STIMULUS PAYMENTS --- Farrow & Associates
In an effort to energize the nation’s economy, the Economic Stimulus Act of 2008 was recently approved, setting forth a plan for more than 130 million Americans to begin receiving rebate checks as early as May.
• The taxpayer has a net income tax liability. They will receive up to a maximum of $600
($1,200 for a joint return); or
• The taxpayer has at least $3,000 of qualifying income. Qualifying income includes:
o Earned income,
o Veteran’s disability payments (including payments to survivors), and
o Social security benefits.
Taxpayers who receive at least $1 of the rebate will receive an additional $300 for each qualifying child. A qualifying child is generally a dependent who is under age 17 at the end of the year.
Rebates begin to phase out at $75,000 of adjusted gross income (AGI) for individuals and $150,000 of AGI for married couples filing jointly. The rebates phase out at five percent of the amount exceeding the applicable AGI threshold.
How do seniors collect the rebate?
Seniors with at least $3,000 in qualifying income will be eligible to receive a rebate, but they do need to file a return. Seniors should do the following:
• Report income including Social Security benefits, veteran’s disability payments, and railroad retirement benefits, on
o Line 20a on Form 1040, or
o Line 14a on Form 1040A
• Fill out name, address and Social Security number on the form and write the words “Stimulus Payment” on the top of the form.
• Mail to IRS address provided on form.
Seniors who have already filed a tax return reporting less than $3,000 qualifying income may want to file an amended return if they are now eligible because of the additional qualifying income that comes with this rebate program.
Frequently Asked Questions
Q. Is my stimulus payment taxable?
A. No, You will not owe tax on your payment when you file your 2008 federal income tax return. The IRS will be sending you a letter later this year listing the amount you received. In the event that you did not qualify for the full amount this year, but you do next, that form will be your record of the amount you previously received.
Q. Will the payment I receive in 2008 reduce my 2008 refund or increase the amount I owe for 2008?
A. No, the stimulus payment will not reduce or increase the amount you owe when you file your 2008 return.
Q. Can I have my stimulus payment direct deposited?
A. If you elected to have your 2007 tax refunds direct deposited, then the stimulus payment will be sent to the same account. If you’re not receiving a refund, but will be eligible for the rebate, the IRS suggests that you put your bank routing information on the form so you will receive your rebate more quickly.
Q. If I owe back child support, will the IRS withhold my rebate?
A. Yes, if there is any amount remaining after the back child support is paid, it will be sent to you.
Q. I claim my elderly parents as dependents. Are they still eligible to receive the stimulus rebate?
A. No, because they are your dependents, they are not eligible for this rebate.
For the most accurate information regarding the 2008 Stimulus Act, contact a tax preparer in your community today. Professional tax preparers are experts who keep current on tax law changes.
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