A CPA I have worked with in the past, Elizabeth Servey, sent out an email recently that is timely for many Americans. The subject matter is about the recently approved tax rebate checks that our President, good ole George Dubya, approved. Below is the content of her email and her contact info as well if you have any questions or want to contact her directly… I also want to say that Rick Mangan, the CPA who is a contributor to this site, could also answer questions if you need…
Dear Friends,
On 2/13/08 the President signed the Economic Stimulus Act of 2008. You’ve probably heard that the government is going to be sending rebate checks to most Americans in an effort to stimulate the economy. This letter hopefully explains, among other items, who gets rebates, how they are calculated, how higher income can reduce or eliminate a rebate, and what, if anything extra, you’ll need to do to get one.
Who gets rebates? Only individuals get rebates. Business entities don’t get them. Nor do estates and trusts. But there are other new tax breaks for businesses. Not all individuals, however, get rebates. You don’t get one if you are or can be claimed as someone else’s dependent. Also, nonresident aliens and illegal immigrants don’t get rebates.
Does that mean all other individuals get rebates? No, to get a rebate, in general, for 2007, you must either (1) owe tax as computed in a special way or (2) have at least $3,000 of qualifying income. Qualifying income in general includes; earned income, social security benefits, certain railroad retirement benefits, and veterans’ disability payments (including payments to survivors of disabled veterans).
How much do you get? A single person with no qualifying children gets a maximum rebate of $600 or a minimum rebate of $300. A married couple filing jointly with no qualifying children gets a maximum rebate of $1,200 or a minimum rebate of $600. To get the maximum, your 2007 tax liability (figured in a special way, explained below) must be $600 or more for a single person and $1,200 or more for a married couple filing jointly. To get the minimum, you must have at least $3,000 of qualifying income or owe tax (figured in a special way) of at least $1. Your rebate amount will fall in between the minimum and maximum if your tax is more than $300 but less than the maximum rebate for your filing status. In that case, your rebate will be equal to your tax. For example, you are single and your tax is $500. You will get a rebate of $500. Tax liability “figured in a special way” in general means; net income tax liability (Form 1040 line 57) plus the child tax credit (Form 1040 line 52).
Increased amount for those with one or more qualifying children. Anyone who qualifies for a rebate in any amount gets an additional $300 for each qualifying child. To qualify, a child must be under the age of 17, live with you for more than half of the year, and be your son, daughter, stepson, stepdaughter, brother, sister, stepbrother, stepsister, or descendant of any such individual. In addition, the child must not have provided more than half of his or her own support. Thus, for example, a married couple filing jointly with two qualifying children could be eligible for a maximum rebate of $1,800.
How does higher income affect a potential rebate? The amount of the rebate (both the basic and the child’s amount) is reduced by 5% of a taxpayer’s adjusted gross income (AGI) above $75,000 ($150,000 for joint returns). For example, a married couple filing jointly with no children has AGI of $160,000, and net tax liability of over $1,200. Their rebate is $700: [$1,200 basic rebate － $500 phaseout (i.e., 5% × ($160,000 － $150,000)].
What do I have to do to get the rebate check? The IRS will automatically figure your rebate based on your 2007 tax return that is due April 15, 2008. It will start sending rebate checks out in May for those who file before then. If you are receiving a refund and you use direct deposit the rebate amount will also be directly deposited. If you owe or did not use direct deposit then the rebate check will be mailed to the address on file. If the address on file with the IRS is not your current address make sure you update your address by using form 8822. I have attached this form.
What if you don’t have to file? Here’s where it gets tricky. Many people who normally don’t have to file a return will have to do so in order to get a rebate check. For example, an individual whose only income is $3,000 of earned income normally would not be required to file a return. Likewise, an individual whose entire income consists of $8,000 of social security benefits normally would not have to file a return. These individuals should file either Form 1040 or Form 1040A to show the IRS that they meet the $3,000 qualifying income threshold. They will not owe any income tax as a result of filing.
Do rebates affect 2008 taxes? The tax rebate check that the IRS will send you after you file your 2007 return usually won’t affect your 2008 return. However, it can! When you do your 2008 return, you will figure what the rebate would have been based on your 2008 return. It could be higher or lower than the check that you actually received from the IRS that was based on your 2007 return. If it is higher, you will get a credit against your 2008 taxes for the difference. It if is lower, you won’t have to pay the difference back. Do keep a record of the amount you receive as you will need it for preparing your 2008 tax return.
I hope this information is helpful. If you would like more details about this, please do not hesitate to call.
Sincerely,
Elizabeth
–
Elizabeth A. Servey, CPA
Tax Accountant
206-909-6853
Elizabeth.Servey@Gmail.com
It’s always fun for me to find places that remind me of home; or a place I’ve traveled to; or somewhere I want to go. Actually, as I think about it, I can see this place dropped down into many a metro area and fitting in nicely. Not because it’s homogenous, but because it’s quirky and stylish enough that I think avid coffee and wine lovers from many places might enjoy its ambiance and design. Granted, it might not pass muster in 
