Tax Rebates –What’s the Catch?
That’s been a common question from our customers at TurboTax ever since the Economic Stimulus Act became law Feb. 13. It’s not surprising. We’ve all doubtless been warned: “If it’s too good to be true, then it probably is.” In fact, Google lists 50 million variations of this adage.
Then how could it be true that the government wants to give most of us what is essentially free money? The simple answer is, because the federal government wants to put money in our pockets so we’ll spend it and help stimulate our slowing economy.
Under the act, starting in May some 130 million Americans will receive what’s known to most as a tax rebate. You might hear the IRS call it a stimulus payment. It will be worth at least $300 and as much as $1,200 or more per household this year. Furthermore, it won’t reduce your 2007 tax refund, need to be repaid later, or be taxed in another year. It won’t lower any government benefits you normally get. And if you’re likely to get a stimulus payment, the IRS will send you a letter telling you how you can (you may have already received this). Hint: You have to file a 2007 tax return, even if you don’t normally need to.
So go ahead and get your share. Learn here if you qualify.
Unfortunately, you might not get a rebate if your 2007 income is too high or too low. But, wait, you won’t necessarily miss out. If you didn’t get a payment or got a partial payment because your income was too high or too low, you’ll get a do-over next year. You can use your 2008 income to qualify, when you file a 2008 return in 2009.
Conversely, what if your 2008 return shows you would get you a lower payment than you did with your 2007 return? No worries. Just keep the difference — really. Also, if you have a baby or adopt a child in 2008, more good news. You could still get a stimulus payment for that child on your 2008 return.
What if you owe federal income tax from a previous year, student-loan debt or back child support? This is where your “luck runs out” (only 372,000 Google listings) because as it does with regular tax refunds, the IRS will turn your free money into a payment of those debts.