Tips you can use: Economic "Stimulus" 2008 February 22, 2008
I have been fielding calls and e-mails on this subject and thought it would help to provide my overview of what is happening. If you have further questions, contact me or discuss them with your tax advisor during your upcoming appointment.
Late on Thursday, Feb 7, Congress passed the stimulus bill (HR 5140) and sent it to the President for signature. On Wednesday, Feb 13, it was signed into law by the President.
Q 1.) What do you need to do to get a "rebate" check during 2008?
A 1.) File a valid 2007 Federal Income Tax return, with a valid social security number.
Q 2.) How much will I (we) get?
A 2.) Usually, the amount will be equal to your taxable income (Form 1040, Line 43; or Form 1040-A, Line; or Form 1040-EZ, Line 6) up to $600 for individuals and $1,200 for couples filing jointly.
Q 3.) What if I don't have any taxable income?
A 3.) Even those who have little or no tax liability may qualify for a minimum payment of $300 ($600 if filing a joint return) if their tax return reflects $3,000 or more in qualifying income. For the purpose of the stimulus payments, qualifying income consists of earned income such as wages and net self-employment income as well as Social Security or certain Railroad Retirement benefits and veterans' disability compensation, pension or survivors' benefits received from the Department of Veterans Affairs in 2007. However, Supplemental Security Income (SSI) does not count as qualifying income for the stimulus payment.
Q 4.) Who is NOT eligible to receive a payment?
A 4.) Individuals who pay no tax and who have less than $3,000 of qualifying income will not be eligible for the stimulus payment. Anyone who does not have a valid Social Security number, including those who file using an Individual Taxpayer Identification Number (ITIN), an Adoption Taxpayer Identification Number (ATIN) or any other identification number issued by the IRS is not eligible for this payment. Both individuals listed on a married filing jointly return must have valid Social Security numbers to qualify for a stimulus payment. Also ineligible are individuals who can be claimed as dependents on someone else's return.
Q 5.) Will the "rebates" be limited based on my income?
A 5.) It will be phased out for taxpayers earning above $75,000 for singles and $150,000 for married couples filing jointly. You will lose 5%, or $50 of the "rebate" for every $1000 you are over the cap for income.
Q 6.) Will I get more money because we have three young children?
A 6.) To qualify for $300 per child, a child must be eligible under the Child Tax Credit and have a valid Social Security number.
Q 7.) What if I don't file in 2007?
A 7.) You will not get a "rebate check during 2008.
Q 8.) How is the "rebate" check tied to next years income tax return?
A 8.) The actual credit will be calculated on your 2008 return, and if you're due a higher credit, you'll get the remainder when you file your 2008 return. If you received a higher credit than you should have, you do not have to pay anything back.
Q 9. ) When will the payments be made?
A 9.) Starting in May, the Treasury will begin sending economic stimulus payments to more than 130 million individuals. The stimulus payments will go out through the late spring and summer.
Q 10.) Are there other provisions to this law?
A 10.) This legislation also offers incentives to spur business investment. The legislation would save businesses approximately $50 billion in near-term taxes through a temporary change to the tax code that will allow American businesses that buy new equipment this year to deduct an additional 50 percent of the cost of their investment in 2008. This will encourage businesses to expand and create new jobs now because buying equipment, software, and tangible property this year will dramatically lower their taxes.
The legislation also increases expensing for small businesses. This means that a business placing less than $800,000 of equipment into service this year would be able to immediately deduct up to $250,000 - up from $128,000 - of its investment in 2008.
Special Circumstances for Recipients of Social Security, Railroad Retirement and Certain Veterans Benefits
Individuals who receive Social Security benefits, Railroad Retirement benefits and certain veterans' benefits may have to follow special filing requirements in order to receive the basic amount:
Those who have already filed a 2007 return reflecting qualifying income of $3,000 or more do not have any additional filing requirements and do not need to do anything more to receive their payment.
Those who have already filed a 2007 return showing less than $3,000 in qualifying income and did not list their Social Security, Railroad Retirement or certain veterans benefits should file a Form 1040X to list those non-taxable benefits and qualify for a payment - if it will put their income above $3,000.
Those who are not required to file a 2007 return but whose total qualifying income including Social Security, certain Railroad Retirement and certain Veterans benefits would equal or exceed $3,000 should file a return reporting these benefits on Line 14a of Form 1040A or Line 20a of Form 1040 to establish their eligibility. Please note the form lines just mention Social Security, but use these lines even if your only benefits were Railroad Retirement or veterans' benefits.
Most taxpayers will receive two notices from the IRS. The first general notice from the IRS will explain the stimulus payment program. The second notice will confirm the recipients' eligibility, the payment amount and the approximate time table for the payment. Taxpayers will need to save this notice to assist them when they prepare their 2008 tax return next year.
Anyone who moves after they have filed their 2007 tax return should notify the IRS by filing Form 8822, Change of Address, and also notify the Post Office.
This article is brought to you by Peter Tuttle, CPA. You may contact me by sending an e-mail via the link to the right of the blog page. Please visit my website at http://www.petertuttlecpa.com/
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