On February 13, President Bush signed the long awaited stimulus package designed to put money into the pockets of many American taxpayers. This month, more than 130 million American households will begin receiving Internal Revenue letters reminding them to file a 2007 tax return in order to receive a 2008 stimulus payment. The maximum rebate amount is $600 ($1200 if married jointly) for taxpayers whose adjusted gross income (AGI) is below $75,000 (single) and $150,000 (joint returns). Additionally, eligible taxpayers who qualify for a payment will receive an additional $300 for each qualifying child under the age of 17. This basic credit will phase out as income levels rise above these levels. Here are two examples of how the phase out works: An individual with AGI of $80,000 (overage of $5,000 x 5% = $250) will have her rebate reduced to $350; a married couple with two children, AGI of $160,000 would qualify for $1,800 rebate. But because of the couple’s AGI exceeds $150,000, their rebate is reduced by $500 ($10,000 x 5%) the couple receives an economic stimulus payment of $1,300.
Low-income earners, Social security beneficiaries, certain railroad retirees and those who receive benefits from the Department of Veteran Affairs who normally don’t file, MUST file this year to receive the stimulus payment A simplified Form 1040A has been created to capture this population of filers. Income of at least $3,000 from any combination of these sources is required and this group of taxpayers will receive $300 (single) and $600 (joint)
It is anticipated that the Treasury Department will start sending out payments in May and will be automatically deposited into bank accounts if that option was chosen with the 2007 tax return filing.
Some people will not receive the stimulus rebate under the following circumstances: Part or all of your payment can be used to pay past-due federal or state income taxes or non-tax federal debt such as student loans and child support. If this occurs, you will receive a letter explaining how the stimulus package was applied. You don’t file a 2007 tax return. Your qualifying income is less than $3,000. You can be claimed as a dependent on someone else’s return. You do not have a valid Social Security Number. You are a nonresident alien. You file Form 1040NR for 2007.
Good news. You will not owe tax on your payment when you file your 2008 federal income tax return. But you should keep a copy of the IRS letter you receive later this year listing the amount of payment. You will need to know this amount next year when you fill out your 2008 return. Any questions regarding items mentioned in this column, please email me at MRBARRYTAX@AOL.COM or call at 516-TAX-SAVE. #