Clarifying tax rebate confusion
Dear Liz: I'm confused about the upcoming tax rebate. In some articles the rebate is described as an advance on next year's refund. In others, experts say the rebate won't affect my refund. Which is correct?
Answer: Well, both. That may seem contradictory, but remember we're talking about tax law.
To generate the money for the rebate checks, Congress created a special 2008 tax credit for most taxpayers. Normally, you'd have to wait until you filed your 2008 tax return next spring to get this money. But Congress wants you to spend the money sooner to stimulate the economy, so the Internal Revenue Service will start sending the checks in May.
You'll have to account for the check you receive when you do your taxes next year, but the rebate won't reduce the refund you would have otherwise gotten if Congress hadn't acted to create the credit.
If, when you do your taxes next year, it turns out your actual credit is larger than the check you received, you can claim the excess when you submit that tax return. If it turns out you got a bigger check than you deserved, however, you won't have to pay back the extra money.
The rebate check in most cases will equal the tax liability on your 2007 return (the one you file by April 15 this year) up to a maximum of $600 per taxpayer and $300 per qualifying child. The rebate is phased out for higher-income folks, meaning that singles with adjusted gross incomes of more than $87,000 and married joint filers with more than $174,000 won't receive anything.
Certain people will receive rebates even if they don't owe any 2007 taxes. Those people include low-income workers and those who receive Social Security benefits or veterans' disability compensation, pension or survivors' benefits from the Veterans Benefits Administration. These folks are eligible for a $300 payment, or $600 on a joint return, if they had at least $3,000 of qualifying income in 2007.
Everybody who wants a rebate check needs to file a tax return for 2007, the IRS says, even if they earn too little to owe taxes. Although some tax authorities speculated the IRS would work with the Social Security and Veterans Benefits administrations to identify eligible beneficiaries, the IRS recently clarified that filing 2007 returns is required to get a check.
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