Stimulus Payment: Free money or loan?
February 14, 2008 9:50 PM Subscribe
Tax payers are to save the second IRS notice regarding the stimulus payment in order to properly file 2008 taxes. Why? Will it be deducted from a potential 2008 refund?
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.
http://www.irs.gov/newsroom/article/0,,id=179095,00.html
Seems several years ago there was something similar where the check was called a "credit" or some such, but ended up being a loan.
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.
http://www.irs.gov/newsroom/article/0,,id=179095,00.html
Seems several years ago there was something similar where the check was called a "credit" or some such, but ended up being a loan.
Seems several years ago there was something similar where the check was called a "credit" or some such, but ended up being a loan.
Tax brackets may be adjusted again to pay for this year's credit extension. Can't pay Peter without robbing Paul.
posted by Blazecock Pileon at 10:21 PM on February 14, 2008
Tax brackets may be adjusted again to pay for this year's credit extension. Can't pay Peter without robbing Paul.
posted by Blazecock Pileon at 10:21 PM on February 14, 2008
Odd. I read that article in its original form and just figured that it was the way things were. Hadn't realized there was a controversy.
posted by ikkyu2 at 10:33 PM on February 14, 2008
posted by ikkyu2 at 10:33 PM on February 14, 2008
Response by poster: What you suggest has been speculated a lot.
Thanks, rokusan! From your link there is a link to the original CNN article where they've since added:
"Article Correction
An earlier version of this report incorrectly described the federal tax rebate as an advance on 2008 tax refunds. The rebate is an additional tax credit for 2008, and it will not be taxed."
posted by Feisty at 10:35 PM on February 14, 2008
Thanks, rokusan! From your link there is a link to the original CNN article where they've since added:
"Article Correction
An earlier version of this report incorrectly described the federal tax rebate as an advance on 2008 tax refunds. The rebate is an additional tax credit for 2008, and it will not be taxed."
posted by Feisty at 10:35 PM on February 14, 2008
Response by poster: And a link from the link from the . . .already mentioned link. . .
(not putting it in italics as it hurts my eyes)
"The bill works by reducing the tax code's 10 percent bracket on the first $6,000 of taxable income to zero for 2008. That 10 percent of the first $6,000, $600, will come back to you as a check in advance, probably sometime in May. That check will basically be a "prebate" on a temporary tax cut that will be enacted next year. So, since the new zero percent tax on the first $6,000 of your income will have already been taken care of, when you go to file your taxes in 2008, everything will seem normal and you will be eligible for the same refund amount as always. The rest of your income will be taxed as usual."
http://www.opencongress.org/articles/view/418-Stimulus-Bill-Misconceptions
posted by Feisty at 10:44 PM on February 14, 2008
(not putting it in italics as it hurts my eyes)
"The bill works by reducing the tax code's 10 percent bracket on the first $6,000 of taxable income to zero for 2008. That 10 percent of the first $6,000, $600, will come back to you as a check in advance, probably sometime in May. That check will basically be a "prebate" on a temporary tax cut that will be enacted next year. So, since the new zero percent tax on the first $6,000 of your income will have already been taken care of, when you go to file your taxes in 2008, everything will seem normal and you will be eligible for the same refund amount as always. The rest of your income will be taxed as usual."
http://www.opencongress.org/articles/view/418-Stimulus-Bill-Misconceptions
posted by Feisty at 10:44 PM on February 14, 2008
Everything I have heard agrees with Feisty. They cut taxes for one year (2008 taxes, to be filed in April 09), and to get the money out quicker, they are giving you an advance on the cut (the 600 dollars.).
So it's free money, and your regularly scheduled refund will come through on your 08 taxes.
Other cool thing, is that since it's a part of your refund that you're getting early, you won't owe taxes on the 600 come next spring, the same way you won't pay taxes on the refund you get in a few months.
posted by cschneid at 6:20 AM on February 15, 2008
So it's free money, and your regularly scheduled refund will come through on your 08 taxes.
Other cool thing, is that since it's a part of your refund that you're getting early, you won't owe taxes on the 600 come next spring, the same way you won't pay taxes on the refund you get in a few months.
posted by cschneid at 6:20 AM on February 15, 2008
Here's an article that explains it very clearly. An excerpt of the important parts:
RYSSDAL: Is it going to a affect next year's refund, though?
VIGELAND: That's a really big one that seems to be out there a lot. In fact, we actually have someone here at Marketplace whose accountant told her that this check was an advance on next year's refund, and that she should plan for her 2008 taxes accordingly. It's simply not true. This check will not affect next year's taxes really at all, and you know Kai, we've been trying to figure out where all this information has come from. Specifically this one, this notion that this is an advance on next year. Well, I called the very kind people at the IRS . . .
RYSSDAL: Probably ought to say that again too.
VIGELAND: Very kind, and they reminded me that actually, the last time the federal government issued checks, back in 2001,the stimulus was indeed an advance, of sorts, on the Bush administration's tax cuts. The bottom line went from 15 percent 10 percent. So, maybe folks are assuming that it is the same this time. It is not. This is not an advance on next year's refund.
posted by hulahulagirl at 7:27 AM on April 11, 2008
RYSSDAL: Is it going to a affect next year's refund, though?
VIGELAND: That's a really big one that seems to be out there a lot. In fact, we actually have someone here at Marketplace whose accountant told her that this check was an advance on next year's refund, and that she should plan for her 2008 taxes accordingly. It's simply not true. This check will not affect next year's taxes really at all, and you know Kai, we've been trying to figure out where all this information has come from. Specifically this one, this notion that this is an advance on next year. Well, I called the very kind people at the IRS . . .
RYSSDAL: Probably ought to say that again too.
VIGELAND: Very kind, and they reminded me that actually, the last time the federal government issued checks, back in 2001,the stimulus was indeed an advance, of sorts, on the Bush administration's tax cuts. The bottom line went from 15 percent 10 percent. So, maybe folks are assuming that it is the same this time. It is not. This is not an advance on next year's refund.
posted by hulahulagirl at 7:27 AM on April 11, 2008
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posted by rokusan at 10:12 PM on February 14, 2008