Tax refund? Tax stimulus rebate? How to get both of them faster

This tax season, many of us can look forward not only to a tax refund, but also to a one-time tax rebate, ranging from $300 to $1,200, plus $300 for every child.

To get that rebate, you must file a 2007 federal tax return.  And if you want that new rebate faster, you should file your 2007 taxes electronically and arrange for direct deposit of your tax refund. Doing so will automatically will also ensure direct deposit of your rebate. The IRS asserts this route is faster and more secure than snail mail.

How long can you expect to wait for your refund if you do it all electronically? As little as 10 days from the time the IRS confirms it got your return. And your rebate? The IRS says the earliest rebates will be distributed in early May.

Though the IRS hasn't said so, it stands to reason that early filers would get their rebates early as well. Conversely, it's a sure bet that if you file for an extension, you'll have to wait beyond that time for your rebate. That's because the IRS must have your 2007 return before it can determine the size of your rebate.

Other rebate facts:

•You must have at least $3,000 in income to get the rebate. At $75,000 in adjusted gross income for individuals and $150,000 for couples filing jointly, the rebate begins to phase out.

•If you're eligible to be claimed as a dependent on someone else's tax form, you're ineligible for the rebate. For example, college students who earned more than $3,000 can't get the rebate simply by asking their parents to forego claiming them as dependents.

•A number of folks who normally wouldn't file an income tax form, including certain veterans,  Social-Security recipients, and recipients of Railroad Retirement benefits, may be eligible for the rebate. But they MUST file a 2007 return in order to get it.

•If you've filed a 2007 return already but haven't included the benefits mentioned above--which might qualify you for a rebate--you can file an amended return, Form 1040X, available at  www.irs.gov.

•Beware of e-mail and phone messages on the rebate that purport to be from the IRS. They are most certainly are scams.

Comments

[Michael Lee]

I am confused on the $300 payment for qualifying children. The IRS publication seems to contradict itself. It says "Parents and anyone else eligible for a stimulus payment will also receive an additional $300 for each qualifying child. To qualify, a child must be eligible under the Child Tax Credit and have a valid Social Security number." and also under 'Exclusions' "Also ineligible are individuals who can be claimed as dependents on someone else’s return."

This looks like it says only parents with children that qualify for the Child Tax Credit (must be under 17) can get the $300 extra payment. At the same time, it indicates a child cannot qualify for any stimulus payment if they can be claimed as a dependent on someone else's tax return. To me this indicates that someone that is 20 years old going full time to a university cannot get the stimulus payment himself, nor can his parents get the $300 extra payment.

Could you please clarify this?

Thanks.

[Tobie Stanger (Consumer Reports)]

Michael,

You’re right that there are some strange inconsistencies. But according to my source, Mark Luscombe, a tax expert at CCH, they are supported by the law.

To be considered eligible to be your parents’ dependent you have to meet four tests: relationship, age, principal residence, and support.

•Relationship. You are the taxpayer’s child or stepchild (whether by blood or adoption), foster child, sibling or stepsibling, or a descendant of one of these.

•Age: You must not have attained the age of 19 by the end of the calendar year, or must be a student that has not attained the age of 24 by the end of the calendar year.

•Principal residence: You must have same principal place of abode as the parent for more than 1/2 of the year.

•Support. You must not provide more than 1/2 of his/her own support during the year.

You have to meet all of these to be eligible to be claimed on your parents’ return. So the student in your example is eligible to be claimed as a dependent by his parents, even if they decide not to claim him. That eligibility excludes him from getting the tax rebate himself.

At the same time, there’s another qualifier for this rebate that’s related to the Child Tax Credit: Dependents have to be under 17.

So yes, there will be folks who are by definition dependents, disqualifying them from claiming the $300 themselves, and whose age disqualifies their parents from claiming it as well.

Such is our twisted tax code.

Tobie Stanger
Consumer Reports

[Brent]

What I want to know is how this affects my taxes next year. I keep hearing people say that this is a pre-bate and that confuses me even more. Does the stimulus rebate just come from the total amount of federal taxes you paid?

For example if my taxable income were around $5k after deductions, etc... and ended up paying a federal tax of $50, would I only be eligible for $50 or would I get the whole $600?

[Rita]

I am looking for information on how this rebate will affect my taxes next year. Will we be taxed on the amount we receive? I have also heard we will have to pay the amount we receive back next year on our taxes. Can you possibly clarify how this will work and affect us in the end??

Thank you

[Darlene Smith]

I have a question! MY husband and his ex wife have joint custody of 2 boys. They rotate claiming the boy due to the way the divorce was written up. His ex wife has on of the boys that live with her and we have one that lives with us. This is her year to claim the boys. The money should be split between us both with each getting 300.00. My husband ex wife will get 600.00 for both boys when she only has one that lives with her.Is there any way to make her give the one living with us his part since she doesn't help take care of him. I think there should be a way to make her split the money or be in trouble with the irs is she doesn't. Thank you

[Cath]

Is this really a rebate or an advance on our potential 2007 tax refund? We had to pay back the one from 2001 but were never told until we were actually doing our taxes and went from getting a refund to owing money to the IRS. Is this going to happen again this time?

Can you please clear this up?

Thanks!

[Mr. Bob]

I'm currently collecting SS, I also have a small State retirement and small Air Force retirement both of which I pay Federal taxes on. These two retirements combined equal about 15K a year, Is this amount considered Qualifying Income for rebate purposes.
There are so many conflicting stories out there.

Thanks.

