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February 08, 2008

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It sure reads that way to me in the story you linked. :( That stinks.

I am seeing contradictions here.

The linked article does seem to make it quite clear that it is an advance on next year's refund.

However, why are we hearing all the politicians talk about how much this will add to the national deficit over the next two years if the money will essentally be paid back by taxpayers next tax season?

If we pay it back, then the deficit will not increase. So someone is misquoting here. Either the dificit will increase by the amount fo the stimulus package, or we will pay the money back next April....but not both.

Good point wanzman. I looked on a couple of different news outlets, and they all had a similar story, but without the part about it being an advance. Very confusing.

The IRS website says this:

"The Administration and Congress have announced an economic growth package that would provide advance payments to many Americans. However, no legislation has yet been enacted, so final details are not available. As more information is available, we will post it to our Web site.

Taxpayers should be aware that there are identity theft scams involving the proposed advance payment checks, known informally as rebates to many Americans. The IRS knows of at least one telephone scam making the rounds which uses the proposed rebates as bait."

They call it an advance payment....

How is this supposed to stimulate the economy? I'm reading to setup my w4 to get the smallest refund possible next year, if this is an "advance" then that means I will end up owing next april which is not my goal. Hopefully we can get more information about this in the coming weeks. Also, will be able to opt out if it is an "advance"?

Kelly, I think, has it right. I think this basically means it's the same style as the last time around, where while 2007 tax is used to calculate the refund and get it early, what it is is actually a credit for the 2008 tax year, paid in advance.

From the bill itself:

"In General- In the case of an eligible individual, there shall be allowed as a credit against the tax imposed by subtitle A for the first taxable year beginning in 2008 an amount equal to the lesser of..."

The credit last time around was based on the idea that it was really supposed to reflect a tax table change for the year the check was issued, paid in advance.

The Library of Congress has this to say:

http://thomas.loc.gov/cgi-bin/query/D?c110:1:./temp/~c110NC4m5K::

The actual name is: "Family Economic Stimulus Act of 2008"

And it is catorigorized as: "Advance Refunds of Credit Based on Prior Year Data"

Eligible Individuals:

`(d) Eligible Individual- For purposes of this section, the term `eligible individual' means any individual other than--

`(1) any estate or trust,

`(2) any nonresident alien individual, and

`(3) any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which the individual's taxable year begins.

Am I reading that right?
nonresident alien individual?

I think it will be a backbreaker come April 15 2009 if this is a "loan" against 2008 taxes. The way I understood it is was to be a "gift" from the government. I should of known better!

Type in "economic stimulus package" as the search in the above link. First bill introduced to the House.

To Will - even if they do provide an option to opt-out (assuming this is just an "advance") don't do it.

Take the money the goverment gives you - put it in a high-interest account for a year (E*Trade is currently paying 4.4%) and pocket the difference. Then use the money to defray the costs of buying Turbo Tax next year. ;-)

Irritating, yes. But take anything the government gives you and make the best of it.

@JBM, That's not the version that went to the Pres. The actual version is called "Economic Stimulus Act of 2008."

And yes, it appears to be an advance on 2008 returns when reading the actual bill.

Also, the bill makes it pretty tough for illegals and non-residents to get these advances. You must have a VALID SSN reported on your 1040 to get the dough.

The stimulus is essentially the temporary removal of the 10% tax bracket, so while it may technically be an "advance" on next year's refund, that refund would have been much larger due to this temporary adjustment. You'll basically be calculating your taxes next year based on the present tax rules.

Friking politicians. They want a quick fix so they can say the did something. They don't care about the fact that the bill will come due, and people will then have to pay it at this time next year. This will just get them higher in public opinion since it's an election year.

This also has me greatly concerned on a personal level. Based off of 2007 taxes, I don't qualify (oh well, I don't get any "free" money). However, since my wife and I have moved to a lower cost of living area, and our incomes have become lower, based off of 2008, I would qualify. Am I going to be responsible for paying back money I never received?!?!?!?!

You want to hear a complaint, I am single 32 and barely make over six figure salary. Does that afford me a nice lifestyle, yes. A nice enough lifestyle to turn down a $600 check coming in the email, no! Why not give the money to those of us not in debt and who could afford to put the money back in the economy by buying stuff to rejuvinate the economy.

