child born in 2008, you will get the $300 child rebate next year, assuming you meet the other qualifications.
Notice to Non-Resident Aliens
Rebates will not be sent to nonresident aliens (you must have a Social Security number to get a rebate), estates, trusts or people who are or could be claimed as a dependent on someone else tax return. That means most high school and many college students won’t get a rebate even if they earn more than $3,000 or pay taxes.
To get a rebate, you – and your spouse if filing a joint return – must have a valid Social Security number. Your children also must have Social Security numbers to get the $300 child rebate. An individual taxpayer identification number will not suffice.
If you have a Social Security number but your spouse has just the taxpayer ID number, neither of you will get a rebate if you file a joint return. If the spouse with the Social Security number files separately, he or she might qualify for a rebate up to $600.
Restrictions:
If your 2007 adjusted gross income was more than $75,000 (single) or $150,000 (married filing jointly), you will lose all or some of the rebate. For every $100 you make over those limits, you lose $5 of rebate until your rebate is gone. At what point your income disappears depends on how many children you have. But it drops off pretty steeply, Stiff said.
Q: “Will the rebate be taxable income that we need to claim as income for 2008 on our tax returns? Will the checks be in the actual amounts quoted, or will there be taxes deducted?”
A: The rebates are not taxable. You will not have to report them as income for 2008. No taxes will be deducted from the rebates. Rebates also will not be added to income to determine whether people are eligible for federal or federally subsidized programs such as food stamps or welfare.
IRS is expected to send a letter to all Tax payer on this matter. So Don’t panic about the letter you might be getting from IRS after next week. Its about Tax rebate and nothing about your taxes.
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