I’ve written about the economic stimulus rebate program a few times on my site, but I continue to receive a substantial amount of stimulus questions in the comments of the articles I have written and via e-mail. Because I have received a lot of questions, I thought it would be good to put the majority of them in one place so I can refer people to the FAQ section – hopefully helping a lot of people while also reducing my workload.
As a note, I try to respond to every reader e-mail/comment/question, and repeating answers can take up a lot of time! But I love reader comments and questions, so feel free to hit me up! (but if it is regarding the economic stimulus package, check this FAQ section first!).
Keep in mind, this information is gathered primarily from the IRS web page, and I am not a tax professional. So if you are in need of professional tax advice, please consult the IRS or a tax pro.
What is the economic stimulus package?
The economic stimulus package is a change in the tax code that will eliminate the 10% bracket from 10% to zero for the first $6,000 of taxable income in 2008. But the government decided to do this based on tax filer’s 2007 taxes so they could distribute this money so tax payers would spend it now and (hopefully) boost the economy.
Who is eligible for the rebate?
The economic stimulus rebate check is available to qualifying tax payers, based on IRS calculations. Single tax filers with adjusted gross income (AGI) less than $75,000 and couples filing jointly with AGIs less that $150,000 will qualify for full rebates. Those with AGI levels above the maximum will receive a reduced rebate based on a phase-out schedule.
Persons who do not owe income taxes, but earned at least $3,000 in wages, Social Security benefits, or veterans disability benefits, will get rebate checks of $300 for individuals and $600 for couples.
Who will not receive an economic stimulus check?
You will not receive an economic stimulus rebate in 2008 if:
- Your net income tax liability is zero and your qualifying income is less than $3,000. To determine your qualifying income, add together your wages, net self-employment income, nontaxable combat pay, Social Security benefits, certain Railroad Retirement benefits and certain veterans’ payments.
- You can be claimed as a dependent on someone else’s return.
- You do not have a valid Social Security Number.
- You are a nonresident alien.
Keep in mind, the calculation will be run again in 2009, so if your situation changes, you may be eligible to receive a rebate at that time.
How much will I receive for the rebate?
Qualifying single filers (AGI less than $75,000) will get rebates of up to $600. Qualifying couples (AGI less than $150,000) will get rebates of up to $1,200, plus $300 per dependent child younger than 17, with no maximum number of eligible children. The rebate starts out at $300 per person, but rises to $600 per person to match the taxes you will pay based on your 2007 Adjusted Gross Income (AGI).
Your AGI is generally lower than your salary, and is based on your earnings after tax deductions such as 401(k) and Traditional IRA investments and other qualified deductions. However, if you earn above a set limit, you may receive less than $600. The tax rebate decreases by $50 for every $1,000 earned above $75,000.
I recommend using the official stimulus rebate calculator (calculator removed from IRS website) for a better idea of how much you might receive.
What do I have to do to get my rebate check?
If you file taxes in 2007 and qualify for the rebate, it will be automatically sent to you. To receive the economic stimulus rebate, you are required file a 2007 tax return, either a form 1040, 1040A or 1040-EZ. If you are someone who normally doesn’t file a tax return (for example, a pensioner, retiree, of someone whose income is based on Social Security, military veteran’s disability, or other income), you will need to file a tax return in order to receive the rebate.
Will I receive my rebate check via direct deposit or by mail?
Stimulus Payments will be direct deposited for taxpayers who select that option when filing their 2007 tax returns. Taxpayers who already filed and requested direct deposit won’t need to do anything else to receive the Stimulus Payment. Taxpayers who did not request Direct Deposit for their 2007 refund, or provide their bank information to the IRS if you paid taxes, will receive a paper check by mail.
I received my refund on a prepaid debit card – will my rebate check some the same way?
Those who received their tax refund on a prepaid debit card from a tax preparation company will receive their rebate by mail. They will receive a check sent to the address on their return. Refund anticipation loans for the stimulus check are not allowed by the IRS.
What if I earned more than the maximum income?
If you earned more than the maximum, you may still be eligible for a refund check. However, it will be reduced by 5-percent of the amount you earned above the AGI income cap of $75,000 for a single filer or $150,000 for couples. The rebates will follow this formula until it phases out, and those earning above the phase out level will not receive a rebate check.