I truly hope this is just an advance on next year's tax refunds because anything else would be unfair for those not elgible for this refund. Where is the outrage on that, I could see cutting off the super wealthy. But I ask those of you making $75,000 living NYC, Chicago or LA, how wealthy are you actually?

Here's an example to supplement my comment above:

Let's say congress passed nothing and next year you (an individual filer) were due a refund of $300 on your 2008 taxes.

Now compare that to what they're doing - temporarily removing the 10% tax (which applies to the first $6,000 in income). You would be due a refund of $900 next year. They're just giving you the $600 excess earlier.

this comment concerned me greatly, but I'm pretty sure it's an error. According to the Senate Finance Committee Summary at http://www.senate.gov/~finance/sitepages/leg/LEG%202008/020708%20Leg%20Text%20Amend%20HR5140.pdf, it's a tax credit for 2008, which they are going to send out in advance of the 2008 tax return filings. Similar to the earned income credit, which you can also get paid to you during the year, instead of waiting for the tax filing season. If for some reason you don't get the check, you can take it as a credit on your 2008 tax return.

CNN just updated the story removing that sentence.

Yes this is true. I guess they are thinking that the economy needs a boost now and it will have improved enough by last year that it can stand to have less spending money in people's hands next year. They don't tell this to people when they are getting them all hyped up about it.

You will not have to pay back money you didn't receive. They ask you that on next year's return. This is the same as it was last time they did this but people must have forgotten.

What I think is funny is that people spend the same (i.e. not less) when they owe more in taxes but they spend more when they get a refund. Watch where your money is going and don't think of your refund/rebate checks as free money!

Yes most if not all of the money will be a credit against next year's tax return, HOWEVER - this act eliminates the 10% tax bracket in 2008 so you are raelly getting money back. If it was just a check this summer, followed by "repaying it" on next year's tax return then it would be like a 10-month loan.

But since part of the package is a 2008 tax cut, this is extra tax money back to all of you.

If they sent the checks this summer and didn't force people to take a credit aganst next year's tax refund, but still eliminated the 10% tax bracket for 2008, then we'd all be getting double-benefit (which I'm ok with, but that's not how it works).

Essentially we're getting an advance refund of 2008 taxes.

Umm... I don't see the quoted comment at all in the linked article. I even had Firefox search the page for some phrases in the quote and couldn't find a thing.

The article did state the mentioned paragraph about it being an advance on next year's taxes...it was updated around 1:15pm today and that paragraph was removed.

It's no gift. They're hoping you'll see it as such and spend it.

If you're concerned about it screwing around with your 2008 withholding and resulting in a higher tax payment/smaller refund in April 2009, then simply give it right back by making an estimated tax payment of the same amount after you receive it.

Or, better yet, put it away and let it draw interest for a year. Then the money will be there a year later--with added interest as a windfall. Or, better yet, use it to pay off some high-interest debt.

The average federal tax refund last year was ~$2,500, so they're pretty much guessing that the average taxpayer won't care that a few hundred dollars will be missing from this amount come April 2009.

Joe, I am with you, although I am older. We could've actually stimulate the economy by spending it or, at worst, buying American companies' stock... What bugs me is that they set a limit for singles as half of that of couples. But housing and other expenses for couple aren't double that of singles, it's less. Financially, a couple earning 150K is not worse off than a sigle earning 100K; and a couple earning 200K is way better off than a single earning 100K. Heating, electric bills are almost the same. A difference between a one bedroom and a two bedroom is not that large, for example. Buying stuff in bulk - something we singles cannot do - also saves money. And if one considers children, that a single parent with child has needs much higher than half of a couple with child.

At least we won't owe any extra taxes in 2008.

Why is our government so F***ing stupid?

Folks, Bush pulled this rabbit before in the last "Tax Rebate." I think it was in 2001 and the amount was $400 per person. Imagine my surprise when I filed by 1040 the following year only to find a box where I needed to list my "rebate." And what happened? Yep, paid the IRS significantly more than ($1100) usual. I'm not going to chuck my check in the mail, but I do wish the pols would call it what it really is, a "payday" advance.

