Like many Americans, my wife and I received an economic stimulus check last year. We received the full check – $600 each, for a total of $1,200. When I started filling out our tax return with TurboTax I noticed there is a section to enter the amount of your stimulus check. When I did so, the amount of our tax return dropped by the exact amount of our stimulus check. At first I thought I was losing out on money. Then I remembered why it appears this way.
How the Economic Stimulus Check Affects your 2008 Tax Return
The stimulus check was not free money like many people assumed. The stimulus was actually a change to the tax code that was to take effect for the 2008 federal tax season (taxes filed this year).
The new tax code eliminated the 10% tax bracket. The economic stimulus package was a change in the tax code that eliminated the 10% bracket for the first $6,000 of taxable income in 2008. However, the US Government wanted to give its citizens the money up front in the hopes they would go out and spend it to stimulate the economy. In some ways, the stimulus check was like an advance payment for the changes that took affect for the 2008 tax season.
How tax software programs handle the stimulus check. Commercially available tax software such as TurboTax, TaxCut, etc. will fill out your tax return based on the 2008 federal tax code – eliminating the 10% tax bracket from the first $6,000 of your income. When you input your information, the tax program automatically gives you that additional $600 (10% of $6,000 for single filers) as part of your tax return. When you input the amount of your economic stimulus check into the tax program you use, the software will reduce your 2008 tax rebate by that amount because you have already received that money. Call it an advance on your tax return if you will.
What if your 2007 and 2008 income is different? Will it change the amount of your Stimulus check payment?
Good question, and yes it can, but it may not. The stimulus check was based on your 2007 tax return because 2008 federal tax returns had not yet been filed. However, that means the tax situation may have changed for some people between the two years. There is good news though – if the government overpaid you based on the amount you would have received this year, you don’t have to pay it back. If the government underpaid you, you will receive it as part of your 2008 federal tax return.
Here are two examples:
You did not receive a stimulus check because you earned too much money in 2007.
Eligibility for the stimulus check phased out above certain incomes, starting at $75,000 for single tax filers and $150,000 for joint tax filers. Single filers who earned more than $87,000 and joint filers who earned more than $174,000 did not receive a stimulus check because they earned too much money to be eligible. If your 2008 income dropped below those levels, you may find yourself eligible for the amount of the stimulus you would have qualified for. That amount will be figured into your 2008 federal tax return
The IRS sent you a stimulus check but your 2008 income won’t qualify for it – you keep it.
Conversely, if you earned under the phase out limits in 2007 and received a full stimulus check, but earned more than the phase out limits in 2008, you do not have to pay back the stimulus check you received. Please note this is for income limits and not for other errors. If the IRS added a zero to your stimulus check and sent you $6,000 instead of $600, they might want that back!
How to find out how much you received from the stimulus check
When filling out your federal tax return you will need to input the amount you received from the 2008 stimulus check. If you don’t remember off hand, you can find out from the IRS via this online stimulus payment tracker. Simply input your information and the IRS will inform you the amount you received from the stimulus.
More economic stimulus questions?
Please be sure to check out this article – Economic Stimulus Rebate – Frequently Asked Questions. You may just find what you are looking for!
Good luck with your taxes this year – and if you have filed yet, here is some information on how to e-file your federal taxes for free!
{ 107 comments }
Yay, I will get my remaining $21 with my tax return. In 2007 my income while a student was low and I only got $579 for my tax obligation of that year. After graduating my income has gone up, but not over the upper limit and therefore they will send me the rest of my stimulus money. Now what will I do with that extra $21 on top of the rest of my return who knows.
I suppose I just assumed that the stimulus check was free money. Thanks for the heads up, I would have been super confused come tax filing time.
This is exactly why I read blogs!
Great post, Ryan!
Not to be boring, but there is no free money, unfortunately, unless one is a Wall Street executive getting a great big bonus while holding out your hand to the honest taxpaying Americans for a bailout.
Did you hear about Senator Claire McCaskill’s proposal to limit exec salary (including benefits) of companies getting bailouts to what the President makes i.e. $400,000?
Sounds reasonable to me, ex Mayor Giuliani’s comments notwithstanding. Gee whiz! Where is that man’s head?
~Peace~
Imani
I had a baby in 2008, so I’m expecting a $300 tax credit on my ‘08 return. YAY!
