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After my Will You Get a Rebate Check? column appeared on Monday, I received dozens of follow-up questions about how the rebate will work.
On February 13, President Bush signed the Economic Stimulus Act of 2008, which authorizes the rebate checks. That day the IRS revealed more information about who will receive the checks and what they'll need to do to get the money. Here are answers to many of your questions:
How can I figure out how much my refund will be?
Use our new Kiplinger Tax Rebate Calculator, which will figure how much you will receive based on your income, filing status, number of children and tax liability.
Will I need to do anything or file any extra forms to get my rebate?
Probably not. Most people simply need to file their 2007 tax returns, then the IRS does the calculations and automatically sends out the money. If you signed up to have your tax refund deposited directly into your savings or checking account, then you'll get your rebate money through direct deposit, too, which is the fastest way to get the cash.
The first rebates should go out in May. Some people who receive their rebates through direct deposit may even find the money in their accounts before they receive the IRS's notice that it is coming.
How do I get credit for a rebate if I don't earn enough money to have to file taxes? My only income is from Social Security.
You're in the one group of people -- and there are an estimated 20 million of you -- who do need to take an extra step to get the money. Millions of people who don't usually have to file tax returns will need to file a 1040A or 1040 for 2007 to get their rebates.
Low-income seniors and disabled veterans (and their widows) who don't earn enough to qualify for the full rebate may still qualify for checks of $300 (or $600 for joint filers), as long as they have at least $3,000 in income from Social Security, veterans' benefits, Railroad Retirement benefits, a job or self-employment.
Even if you don't generally file a tax return, you'll need to report your 2007 benefits on line 20a of Form 1040 or line 14a of Form 1040A.
You can't use the simplest tax form -- the 1040EZ -- because you can't report Social Security or veterans' benefits on that form.
To figure out what number to use, you should have received Form 1099-SSA in January, reporting your 2007 Social Security benefits. Anyone receiving Railroad Retirement benefits should have received Form 1099-RRB. And people who received veterans' disability compensation, pension or survivors' benefits from the Department of Veterans Affairs can estimate their 2007 benefits by adding up their monthly benefits for the year.
Enter your 2007 total for any of these benefits on line 20a of Form 1040 or line 14a of Form 1040A, even though that line is designated for Social Security benefits.
If you've already filed a 1040 but had not reported some of these qualifying benefits, you can file a Form 1040X to amend your return. Listing the additional benefits will not increase your tax liability but could help you qualify for the rebate.
For more information, see the IRS fact sheet Instructions for Low-Income Workers and Recipients of Social Security and Certain Veterans' Benefits.
These requirements may seem overwhelming for people who don't normally have to file a tax return. Don't panic. You may be able to take advantage of thousands of free tax preparation sites nationwide for low-income and elderly taxpayers.
The Volunteer Income Tax Assistance (VITA) program provides help to low- and moderate-income taxpayers. Call 800-906-9887 to locate the nearest VITA site. The Tax Counseling for the Elderly (TCE) Program provides free tax help to people age 60 and older. As part of the IRS-sponsored TCE Program, AARP offers the Tax-Aide counseling program at more than 7,000 sites nationwide during the filing season. To find an AARP Tax Aide site call 888-227-7669 or visit the Tax-Aide page at the AARP Web site.
Does the rebate affect my 2008 taxes? Will I get less money back next year because of this check?
Yes and no. The new law actually creates a tax credit for 2008, which, in the normal course of events, would reduce your 2008 tax bill (on the tax return you file NEXT year). But, to get money into the hands of the people quickly to stimulate the economy, Congress ordered the IRS to make a prepayment of the tax savings. The rebate will be figured on the information on your 2007 return. Because you'll get the money this year, it won't affect your 2008 tax bill.
What if, based on your 2007 return, you don't deserve the credit ... but you would deserve it based on your 2008 return? You don't get a rebate, but you will get the credit next year -- reducing your tax bill or boosting your refund.
What if you get a bigger rebate based on your 2007 information than you'd really deserve based on your 2008 return? Again, don't worry. Congress specifically says you won't have to pay back any excess.
I earned too much in 2007 to qualify for the rebate. But I expect to earn a lot less in 2008. Can I qualify for the tax savings based on next year's income?
Yes. There will be a special calculation for tax returns next year. You'll figure how big of a credit you deserve based on your 2008 income and number of qualifying children, and compare that amount to the size of the rebate you actually received in 2008.
For most taxpayers, the numbers will be identical, and the calculation will simply be a waste of time. But for some -- including you -- the numbers will show you deserve more tax savings than you received. And, you'll get the benefit on your 2008 return. As noted above, if the calculation shows you got a bigger rebate than you deserved, you get to keep the extra money. It won't hike your tax bill for 2008.
I had a baby in August 2007. Will I still get the full $300 bonus rebate?
Yes. As long as the baby was born by December 31, 2007, then she counts as a qualifying child for the extra $300 (if you otherwise qualify for the rebate). Parents of babies born in 2008 will have to wait until next year to claim the $300 credit.
I'm going to owe taxes when I file my 2007 return in April. Can I use my rebate to offset that tax bill?
No. You can't use the rebate to offset your 2007 tax bill or estimated taxes. And you won't get the rebate until after you file your 2007 taxes anyway. But once you get the check, you can use it for whatever you want.
I owe back taxes. Will that reduce the amount of my rebate check?
It could. "The IRS does have the authority to apply rebate checks against back taxes or other government obligations to which the IRS routinely applies tax refunds," says Mark Luscombe, principal analyst with CCH, a Wolters Kluwer tax-publishing company.
Where can I get more information as some more of these details are ironed out?
Keep an eye on the Information on Stimulus Package page at IRS.gov, which the IRS is updating as more information becomes available.
AARP, the Social Security Administration and the Veterans Administration will also be providing information about the rebates, especially for people who may need to file a tax return specifically to qualify.
Our Kiplinger Tax Rebate Calculator can help you figure out how much of a rebate you will receive. And the Kiplinger Tax Center includes a ton of information about filing your 2007 taxes.
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