Stimulus tax rebate: Will we have to give it back?

Several readers have asked me whether the federal economic stimulus payments that 130 million of us will start getting in May are really just pre-payments on our 2008 taxes. Next year, will we get smaller tax refunds--or owe more--because we're getting a tax rebate now?

My source at the IRS says no. This will not affect our tax refunds next year or in any future year. This is a one-time payment that won't bite us in the rear later on. You won't owe federal tax on this rebate, either. (For more details, click here for the IRS's fact sheet and scroll to the bottom of the page.)

For 2008 only, the government is providing a basic tax credit of up to $600 per single filer or head of household, $1,200 per married couple filing jointly. The credit is based on what you report on your 2007 tax return. If your 2007 tax was lower than those maximums, your credit is less. For example, a single filer who paid $400 for 2007 would have a $400 credit. Eligible individuals will recieve another $300 for each qualifying child under 17. The credit phases out as your income increases.

This rebate is a pre-payment of that credit. It won't reduce your refund next year or increase what you'll owe. It may affect how you fill out your 2008 tax return, so hold on to any notice on it that you receive from the IRS.

Remember last year's telephone excise tax rebate? Mr. IRS tells me to think of it that way. It's essentially a one-time freebie.

Of course, looking at the big picture, it's not a freebie. The government has to get the money from somewhere to pay us all. If it borrows, it has to pay that money back by reducing expenditures somewhere or eventually raising taxes. So yes, in larger sense, we--or future generations--eventually will have to pay for it. But from the point of view of the individual taxpayer in the here and now, it's a gift.

--Tobie Stanger

Comments

[jose gonzalez]

what if we move before we get the rebate how will we be able to claim it once its available? I live in some apartments and am planning on moving but am afraid that this move will effect my ability to get the rebate.

[Tobie Stanger (Consumer Reports)]

That's a good question. The IRS says tens of millions of dollars in refunds go unclaimed, mainly because of address changes.

If you haven't yet filed, the easiest way to avoid this is to fill out line 74 (b-d) on Form 1040, which instructs the IRS to direct-deposit your refund to your bank account. The IRS will automatically send the rebate to the same bank account. You can choose the direct-deposit option even if you file your return by mail.

If you've already filed, go to your post office and submit a postal change-of-address form. The Postal Service informs the IRS weekly of address changes. Then go online and get Form 8822, Change of Address form, and follow the instructions. (Copy this URL into your browser window: http://www.irs.gov/taxtopics/tc157.html.)

The first rebates don't do out until May, so you have time to set all this up in advance.

[DIANA PARKER]

HOW DO YOU NOTIFY IRS THAT YOU HAVE CLOSED THE BANK ACCOUNT THAT YOUR 2007 REFUND WAS DEPOSITED INTO? HOW DO YOU SUBMIT A NEW BANK ACCOUNT ROUTING AND ACCOUNT NUMBER TO THE IRS?

[Lakisha Stokes and Steven Hill]

When will we get our stimulus tax refund

[brett504]

I can believe it, the IRS has always been greedy, and they had to figure out some way to get the money back that the government gave us. So in the end we really got nothing.
And this will cost me more in the end, when I pay my taxes next year, so I lost.