You all going ahead of yourselves. Nobody will pay back. Read this, if you need to twice, to understand:
DESCRIPTION OF THE
“ECONOMIC STIMULUS ACT OF 2008”


Taxpayers will reconcile the amount of the credit with the payment they receive in the
following manner. They would complete a worksheet calculating the amount of the credit based
on their 2008 tax return. They would then subtract from the credit the amount of the payment
they received. For many taxpayers, these two amounts would be the same. If, however, the
result is a positive number (because, for example, the taxpayer paid no tax in 2007 but is paying
tax in 2008), the taxpayer may claim that amount as a credit against 2008 tax liability. If,
however, the result is negative (because, for example, the taxpayer paid tax in 2007 but owes no
tax for 2008), the taxpayer is not required to repay that amount to the Treasury. Otherwise, the
checks have no effect on tax returns filed in 2009; the amount is not includible in gross income
and it does not otherwise reduce the amount of withholding.

You all going ahead of yourselves. Nobody will pay back. Read this, if you need to twice, to understand:
DESCRIPTION OF THE
“ECONOMIC STIMULUS ACT OF 2008”


Taxpayers will reconcile the amount of the credit with the payment they receive in the
following manner. They would complete a worksheet calculating the amount of the credit based
on their 2008 tax return. They would then subtract from the credit the amount of the payment
they received. For many taxpayers, these two amounts would be the same. If, however, the
result is a positive number (because, for example, the taxpayer paid no tax in 2007 but is paying
tax in 2008), the taxpayer may claim that amount as a credit against 2008 tax liability. If,
however, the result is negative (because, for example, the taxpayer paid tax in 2007 but owes no
tax for 2008), the taxpayer is not required to repay that amount to the Treasury. Otherwise, the
checks have no effect on tax returns filed in 2009; the amount is not includible in gross income
and it does not otherwise reduce the amount of withholding.

I was hopping that the Government would make a clear understanding of this "rebate". One minute it's not to be repaid, then posted as an advance on next year's tax return, and then in terms only a tax preparer could understand.

I don't know if CNN screwed up or if they posted something that wasn't suppose to go out to the public. But I wrote my congress people and am waiting to see what they have to say about it. I don't think the rebate should be a loan of anykind. Hows this going to stimulate the economy?

View the full text and make your own judgement as to what it means.
http://www.govtrack.us/congress/billtext.xpd?bill=h110-5140

Oh, and note the "Appropriations To Carry Out Recovery Rebates" section. The administrative costs to carry out this sham are $250 million. Surely they could find a better use for this money than buying more check paper stock and licking envelopes. Ka-ching!

This IS a "pre-bate". There will be a credit on the 2008 tax forms, reflecting these amounts.

The difference is that instead of waiting until you file next year to get the credit, you will get it ahead of time.

How exactly did you think it was going to cost 150 billion dollars if they were going to take it back.

Is it a set number of $300 for singles and $1200 for couples? Or is it a percent of erned income?

Thank you @GEEZPEOPLE:

It's been mentioned in a few posts, but I still think people don't get what Congress is doing (understandably the language they use isn't always easy to get):

***They're temporarily removing the 10% tax bracket on the first $6,000 in income for single filers (total of $600), and the first $12,000 in income for married filers (total of $1,200)***

To use an example: Assume congress never passed this bill, and suppose you are someone (an individual filer) who would receive a $300 refund next year for your 2008 taxes. What would you rather have?

1. No stimulus package: $300 refund in April 2009
2. Stimulus package figured on your tax return: $900 refund in April 2009
3. Stimulus package as it has been passed: $600 in June of 2008 and $300 in April of 2009

I'm taking #3 every time.

While it may be an "advance" on next year's taxes, it's a prepayment of an excess that they've decided to give. If they had passed nothing, we'd be worse off.

I hope this makes sense - sorry if it doesn't, but bottom line, we're better off financially with the stimulus than without.

JBM said:
"Am I reading that right?
nonresident alien individual?"


This most likely refers to taxpayers that have TIN numbers - tax identification numbers -instead of SSNs.

For example, if i'm a British citizen living in Britain but I needed to pay taxes in the US last year (say if I own a property in the US), I need to pay US taxes. But the non-resident alien wouldn't have a social security number, so they get assigned a special number by the IRS that they use to file taxes.

All it's saying is that those people won't get the rebate. Makes sense.

This is a good article that explains it pretty well...
http://articles.moneycentral.msn.com/Taxes/Advice/TheDetailsOnTaxRebates.aspx

Link to final version of the bill:
http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_bills&docid=f:h5140enr.txt.pdf

Brion - Good point!

CF - Thanks for that explination. Reading up on this all morning and thats the clearest picture I've gotten of it so far.

