Start checking your mailbox in early May. That's when more than 130 million Americans should begin receiving big checks from Uncle Sam, thanks to the $168 billion Economic Stimulus Act of 2008 passed by Congress and signed by the president.
These payments, commonly referred to as the 2008 tax rebates (as opposed to the normal tax refunds you receive when you've overpaid income tax), typically will range up to $600 for individuals and $1,200 for married couples filing jointly, plus an additional $300 per qualified child under age 17.
There's also good news for people who owed no 2007 federal income tax: Thanks to a last-minute bill addition, those folks will receive $300 provided they earned at least $3,000 in 2007 from wages, self-employment income, Social Security or disability benefits, certain veterans' benefits or certain other income sources.
The IRS has posted an information page that discusses eligibility, shows payment examples and answers many commonly asked questions (click on "Rebate Questions" at www.irs.gov). Here are a few highlights:
- You must file a 2007 federal tax return in order to receive a rebate, even if you owe no taxes and wouldn't ordinarily file. A sample Form 1040A for low-income earners appears in the "Frequently Asked Questions" section on the IRS site above.
- You don't need to calculate your rebate amount; if you qualify, the IRS will figure it and send you a check.
- Rebates will phase out gradually for individuals whose adjusted gross income is over $75,000 ($150,000 for married couples filing jointly).
- Children age 17 and older on December 31, 2007, who are claimed as a dependent by their parents, won't earn a rebate, either for their parents or themselves. If not claimed as a dependent, they may be eligible for their own rebate.
- The IRS is using 2007 tax returns to determine rebate amounts. So, if you weren't eligible in 2007 but it turns out you will be in 2008, you'll receive a rebate when you file your 2008 taxes next year.
- Furthermore, if you receive a rebate but it turns out you weren't actually eligible (because your 2008 income doesn't qualify), the government will not ask you to return the money.
- Those who file for direct deposit on their tax return will likely receive rebates sooner than those who opt for a check.
- Rebates are not taxable and won't be added to 2008 income.
Although Congress intends for people to reinvest their rebates in our faltering economy, you should temper that desire to spend it all at once. Consider using at least a portion to pay off high-interest debt, boost your emergency savings or add to your retirement nest egg.
One last caution: Scammers posing as IRS representatives and promising to send early rebate payments (among other bogus claims), have tricked many unsuspecting people into revealing personal or bank account information over the phone or via email links to official-looking forms. The IRS does not gather such information by phone or email.
To learn more about these and other scams, type "identity theft" in the search box on www.irs.gov. Another good resource is Practical Money Skills for Life, Visa's free personal financial management site, which contains detailed identity theft and security precautions everyone should take (www.practicalmoneyskills.com/learn/identity_theft).
Bottom line: If you're eligible, make sure you file a tax return to receive your rebate. Once you've got it, spend wisely.
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