I jumped for joy when I first received my stimulus check. Unfortuntely, I moved to California during the middle of 2008 so, it looks like I will get a big I.O.U. for my tax return this year ;(
Anyone hear anything else regarding California tax payers actually receiving money and not an I.O.U. ?
@Office Cubicles…wow, that stinks! Still hearing, as of today, Jan 30, IOUs for CA residents(CNN). Sorry
I should have received $900 since I have two children (Both were full time students) filing as head of household with no spouse. Instead they gave me $600.00. H&R Block filled in this section for me showing I was still owed $300.00 and now my refund is held up at the IRS for a mistake made on the return with no explanation of why. I thought $600.00 was for single people only and not parents with children? I’m not sure at this point how they will be changing my return but know that whatever the do, I am stuck with their decision whether I agree or not it seems.
Sharon: The rebate was only available for children under the age of 17 by the end of 2008, so that may have affected your return. If there is a problem, definitely contact the IRS to see if they can fix the issue. Good luck.
Thanks for clarifying – that’ll be one less head-scratcher when I get to my tax returns this year.
I’d definitely rather get it upfront. Then again, it’d be nice if these types of things were more clear in the beginning so we all knew what we were actually receiving. Good post.
Thanks, Frugal CPA.
I think everyone got caught up in the idea of “free money” and didn’t think twice about how it would affect them later on.
The scary thing is that this wasn’t even a major change in the tax code. If they do something more complicated this year or next, we’ll all be confused!
The stimulus check was not an advance on your 2008 refund. From the IRS FAQ at http://www.irs.gov/newsroom/article/0,,id=182003,00.html :
Q. Will the payment I receive in 2008 reduce my 2008 refund or increase the amount I owe for 2008?
A. No, the stimulus payment will not reduce your refund or increase the amount you owe when you file your 2008 return.
Turbo Tax assumed you did yet not receive your stimulus check, so it started with a default refund of $1200. When you told it you had receive the refund, Turbo Tax subtracted the $1200 (resetting to your normal refund amount).
Jeff: You’re correct, it will not affect your taxes. I wrote that in the article as a way to explain the concept to people, however, I can see how it might be misleading. I have corrected the line in question.
Forgive me but I’m still slightly confused. I’ve been surfing around the internet to find out if the 2008 stimulus will affect my 2008 refund, and I still don’t have a clear answer. I started filing my return using turbotax this year and there was an a section where you listed how much was your 2008 stimulus rebate. I put in $300 and it subtracted it from my federal return amount. Some say that it will not affect my return amount but it did. When I get ready to e-file will it add it back in to my amount I’m just not sure about what’s going on here.
Sarah: The TurboTax software works on the assumption that you did not receive your rebate already and it adds the amount of the stimulus rebate into your return. Because you have already received that amount, TurboTax then deducts it from their calculation. While it appears as though it is affecting your return, it does not actually reduce your return.
It is a little confusing, but it appears as though you have filled out your return properly regarding your stimulus check.
Thanks so much for getting back to me. Its starting to make sense now butI did my taxes myself before using turbo tax and I got the same amount turbotax gave me before the software deducted the $300 stimulus amount. So I’m still a bit fuzzy with that aspect.
This is from the IRS.GOV website FAQ…
Q. Will the payment I receive in 2008 reduce my 2008 refund or increase the amount I owe for 2008?
A. No, the stimulus payment will not reduce your refund or increase the amount you owe when you file your 2008 return
Martin: That is correct. However, some tax software programs are programed with the assumption that you did not yet receive the stimulus rebate. If you did not receive the stimulus check last year and were eligible, then you will receive it this year. If you did receive it and the tax software makes the assumption you did not receive it, then it will “appear” as though your refund is changed by the rebate. But your refund is not different and no change to your 2008 taxes occurs.
Ryan…did you ever imagine this post would have generated the response it did?
You are having a lot of response! People want to know the facts about their 2008 stimulus check in regards to filing in 2009. I have heard stories of how the government took back the amount given and that would mean some people would owe taxes for 2009. I was scared glad I found this site! Thanks!!
Glad you found the information you were looking for Getta.
Odd. I did my taxes with TurboTax Online this year. Last year, I received $1500 for myself, my wife and 1 dependant child. Maybe the online program is different, because I started at $0 and my refund did not go down 1 cent after entering stimulus payment. We had another baby last year after the stimulus payments went out and TurbTax said I would get an additional $300 this year, but I’m not sure how. My return did not increase by $300.
Chris: The additional $300 is probably because you had another child in 2008. The stimulus payments were made based on 2007 tax returns, but actually take effect based on 2008 taxes, so if your situation changes, you will be owed the difference. In your case, having another child was enough to earn another $300 credit.
I have two friends that when they did their taxes this year their refund was reduce by $300.00 because of the $600.00 stimulus check they got last year. That tells me the government took half of that stimulus check back.
James: No one pays taxes on the stimulus payment and the IRS has stated they will not take back refunds if they paid too much to recipients in 2008. It is more likely that the tax preparation software they used automatically populated their return as though they did not receive the stimulus check in 2008.
Did you see their federal tax return and verify that the tax preparation software they used did not automatically assume they did not receive the stimulus payment in 2008? It may appear that they refund was reduced, but that is not the case.
Actually this did happen. At first the correct amount was not entered and the IRS rejected the return once the correct amount was put in the refund drop 300.00. They used Taxslayer.com I just read this article see link below. Sincerely, James
http://www.msnbc.msn.com/id/29041264/
Hi James,
Thanks for the response. It appears as though this is an error on the part of the software or the tax preparer. I hope they are able to get the situation fixed.
I had a baby in 2008. Will the additional $300 be automatically figured into my tax return or do I need to complete additional paperwork?
TIA!
I am used to getting a tax rebate in the amount of $5,000 (or more). After entering all my information/deductions (not including stimulus check amount), it appeared as though I would get the same amount as I normally do ($5,000). That seemed right as my circumstances (income/dependents) have not changed. My AGI is under $60,000.
Yet as soon as I added the amount of stimulus I received ($2,100), TurboTax immediately subtracted that from my refund amount.
You say the stimulus check was essentially an interest-free loan against the tax rebate I should be getting back this year.
The IRS says that it is NOT, and that programs are not calculating this correctly.
Who’s right?
If it was,
Jenngroove: Congrats on your new baby! I believe it will be taken into account when you file your taxes. It should be automatic because the IRS (or your tax software) should compare the amount of money you actually received from the stimulus versus the amount you should have received based on your 2008 income. The new baby will alter the amount you should have earned.
Christina: TurboTax and some other software programs work on the assumption that you did not receive your rebate already and it adds the amount of the stimulus rebate into your return. Because you have already received that amount, TurboTax then deducts it from their calculation. While it appears as though it is affecting your return, it does not actually reduce your return.
It is a little confusing, but it appears as though you have filled out your return properly regarding your stimulus check.
I have already filed my taxes with a “professional tax person” and he never mentioned the stimulus taxes. My amount that I’m suppose to get back is about the same amount as every year. Does that mean that he “messed up” with my taxes??? I’m nervous now.
Nancy: No, that does not mean he messed up. Most people won’t notice much of a change to their return. If you have concerns, the best thing to do is to contact the tax professional and ask him specific questions about your return. He or she should be able to help you understand exactly what your return entitles you to.
I only earned enough taxable income in 2007 to get a $300 stimulus check, but based on my 2008 income, Turbo Tax said that I had an additional $300 coming after I finished filing my 2008 taxes. Is that factored into the tax return that I received or will I receive that separately?
Justin: I believe it will be factored into your tax return.
next time they give out any money I will be returning it..
There is a glitch in all of the online tax service programs…it does indeed deduct the amount that you received for the stimulus and it should not. It is not “appearance only”. Notify the IRS and follow their instructions to get your money back…that is what I did and my 2nd refund is pending. Thank you !!!
Hello Informed,
There has been a reported glitch in some of the early releases of certain tax software programs, however many new releases have been corrected. Most of the tax software programs come with free updates, so changes can be made even if the error was on the disk someone originally purchased.
If there is a problem with your tax return you should always notify the IRS and get it corrected. I’m happy to hear you were able to do so.
We got $1800 on our stimulus check and when we filed after putting in the amount it deducted $500. But my concern is that some people have told us that their “tax people” have not included the stimulus check on their return. They’ve told them that they didn’t need to include it, that it doesn’t ask for it anywhere. It asked for it on ours, even said not to guess cause they know how much we received. Have they messed up on their claim then? And if so what can they do? Thanks
So, if the stimulus check won’t change the amount of refund, then why is my federal refund considerably less than it was last year with the same amount of income?
This info and discussion has been VERY helpful. I, too, had my `08 return ready to go -not using tax software- when, oops, did I forget to include my “stimulus” $$? Based on what everyone has said plus the very useful links that were provided, I discovered that my long-since-gone stimulus $$ were not required to be included. Plus I also found the IRS letters I received (and promptly filed) re the payment, and there is a separate 1-sentence paragraph on one that says “you will not be required to report the amount … as taxable income on your `08 federal income tax return.” Thanks everyone!
Maria: It’s hard to say what to do. The IRS tracks how much they gave or did not give people, and they will verify that information against taxpayer’s returns. The tax professionals should all know this. The best thing to do is fill out the tax form correctly as required. If they missed something, they may be able to file an amended tax return to correct any mistakes.
Kevin: The change in the tax code removed the 10% tax bracket, which means you may have had less money deducted from your taxes, thus the lower tax return. If that is not the case, I recommend speaking with a CPA for further guidance.
THIS IS SUCH B.S. I would have never taken it had i known this to be the case. I ended up owing the gov money cause I blocked taxes on my paycheck a couple times. Now I owe them $600.00 additonal dollars which I have to come up with now, which i would not have if I didnt accept that stupid check. It was not clear that it wasn’t free money at the time. Another case of the government not being clear. It’s such b.s. By the way that stimulus package clearly really helped right? LOL. So now in a worse economy i am struggling to pay back that six hundred which i didnt even ask for.
Thank you so much for this article! I’ve been TELLING EVERYONE that the stimulus check affected this years return and EVErYONE said I messed mine up (in TurboTax). I knew I was right b/c I entered my info with and without the stimulus to check and TurboTax wouldn’t be wrong! Not to mention I researched this last year so I kind of knew that’s what was happening!
Thanks again.
To marc…you’re right. It wasn’t clearly explained, however, I found the info on the net last year explaining what was happening. I’m getting 13 dollars back and I’m lucky I don’t owe…it’s almost like, having the deductions on our W-4 so the gov doesn’t get OVERPAID with my tax money each year is going to cause me to owe them the 600. I see what you’re saying! Good luck!
Did y’all actually expect the nightly news or the other media to really explain everything? If you looked up much or read the paperwork that came with the checks it explained that it was an advance on your 2008 tax return but they were not taxing the first part to make up the difference. That you should continue paying as you were and you would come out just fine.
I figure I looked up the information and knew what it was so I had no issues with them giving me the check, other than the fact that I didn’t agree with the economic policy they were pushing.
My understanding from this site (and others) is that the check was NOT an advanced against your 2008 returns. It was an ADJUSTMENT to how the gov calculated taxes on the first $6,000 you earned in 2008. So, any adjustment to your 2008 returns that happens now is taking in to account your acutal taxes paid vs. the predicted outcome at the time the checks were cut because of the change in tax law. Right?
We went to Jackson Hewit and accidently gave the wrong amount of our stimulus check. We claimed $600.00 but should have been $1200.00. We completed our taxes and went home with our copies of our return. The next day we received a message from JH stating that it was rejected due to the stimulus. They redid our taxes with the correct amount of the stimulus check and the amount of our refund went down the $600.00, so how can say it does not lower your refund?
Kevin: That is correct.
Dmat: The stimulus does not affect your refund. The incorrect amount was put into your return, which made it appear as though your return should be higher than it actually was.
The correct amount for your return was $1200, but $600 was incorrectly entered. The IRS will adjust returns to meet the correct amount of the stimulus they were eligible for. You were eligible for $1200 and you received $1200. The original return stated you received $600 so the IRS was going to send you that extra $600 until they checked their records and rejected the return based on the stimulus you received.
Wow! This is getting more confusing by the day. Hopefully, TaxSlayer has made correction to their online tax preparation program.
When will you hang out your Tax Preparer shingle, Ryan?
I admire your stamina but suggest you get ready for your baby by stocking up on some sorely needed sleep
Best Regards,
Imani
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