Tax Rebate Checks To Go Out Earlier than Expected - Economy * US * News * Story - MSNBC.com


I plan on using about twenty-five percent on purchases and the rest will go to saving. If you qualify to receive a rebate check, how will you use or manage the money?

PS. Don't forget it's counted as earned income on next year's taxes.

BABRAM

Steve- I got audited the last time for not counting it as income the following year (2002). At that time I worked a full-time job, had a side business (insurance), new house, two mortgages, etc... They may had changed this since the last rebate check in year 2001, but this concerns me a bit. The words they used are implying to the check itself you receive as not being taxed and they never mention that it's not income. In fact they didn't mention the words "earned income" except with regards of qualification, which is not the same as eventually being taxed later. The difference I see so far is that in 2001 they admitted it was an "advance payment." What could be happening is that Bush is lowering taxes on earned income or we are being given larger deductions for 2008, so when you file next year in effect the income is offset. However I'd bet that either we will have to count this as income later in spite of the IRS giving circumstance for the pending year, or skip a year to be taxed heavier in 2009. The following is information from the 2001 Rebate. See how they worked it then. Unless the White House lawn started growing money trees since then I know the math has to be accounted for eventually. Between Bush and the Congress they are going to attempt to boost the economy and that is not done by giving away free money; no such thing as free.

CNN.com - Some guidance on the tax rebate check - June 7, 2001

"The tax bill the president is signing immediately creates a bottom income tax bracket of 10 percent, effective retroactively to the beginning of this year. That means the first $6,000 of a single's income or the first $12,000 of a couple's income is suddenly going to be taxed at 10 percent (instead of the old 15 percent rate). Because this change is retroactive, the government will owe everybody who already paid some of those taxes (through withholdings from their paychecks from January until now) some money back. The Treasury Department points out that this is not officially a "rebate" ... it's an "advance payment" to taxpayers of money they would have gotten back from the government as a rebate when they filed their tax returns next April (for 2001)."

speechlesstx

Bobby, as I understand it the payment is an advance on a new tax credit we'll receive for 2008. In other words it will show as a tax credit for 2008 and will be balanced out by the advance payment for a net effect of zero on your 2008 return. The IRS will also recalculate next year and give people a second chance at the rebate. If they qualify for more, such as adding another child, they'll get the difference next year - but if they actually qualified for less based on their 2008 status they'll get to keep the difference anyway. But still, a net effect of zero on your return.

BABRAM

Steve-

That's what I said earlier, but that's one of many ways the business mechanics can be worked.


No sir. It does have an effect and that's why I'm concerned. I want to call it like it is and I think pawnshop stimulation would be closer to the truth. The government would rather the public believe it's Christmas or Hanukkah in July, but I know better. You can't receive a full tax credit if in part it was advanced. When you get an advance, that portion is later missing from what would had been the full amount. Factually you will be multiple taxed on that same dollar. You were already taxed earned income originally when your employer paid you, then you spent that dollar and was taxed on goods. At the end of the year you filed your taxes. Now you can have an advancement to be taxed once again on any purchases. I'll be curious to see how the IRS words this ploy into next years tax forms. I've been using TurboTax the past few years because it's preprogrammed with more knowledge than my overpaid tax accountants could ever remember.

PS. for Tom: I'm not blaming just the President, it's Congress and the Fed's also.

speechlesstx

Yes, if you're getting an advance on your paycheck, but this is a credit. If my paycheck is $1200 and I get a $300 advance I will only get a $900 paycheck, but if someone owes me a credit I get it all regardless. It is just that the credit is for the 2008 tax year, but we're getting it early instead of when we file next year.


Technically what this is is deficit spending in an attempt to stimulate the economy, so it's true that if you spend it on taxable goods it will be taxed which will generate revenue to cover a portion of the money spent. But, this time the rebate itself is nontaxable. The IRS doesn't get any clearer than "you will not owe tax on your payment" and it "will not reduce your refund or increase the amount you owe." Anyway, regardless of whether we agree with the idea of the plan (which I don't, but will use the money anyway), we shouldn't get people all worried about negative consequences next year. The net effect on your tax return next year is still zero - it will not be counted as earned income subject to federal tax, it will be zeroed out.

tomder55

I think the portion of the IRS publication that Steve linked to was pretty expicit and self explaining .

You will not owe tax on your payment when you file your 2008 federal income tax return.

nauticalstar420

By any chance, do any of you guys know if this week's release for the rebates was set in stone? I was supposed to get mine today -- still waiting.

amIwrong

I will spend it on gas.

BABRAM

When receiving advancement of any sorts dealing and being paid it's borrowed, no matter if it's out your own paycheck (to use your example) or off a credit that you would have had in full otherwise later. Which BTW brings up why you would have credit in the first place. Our government doesn't pay us interest to hold our money. Secondly if it was my money it shouldn't be called an "advancement."




Ok I already went over this. They send you a check or direct deposit and it's not immediatly taxed. In other words the check doesn't come with a deduction for taxes.



It's not that I'm out of sorts with the plan Bush and Congress jointly approved to stimulate the economy. It's that I know how the business side of this works and it's a temporary band-aid. The net effect is that your spending today what you would have had tomorrow and in it is a taxation process, at least on the retail level for now. Another thing this does is buy our government time. Trust me when I say that I'm not appealing to anarchy, but I'd rather prefer to call it for what it is than let my government treat the American public like mushrooms that are being grown in the dark and fed $#!t.

HistorianChick

Mine is all going into savings.

And a pair or two of shoes....

speechlesstx

Here is the original schedule for electronic deposit, it goes by your SS number.

Last two SSN digits:
00 through 20 May 2
21 through 75 May 9
76 through 99 May 16

I imagine that even though they're getting them out early it will still be in similar stages.