Mr. Bob

[HUGH PRESTON]

As a married couple we file JOINT. My wife does not have income to report for 2007. Does she get the rebate?

[Tobie Stanger (Consumer Reports)]

If you earned income in 2007 between $3000 and $150,000 and file a joint return, you and your wife together will receive a single rebate of up to $1,200. She will not get rebate separately from you.

The actual amount you will receive depends on how much you actually earned. If your joint return shows adjusted gross income (AGI) between $150,000 and $174,000, you’ll still receive a portion of the rebate, but the amount gradually declines to $0 after $174,000 in AGI.

[Tobie Stanger (Consumer Reports)]

Answer to Mr. Bob:

My source at the IRS says you can qualify for the stimulus rebate in three ways:

1. If your Social Security income for 2007 was greater than $3,000, you qualify for the minimum stimulus rebate of $300 for an individual and $600 for a married couple filing jointly.

2. Even if your 2007 Social Security income wasn't that high, you could qualify for the stimulus rebate if your Social Security income plus other, earned income was $3,000 or more.

3. You could also qualify for a stimulus rebate if your tax liability, as shown by adding lines 57 and 52 on your 2007 tax return, is $1 or more. In this case your gross income has to be greater than the sum of your standard deduction and one personal exemption (two if filing jointly).

If you qualify this third way, you are eligible for a larger amount of up to $600 per individual and $1,200 per married couple filing jointly.

I hope that helps!

[Greg Smith]

I really am confused. I am a veteran and a 22 year old college student. I have been an independent for going on three years now. Is my age going to disqualify me for the rebate, Even if I made $12k in taxable income? What about marital status? Would age still supersede marital status?

[Tobie Stanger (Consumer Reports)]

To Brent, Rita and Cath: See my post of Feb. 21, which may answer your questions.

To Greg:

Your age and standing as a full-time student would make you ineligible for the refund because those factors make you eligible to be claimed as a dependent on your parents' return (even if they opt not to do it). However, I believe that if you are married and file jointly for 2007, that makes you ineligible to be claimed by your parents, so you could get the rebate.

IRS Publication 501, "Exemptions, Standard Deduction and Filing Information" may have more answers to your question. Here's the URL:

http://www.irs.gov/publications/p501/ar02.html#d0e2859

[stan welch]

I draw Social Security disiabilty & my wife works fuul time job.
We filed jointly will we get the refund

[Tobie Stanger (Consumer Reports]

Assuming your combined income for 2007 is greater than $3,000 and less than $174,000, you would be eligible for a refund of up to $1,200.

[Lynn Taylor]

My parents are retired and collect soc sec and my dad has retirment income. Do they have to file 2007 tax return to be eligible for the rebate? Also how do they file a tax return if they don't pay out any taxes? Thanks

[Tobie Stanger (Consumer Reports)]

Go to this IRS address to get the information:

http://www.irs.gov/irs/article/0,,id=179096,00.html

At the bottom of the article is a link to a downloadable document that instructs how best to fill out Form 1040A, which your parents will have to use.

Good luck!

[Almarie Smalls]

I filed my son's income tax and a portion of it was retrieved by IRS for delinquent child support. Will the same thing happen to his rebate?

[Tobie Stanger (Consumer Reports)]

Here is an answer from the IRS:

For this purpose, stimulus payments are no different from other federal tax refunds.

Federal tax refunds have always been offset to cover past-due federal tax obligations. In addition, federal statutory requirements that federal refunds be offset for other, primarily nontax, purposes have existed since the early 1980s.

Another Treasury bureau now actually has the administrative
responsibility for these other nontax debts. The instructions for Line 73, Form 1040, provide the description, below.

Refund Offset
If you owe past-due federal tax, state income tax, child support,
spousal support, or certain federal nontax debts, such as student loans, all or part of the overpayment on line 73 may be used (offset) to pay the past-due amount. Offsets for federal taxes are made by the IRS. All other offsets are made by the Treasury Department's Financial Management Service (FMS). For federal tax offsets, you will receive a notice from the IRS. For all other offsets, you will receive a notice from FMS. To find out if you may have an offset or if you have any questions about it, contact the agency to which you owe the debt.

[cynthia daniel]

I would like to know the proposed time of distribution of the stimulus refund. How is it determined who gets their refund first? Does it go by birthdate or geographical location or social security number?

[Tobie Stanger (Consumer Reports)]

The IRS says it hasn't yet come out with a distribution schedule. But it's likely that the earlier you file, the earlier you'll get your stimulus payment, or rebate. The agency can't determine a taxpayer's rebate amount until it processes that person's or household's 2007 return.

[Richard Martin]

Tax Rebate = FREE MONEY? I can't seem to get a straight answer on this issue. Will it's receipt require inclusion on 2008's return which will reduce any otherwise calculated potential refund?

[Tobie Stanger (Consumer Reports)]

No, it won't reduce your potential refund. Yes, you'll have to include it in your return.

Please see my blog from February 21:

http://blogs.consumerreports.org/money/2008/02/tax-stimulus--1.html

[Paul of Chicago]

I am on temporary disability with my employer. And I retire soon. I have filed my tax returns and have received my refund. Do I still qualify?

[Tobie Stanger (Consumer Reports)]

According to the IRS, if the disability payments are reported on a W-2 Form, they are considered earned income. If you report at least $3000 in total earned income for 2007, you are eligible for a rebate.

If the disability payments are reported on a Form 1099-R, then they're considered regular pension income, which doesn't count toward rebate eligibility.

[Susan]

If you file an extention for 2007, will you still get it? Or what if your regular refund is held up for some reason, will you still qualify?