‘‘(d) LIMITATION BASED ON ADJUSTED GROSS INCOME.—The
amount of the credit allowed by subsection (a) (determined without
regard to this subsection and subsection (f)) shall be reduced (but
not below zero) by 5 percent of so much of the taxpayer’s adjusted
gross income as exceeds $75,000 ($150,000 in the case of a joint return ---- So based on this, our rebate will be a percentage of our income.

I say if we're not given an opt out option then people should save it in a high interest savings account and reap the rewards of your "advanced" funds.

Sounds like I should change my W4 to deduct an
addition $50 a pay to compensate for my higher
tax bill next year. Then I can just bank this rebate check and withdraw $50 a pay to make up for the additonal deduction. Some stimulus.
To spend this stimulus refund is like taking out a short term loan from yourself. so all they did was pump money in now and it will then
be sucked back out next April.

W4 extra deduction maybe the way to go. I may not have a good tax return next year and won't able to pay the rebate tax back.

I know what I'm going to do with my rebate. Middle-class people finally being able to go out to a nice dinner, stock up on groceries and stuff, and that will be the end of the money.

What is wrong with all of you? Doesnt ANYBODY realize that the only reason this rebate is on the table is to get the real issues he wants to pass. Take a hard look at all the other things attached to this bill. You will see that none of these would otherwise pass unless he included a incentive like this to so many desperate Americans. It's like dangling a carrot to a starving horse and leading the horse over a cliff with it. Wake up America. Can anyone say line item veto?

First, I am pretty sure this is the only constitutional way they can do this, people. Unless you think the government can literally just decide to cut checks to certain citizens and not others based on income. The income tax code (for better or worse) has been permitted to be done on such discriminatory (oh, I'm sorry, "progressive") grounds, so this is how they can do it.

And yes, wanzman, this most definitely will increase the national debt, notwithstanding that your tax refund for 2008 will be reduced by this amount. First, you are forgetting that this is money the government doesn't get. Don't confuse the "reduction of the refund" as the same as paying back a loan. The government is giving you back today tax revenue it expects to collect from you tomorrow. What it is doing by the "reduction of the refund" is simply put to prevent a double dip, if you will. It is still a net reduction in revenue. Second, in case no one is remembering FMF's golden rule of wealth building there is a spending side to the equation. And we've just seen the first 3 trillion dollar budget. Spending isn't staying level or decreasing. It's increasing. As it has been decades. But don't worry, the government will report how we've reduced "the rate of increase in spending" and that will get translated in short hand into a "reduction". Or my personal favorite: that the budget -- as a percentage of GDP -- has reduced. Kind of like saying my spending as a percentage of your income has reduced. Not terribly relevant, but wonderful headlines.

The statement is correct. It you received a rebate check back in 2001, you paid it back in 2002 rather you realized it or not. In 2009 you will have to check the box that will ask if you received the 2008 refund. You don't just have to pay the tax on the money, you have to pay it back. It is indeed a government forced, interest free loan which has to be paid back in 2009.

Jack, please spare us your diatribe of nonsense, nobody wants to read Jack's Book of Wealth Building, except you I suppose, would enplanes the long winded windbaggedness of your thesis.

Jack, Econ 101 doesn't make you an expert, branch out, try micro to go with that macro, tool.

Let's not overlook the obvious. We, as a nation, simply can't afford a 'gift' from the gov't. Where's the money to come from? Yes, it's a bit conniving to make us feel like they are actually reducing our tax burden and leaving some of our hard-earned money in our pockets, but, where would the money come from? We're going bankrupt.

What happens if you have a balance due on your 2009 tax liability. Let's say you are single, under AGI of $75,000 in 07 and have a remaining balance due of $500.00 for 2009. Does this mean you actually have a balance due of $1100.00. $500 + rebate of $600.

It is my understanding that if you file for SS or RR only for 2007, you are not obligated to repay this amount in 2009

Also, people due not realize that the tax liability for 2007 does not include any SE you might owe; therefore, if you had a -0- tax liability for 2007 due to high schedule A deductions, but had an SE due of $700.00. As a single person under $75000 AGI, you would not receive a rebate because SE amounts due are not really a tax liability.

Can someone clarify all of this for me.

Thanks, Mel

hey is this true if that's the case i donot want it

What about the stimulus package for 2009???

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