Everyone wants to know what is happening with the IRS tax rebate checks. The media is flooded with information, but here are the actual facts straight from the source–the IRS website, where anyone is welcome to get the information.
IRS plans to mail the checks–or direct deposit them if a current tax return used direct deposit for a refund– beginning sometime in May, 2008. Mailing will continue through the summer. If you did not provide direct deposit information when you filed your 2007 return, then IRS mails a paper check to the address shown on the tax return. The rebate will in effect reward tax payers who filed returns quickly, because the checks go out in the same order the returns were received by IRS. Even if you wait until a few minutes before midnight April 15 to file your return you will get any rebate due–you just may get it after everyone else.
Some individuals, such as senior citizens whose only income is Social Security, do not need to file returns since they do not owe any taxes at all. Since IRS will have no record of their name, address or bank records it will be unable to send a rebate check unless they file a return. Many seniors are not aware of this because the early drafts of the legislation creating rebates did not include senior citizens as did the final draft. Seniors can file a federal tax return whether or not they owe taxes in order to receive a rebate check. There will be no need to file a state return.
The rebate is not a bonus–it is an tax refund advance against the following year’s tax liability. It will have to be reported on the next year’s return which will ask whether or not a person received a rebate check and how much it was. The rebate amount is small enough it probably won’t affect taxes owed, but it could potentially result in reducing the amount of a refund or increasing amounts owed slightly on the return filed next year for 2008. Eligibility for a rebate is income-based so if you qualified based on income in 2007, the only data IRS has for determining eligibility, but your income in 2008 actually made you ineligible for any rebate, you may owe it back when you file taxes for the 2008.
Rebate amounts vary according to the person’s filing status and income. The IRS website has several calculators you can use to get an estimate of what you can expect. These are the basic ranges.
Individual’s rebates will start at $300; the maximum is $600. Those who are married and who file jointly with their spouse can receive a minimum is $600; the maximum is $1,200. Those with children who be eligible to get $300 for each child. Elimination from eligibility based on income of single individuals starts at $75,000; for married filers, the phase out starts at $150,000.