For singles, the phase-out level begins at $75,000 and ends at $87,000, with a reduction of $50 for every $1,000 earned over $75,000. If you earn above $87k, you will not receive a rebate.
For couples, the phase-out level begins at $150,000 and ends at $174,000, with a reduction of $50 for every $1,000 earned over $150,000. If you earned above $174k, you will not receive a rebate.
Will I receive the economic rebate if I am someone’s dependent?
If you are over 17 and are a dependent, neither you or your parents will receive a rebate, even if you earned enough money to qualify for the rebate. This will affect many high school and college age workers who worked last year and earned the minimum amount to receive the rebate.
However, keep in mind, the rebate is based on your 2008 income, and the rebate calculation will be run again when your taxes are due in 2009. So if your dependent status changes between now and the time you file taxes next year, you may still receive the rebate in 2009.
If you filed your tax return by the April 15th deadline, you will receive your rebate check automatically starting May 2. For those who elected to receive their rebate check via electronic deposit, checks will begin being sent by the IRS on May 2nd. For those who will receive their check via mail, the checks will be sent starting May 16. If you filed your taxes late or filed for an extension, you may not receive your rebate check for several weeks after you file, and there have been some reports that it may take several months to receive your rebate.
I did not receive the economic stimulus rebate letter in the mail. Will I still get the rebate?
Yes, you will. The letter was only sent out to remind people what was happening and to explain when the rebate checks will be sent. The rebates will be sent automatically, so there is nothing you need to do to receive your check.
What if I moved?
To ensure you receive your rebate, you will need to file a Form 8822 with the IRS and a change of address notice with the U.S. Postal Service. This will ensure your check is sent to your new address. Without your current address, the check could be returned to the IRS as undeliverable. You would still get it, it would just take longer because it would have to go through the IRS system.
How does the rebate affect my taxes in 2009?
There is some misconception about the stimulus package; it is not a loan on your 2009 taxes. You do not pay it back. The IRS eliminated the 10% bracket for the first $6000 of taxable income (AGI). The rebate is a credit to reflect the new tax laws.
If you did not qualify for the rebate based on the taxes you filed in 2008, but your situation changes when you file your taxes in 2009, you may be eligible for the difference if it is in your favor. If the change is not in your favor, you will not have to pay the difference.
I am having wages garnished by the IRS. Will this affect my rebate check?
It may. If it does, the IRS will send you a notification letter explaining where the money went and why. Some examples of this could be past due taxes, student loans, wage garnishments, or child support. If you have further questions, contact the IRS.
Can I use the money from the rebate check for whatever I want?
Yes, you can. Once the money is sent to you, it is yours to do with whatever you want (though if you have legal obligations to take care of, you might want to do that). I ran an economic stimulus poll on my site regarding how readers plan on using their rebate checks. This is a completely unscientific poll, but over 500 people have responded. So far, over 40% of the responses indicate the reader will use the rebate check to reduce debt. Saving/Investing follows that with 31%. Feel free to leave your vote if you haven’t already!
I filed for an extension on my taxes. Will I still receive the rebate?
Yes. The rebates are based on taxpayers’ 2007 tax returns. Those who file extensions or file late would likely receive their checks later than regular filers, a U.S. Treasury spokesman said last week. The checks will be sent out automatically; taxpayers don’t need to apply.
Can I check the status of my rebate with the IRS?
You can easily check the status of your rebate at the IRS website. The IRS created a web based tool to help you track the status of your economic stimulus rebate. You will need to have your tax return handy because you will need to input some key information from your return, including your SSN, filing status, and number of exemptions. The tool will locate your information in the database and give you the status of your rebate.
Important note about rebate tracker: The IRS recommends using the Payment Schedule prior to using the payment tracker since your payment information will not be available on this tool until the time that your payment is scheduled.
My rebate was lower than it was supposed to be!
There could be several reasons, such as the amount of taxable income you earned, any back taxes or other obligations that may have been owed the IRS, or something else. Also, if you primary form of income was from Social Security or Veterans Disability, it is likely you will only receive $300.
I recommend using the official stimulus rebate calculator, then contacting the IRS if the numbers are different. Good luck.
Is my rebate check taxable?
Will there be another stimulus check?
There have been a lot of questions regarding another stimulus check. I have covered that topic in the following articles: