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How the Economic Stimulus Check Affects Your Tax Return

by Ryan Guina

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!


Published or updated April 7, 2011.
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1 Philip

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.

2 Steve

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!

3 Imani

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

4 Kacie

I had a baby in 2008, so I’m expecting a $300 tax credit on my ’08 return. YAY!

5 Office Cubicles

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. ?

6 Imani

@Office Cubicles…wow, that stinks! Still hearing, as of today, Jan 30, IOUs for CA residents(CNN). Sorry :-(

7 Sharon

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.

8 Ryan

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.

9 Avdi

Thanks for clarifying – that’ll be one less head-scratcher when I get to my tax returns this year.

10 Frugal CPA

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.

11 Ryan

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! ;-)

12 Jeff

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).

13 Ryan

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.

14 Sarah M.

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.

15 Ryan

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.

16 Sarah M

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.

17 martin

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

18 Ryan

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.

19 Imani

Ryan…did you ever imagine this post would have generated the response it did? :-)

20 Getta

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!!

21 Ryan

Glad you found the information you were looking for Getta. :)

22 Chris

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.

23 Ryan

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.

24 James

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.

25 Ryan

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.

26 James

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/

27 Ryan

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.

28 jenngroove

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!

29 Christina

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,

30 Ryan

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.

31 Ryan

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.

32 NANCY

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.

33 Ryan

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.

34 justinbustin

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?

35 Ryan

Justin: I believe it will be factored into your tax return.

36 willie

next time they give out any money I will be returning it..

37 Informed Tax Payer

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 !!!

38 Ryan

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.

39 maria

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

40 Kevin

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?

41 Marta

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!

42 Ryan

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.

43 Ryan

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.

44 marc

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.

45 Rachel D.

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.

46 Rachel D.

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!

47 Philip

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.

48 Kevin

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?

49 Dmat

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?

50 Ryan

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.

51 Imani

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

52 Cierra

I have a question. I’m 18 and paying taxes for the first time this year. I have 3 tax statements from my 3 jobs in 2008. But one of them was a internship job where I earned about $5500 but never got tax taken out of my check. My other jobs I did get tax taken out. I earned about $8,000 total in 2008. Do you know about how much I might have to pay? I’ve never done this before so I’m sooo confused!

53 Ryan

Cierra: Ahh, I remember my first time doing taxes! It’s not fun and can be confusing. To be honest, I can’t say how much you might owe, or might receive as a tax return – there are too many variables involved. My recommendation is to purchase a tax software program such as TurboTax or TaxCut.

Since you are new to the work force and probably didn’t earn much money last year, you may qualify to file your taxes free. Here is more information about that: How to File Your 2008 Federal Taxes For Free

Best of luck to you!

54 Pamela

I just recently filed my 2007 and 2008 so consequently I never received a 2007 stimulus. When I completed the Turbo Tax for both years, a stimulus box popped up but I didn’t get to read it. So will I get my 2007 stimulus thhis year 2009? And will it be with my tax return, deposited into my account? Thank you for any information you can help with!

55 Ryan

Pamela: The stimulus was sent out in 2008, but it was based on 2007 Adjusted Gross Income. The stimulus is not actually part of the 2008 taxes, it is a change to the 2009 tax code that was sent out in advance in order to help stimulate the economy. I know it can be slightly confusing with all those years in there, but so far there has only been one stimulus check sent out.

The good news is this: If you qualified for the stimulus check but did not receive it for some reason, you should be able to receive it this year. It should be sent with your normal tax refund. However, keep in mind that if you owe money on your taxes, or for child support, or to a state or government agency, it may be withheld for that reason.

Best of luck to you.

56 Shelley

Wow!! I have a few friends who freaked me out by saying that their tax refund was reduced by the amount of their stimulus. So when we went to have our taxes done we asked the tax preparer at Liberty Tax Services if this was to happen to us. The owner stated that the stimulus was free money and it would not affect our return. That the only question was did we receive our correct amount and what it was. We answered correctly and are assuming that the refund is correct as well. It went through and is toted to arrive in our account on Friday the 20th. Should I count on the amount Liberty states I will get? Or is it really going to just be a surprise when it comes? And If I do get what it says, what if the IRS catches something later, is this then Liberty’s responsibility based on their garuntee? I think I understand the idea of the stimulus and the changes, I guess I am just all together leary and afraid of surprises, also I could not find the question of what did you get for your stimulus on my documents that were returned to me, but remember them asking the question. Is there a way to check status of your return?
Thank you

57 Ryan

Shelley: I think at this point you have done everything you were supposed to have done and your taxes were done by a professional. I can’t say exactly what will happen, but it seems like you don’t have much to worry about.

58 Michelle

I do not understand how ANY of you are saying that it does not affect your taxes this year. I did my taxes on Turbo tax AND went to H& R, got more of a refund with Turbo Tax AND they even told me the stimulus check was an advance. I filed my taxes via e-file and when I accidently put in my stimulus check for my husband and I as only $600 instead of the combo of $1200 they REJECTED my file. I was going to get $5300, then when I fixed the mistake, my rebate dropped exactly $600…. amazing how that worked. IT WAS AN ADVANCE on my rebate and now I get $1200 less then I would normally. If I had the choice, I would NOT have taken the stimulus check!

59 philip

Michelle, if you had not accepted the $1200 stimulus check last year then you would get a refund of $5,300 and yes it does have an affect on your taxes!

HOWEVER, if there was not any legislation that was put into place last year then your tax refund would have been the same $4,700 AND you would not have gotten the $600 last year.

It really is just terminology used and the way they did it. The outcome is that you are paying less taxes for the 2008 year by the stimulus amount and it is just claimed at that time.

All you are doing by putting in the information now is filling out the accounting to show that you got the money, and if you never did then you would get it now.

60 Jen

I understand the federal part of it all and how it effects the federal tax return, but what about state? A colleague of my husband told him he just filed his taxes and has to pay $300 to the State because of his stimulus (he received $1800). Is his tax preparer just making things up or can a state tax you on the money?

61 Ryan

Jen: I don’t believe it is considered income, so it shouldn’t be taxed. However, each state does it’s own thing, so I can’t give you an answer. Sorry.

62 Chad

I have read the comments posted, but I am still confused. Last year my wife and I received just under a $3000 tax return. This year we are receiving about $1500. Is this amount lower because of the $1800 stimulus check we received? Or is Turbo Tax doing something wrong?

63 Ryan

Chad: If you put in the information to TurboTax correctly, I will make the assumption the return is correct because I don’t have anything else to go by.It’s also difficult to compare tax returns from year to year due to changes in income, taxes withheld, deductions, etc.

This may explain the difference though: The tax rebate was a change to the tax laws – it eliminated the taxes paid on the first $6,000 of income, and was paid in advance – meaning you received it last year instead of this year.

I hope that helps.

64 Jim

Ryan,

You are spreading bad info my friend. Turbo tax does not assume you didn’t receive the stimulus check at all. Turbo tax shows the correct refund UNTIL you plug in that stupid stimulus check amount. That EXACT amount gets deducted from your refund which is INCORRECT. Turbo tax forces you put $0 in the stimulus section in order for you to see the correct refund.

65 Jim

Michelle,

They are lying to you. Completely false! Here’s the link to the IRS website written in black and white…No confusion after reading the first few sentences….here ya go…

http://www.irs.gov/newsroom/article/0,,id=179211,00.html

66 jay

What’s nice is that I never received my stimulus check (address confusion maybe) yet my tax return is almost exactly $600.00 less. So in theory I just gave away $600 bucks, to make matters worse most of my co-workers didn’t recieve theirs either so we don’t know what’s going to happen.

67 Ryan

Jay: Check out this article and send it to your friends if they did not receive their stimulus check: What to Do About a Lost or Stolen Stimulus Check

It should help you get to the bottom of the situation, that way you aren’t penalized for never receiving the money you should have received. Best of luck.

68 nailbitter007

I did my taxes with Turbo Tax – purchasing the software and installing on my computer. I also did the same thing last year. My income went down slightly this year but my dependents were the same. I received a stimulus check for $1,800 — I have 2 kids and are married filing jointly. I entered the $1,800 where I was supposed to on the Turbo Tax and was when all was said and done I was supposed to get back $3,208 — I received exactly $600 less that was directly deposited into my account. So, is the Federal Government actually taking back a portion of my stimulus or not? I just read this whole blog and I’m still not sure. Should I contact the IRS?

69 Tim

This is from IRS website:
“What is it? It’s an economic stimulus payment that more than 124 million households will receive. It’s not taxable, and it won’t reduce your 2007 or 2008 refund or increase the amount you owe when you file your 2008 return”.
Ok. Its all a play on words. The above statement is true. HOWEVER, when the average person reads it they think during Feb – April 09′ they will receive the approximate same amount of refund as they did in Feb – April of 08′. This thought process is WRONG. Simpley add up the amount of your stimulus check received in 08′ and then the amount on the last line of your completed tax form your looking at right now. Those 2 numbers together ARE your 2008 taxes (refund or payment). Soooooo, the statement is true in the fact that recieving the check in 08′ DID NOT reduce your taxes when filed in 09′. If the statement said “it will not reduce the amount you usually receive” then it would be misleading. But it doesnt say that. It just states that it does not effect the TOTAL taxes you normally would have paid from Jan – Dec 08. They refrain from telling you that it indeed was an advancement and not free money. VERY misleading by the Gov and news agencys. It should have been called “Stimulus Advance Payment”.

70 fredct

Nailbitter, you could contact the IRS. I’m sure they’d be happy to explain. But chances are something was input into TurboTax that confused it. Sometimes a program asks one thing and you think its asking something slightly different, and, blammo, incorrect return.

One thing you can do is look at your 1040 that you filed, line 70, called “recovery rebate credit” (if you filed a 1040A its line 42; on a 1040EZ its line 9). If you received all of your rebate last year, then the line should be zero.

If the line isn’t zero, and you’re sure you got all of your rebate last year, then something messed up.

In the future, its a very very very good, entirely important idea, to look over your return before you file and make sure each line looks right.

71 fredct

P.S. This is a really poor way for the tax software to do it, for user-friendliness. The tax software should make the default assumption that you got the full rebate, and that way, if you tell it so, nothing changes. If, on the other hand, you tell it otherwise, it looks like the benefit that it actually is.

By doing it the other way around they make it look like a punishment.

P.S. The tax software I used – not one of the big brand names – actually did do it that way.

72 Bill

So, I’m filling out my ’08 taxes using form 1040EZ (and I’m not using any software to help me – I’m doing it all by hand). I received a $300 stimulus check last year. How do I account for this on the 1040EZ?

73 fredct

Bill, you need to fill in line 9 on the 1040EZ, which refers you to the “worksheet on pages 17 and 18″ of the 1040EZ instructions.

If you got the full 2008 stimulus rebate that you expect to be eligible for, then the answer should be 0. If the answer is greater than 0, then you’re getting some additional money. At no time will you actually owe anything back.

74 Tim Dorram

Due to selling some stocks in 2007 my wife and I made to much money for the stimulus check. If I am reading this correctly if we made less than the $175,000
in 2008 and we will we will get a tax credit.

75 Fred

Tim, that’s basically correct (the top number varies a little, I calculate $174K for MFJ no kids, higher for w/ kids).

I was in a similar situation, due to my new job, and some very generous moving benefits I received (including tax-true-up), pushed me over the AGI limit. But when I filed this year, with my normal income, I received my credit on the ‘Recovery Credit’ line.

On the flip side, if you received it last year, but your numbers say you don’t deserve it this year, you get to keep it anyway.

76 Kevin

All of the people I know who received stimulus checks in 2008 did not report the rebate on their return. I’d assume the IRS is going to have a big problem resolving returns – is it possible the IRS is “fixing” the incorrect returns or just reducing refunds accordingly (if applicable)? I’m surprised there is still very little information about this ANYWHERE – it seems the Internet / News / IRS web site would be full of information about this play on words – as much as the media LOVES to report on how terrible the economy is it seems they’d salivate over such a story – (or, do they have motive not to report this now – since the election)? “Bush deceived Americans with So-Called ‘Rebates'” – we are yet to see this and I’m not sure why.

77 Ryan

Kevin: Bush didn’t deceive anyone – this was explained when the stimulus was announced last year. Unfortunately, many people in the media reported it from the perspective that it was free money, instead of how it really works.

Regarding not reporting receiving the stimulus payment – from what I understand, the IRS will reject your return and it will need to be corrected before it is accepted.

78 Fred

Bush didn’t deceiver anyone because you are *not* paying anything back.

Listen, I’m no Bush fan – not at all – but this an absolute rebate. What’s on the 2008 return is the opportunity for you to earn *more* of it, not for you to pay any of it back.

It *is* free money – as much as any money is free when we’ve been running a deficit all along.

This is how it works:
– Lets say based on your 2007 income you received a $300 rebate because you were part was through the cutoff. However, based on your 2008 numbers, you should have received $450, because your income was slightly lesser. The 2008 return allows you the option to claim the extra $150.

– Lets say the reverse: based on your 2007 income at the time you received the maximum $600. However, your 2008 income was much higher, beyond the cutoff, and you really deserved $0. Nothing happens, you keep the full $600.

As far as what happens if you’re wrong on your return:
– if you claim extra money that you don’t deserve, the IRS will catch it and remove the extra from your refund. See nailbitter’s comment above.
– if you had the opportunity to claim extra money, but didn’t… I don’t know. But I wouldn’t expect the IRS to correct it for you.

But lets be clear… THIS IS AN OPPORTUNITY TO CLAIM MORE REBATE MONEY. IT IS *NOT* TAKING ANY OF YOUR MONEY BACK.

79 Lee

I used Turbo tax and although they say you will not owe if you were due less, I told Turbo Tax my stimulus amount ($600) and it says I owe money back to the government. I did a test and decided to tell Turbo Tax I did not receive a stimulus check and Now I am eligible for a refund. The amount of the refund is let say my amount owed to the government when claiming the stimulus is – You owe $90 and yet when I omit the stimulus information from Turbo Tax it says – Yeah you get a refund of $510 – so the IRS says? I won’t owe if they over paid me, but the numbers don’t seem to support this. – This whole thing is giving me a headache.

80 fredct

Unfortunately TurboTax does something stupid (surprise, surprise).

It makes a baseline assumption that you received no stimulus last year, and therefore it *assumes*, to begin with, that you will be getting an addition $600/ $1200 back, and calculates that into your numbers all along.

Then when you tell it you did get your stimulus last year, it says ‘oh’, and subtracts the $600 because you already got it. Even though this is exactly what 99% of the population will experience, to TurboTax, its a surprise.

In other words, you owe $90, but TurboTax assumed that you got no rebate last year, and therefore were going to get another $600 back. When it finds out you actually did get your rebate already, it subtracts it back out.

Its a stupid, stupid way to show it. They should assume that you’re getting no extra money, and then only adjust it upwards if it finds out that’s not the case. Then there aren’t any unpleasant surprises. One of a long list of reasons to avoid TurboTax, IMHO.

81 Christopher

My filing status for tax year 2007 was “Single”, so i got $600 stimulus check. I got married in 2008 and my wife has”zero” income in 2008 and also did not receive any stimulus payment. For tax year 2008, I filed taxes with “married filing jointly”.
Should i be getting an additional $600 ?

82 Fred

Christopher,

Probably, depending on details of your income level, I believe (I’m not entirely versed on all the particulars).

Check line 70 of your 1040 – “Recovery Rebate Credit”. The line number will differ if its a 1040A or 1040EZ, but should be titled the same. If you don’t see $600 there, follow the referenced worksheet (if you’re using tax software, it should be able to display the filled-out worksheet for you).

83 Justin

Stimulus payment paid in 2008 fooled many. Like many, I also thought the stimulus payment was free money. It turned out that it was just an advance payment of your 2008 tax return. When I entered the stimulus payment amount in Tax Cut (in Recovery Rebate Credit), it lowered my refund by exactly that amount. This will not help stimulate the shatterred economy. People need free money to stimulate economy, not an advance which you end up paying back.

84 philip

Really Justin??? Have you not read ANY of the comments in this post??? Read a little bit and you will have an answer to what you said, it has been repeated at least a dozen times in here how it IS FREE MONEY!!

85 Fred

Too many people, on both ‘sides of the aisle’ and in the middle too, like Justin here, believe what they want to believe, and don’t bother to seek out actual facts.

Its extra unfortunate because even the main article explains it, so he didn’t even read that.

86 R

Let’s speak very plainly here and forget about all the mumbo-jumbo of TurboTax not subtracting and then subtracting stimulus amounts and how this doesn’t impact 2008 returns (because it does impact return amount). The 2008 stimulus payment was an advance payment on 2008 taxes (those that are due by April 15, 2009). It was NOT free money. If you received a stimulus payment in 2008, IT WILL BE DEDUCTED FROM YOUR CALCULATED 2008 returns. Here is an example:
Married couple receives $1200 stimulus payment in 2008. When filing 2008 tax returns (in 2009), their calculations show a return of $1125. After they deduct the $1200 stimulus check they received in 2008, they owe $75.

87 Fred

R, you are mostly incorrect. You are correct on most facts, but are missing the big picture. And I’m sorry to hear that you think important facts are just ‘mumbo jumbo’.

For instance, you are correct the 2008 stimulus was a prepayment of calculated 2008 return. However, the big point you are missing is that it was a prepayment of a *tax cut* on your 2008 return.

For instance, lets say that normally, you would be a person who would have a total tax due for the year of $5,000. Note: this does *not* mean you would normally owe $5,000 when you do your taxes, but rather that your total tax paid for the year needs to be $5,000. So if your withholding totaled $5,500, you would be a person who would get a $500 rebate, or if your withholding totaled $4500, you would owe $500, etc.

In fact, to make this even more concrete, lets say your withholding totaled $5,500, so normally you would get a $500 rebate.

Anyway, okay, so you’re this person who’s total tax for the year would previously have totaled $5000. The 2008 stimulus bill took that and made it $4400, because you’re single, no kids.

Now its possible they could have given you nothing last year, and then you would have gotten your $1100 rebate, instead of a $500 rebate now. But they didn’t want to do that, they wanted the money out there immediately. So rather than waiting until now to get you your extra money, they ‘prepaid’ it to you last year. But it absolutely in every way was a reduction in taxes.

Now, when you file your 2008 return, they need to make sure you got your money already, so that’s why they ask you. Otherwise you *would* be eligible to get it now. Then see the previous explanation on why Turbo Tax is stupid for showing it the way it does.

Key points:
* Yes, it was a pre-payment against 2008 tax return.
* But it was a pre-payment against a 2008 taxcut
* It absolutely was new money you are getting – ‘free money’, if you will (I don’t like that term anyway).
* Without that law, your pockets would be $600/$1200/etc lighter, whether you care to understand it or not, its true.

88 fredct

Let me make one more thing perfectly clear…

There is only one effect that the 2008 stimulus law can have on your 2008 tax return. And that is in the line marked “recovery rebate credit“.

I bold credit because that’s what it is. The *only* effect it can have on your 2008 tax return – versus what a return would be without this law – is to give you money on the “recovery rebate credit” line, if you didn’t get the full amount back last spring.

There is no way that the 2008 stimulus law takes any money away from you – and that includes not taking back the money it gave. The money it gave, you keep PERIOD

The only way it effects your 2008 return is the potential to earn an additional credit above and beyond what you got last spring.

Nothing will be deducted from your 2008-anything. Nothing. (and Turbo Tax is still stupid)

89 Tina

I have a ? I really dont know much about this, but i was wondering if i got a stimulus last year 2008 of 300 dollars, now i worked last year and did my 2008 taxes this year but i have not worked in 2009 yet will i be getting this 2nd stimulus or no, my husband has been getting his through unemployment of 50 a week, and my friend has been getting his 50 a week into his check, so if im not working how would i recieve this, if i were to get it? would the irs just mail it to me? thanks for your help, greatly needed!!

90 Ryan

Tina: There is no check being sent out this year – the stimulus is in the form of fewer taxes being withheld from paychecks.

Here is more information.

91 Fred

Tina, lets clarify. by ‘this 2nd stimulus’, do you mean the potential addition to the 2008 stimulus on the tax return, or do you mean the new 2009 ‘Obama’ stimulus?

Also, can you tell me 1) if you were married last year, or just got married during 2009, 2) if you have any kids/dependents, and 3) if either of you has any earned income so far this year?

92 Christopher

Hey Fred,

You did a great job in explaining the stimulus payments in detail.

Dude Thanks a lot. Keeping helping others just don’t care about the people who doesnt want to accept/understand facts!!

93 R

* Without that law, your pockets would be $600/$1200/etc lighter, whether you care to understand it or not, its true.
:)
Yes my pockets got $1200 heavier last year when I got the stimulus check. After preparing my 2008 taxes, they got $1200 lighter after I claimed the stimulus payment. I now OWE $75. This after years of getting back about $1200 dollars. Since I’m making about the same money I did last tax year (2007), where is this *new* money? My point is that the stimulus payment is deducted from your 2008 tax return (i.e. I would have got back $1125 but after subtracting the $1200 stimulus payment, I owe $75). At least that’s what TurboTax shows on my returns. Is TurboTax calculating this incorrectly?

Christopher…what do you do for a living? Let me guess. Cheerleader?

94 Fred

R, no, the 2008 stimulus payment is not deducted from your 2008 return. Period.

I can’t tell you why your return is different this year as I don’t have nearly enough detailed information (nor would you want to give away that much information on a public message board, I’d imagine).

However, what I would tell you to do is take this year’s return, last year’s return, sit them side-by-side and find out the difference. Did you have any additional income? Were your withholding reduced? Did you lose a dependent or a child credit due to age or some other factor? Does your spouse no longer work and you were counting on those withholding? Move to a smaller home (or, these days, lose your home) and no longer have the mortgage interest deduction? Etc, etc, etc.

What you won’t find causing the difference, I guarantee you, is anything to do with the 2008 stimulus rebate.

I would really, seriously recommend you do this, because otherwise it will likely happen next year too, as something about your situation caused this. I hope you get to the real cause, and not let what you believe to be the cause (which isn’t) give you an excuse not to actually look into it.

It is always a good practice to compare your return and understand the differences.

Not that owing some is bad, its actually to your financial benefit not to have given the gov’t an interest free loan all year long. But I understand many people like their rebate anyway.

95 Fred

R, by the way, its often possible that you, or your tax software, made a mistake, or forgot to enter something. A very important reason to look over your return in detail if you see significant differences from what you’re used to.

Christoper, thanks, I appreciate the encouragement :) Glad to know my time is helping people.

96 Christopher

R, For some chuckles and giggles, lets say i am a cheer leader, on top of that, i have ability to understand things when someone explains something and also have courtesy to acknowledge the help provided!

97 4_Leaf_Clover

Help! My husband and I usually get a tax refund of a little over $1000. Nothing has changed from year to year….we still make the same, no kids, havent moved etc.

When we enter into Turbo Tax that we didnt get a stimulus, we get the same exact as we do every year. If we enter into Turbo Tax that we got $1200 stimulus, our tax rebate dives $1200 and we end up owing.

How is this possible if nothing has changed except that we got a stimulus if we arent supposed to have to pay it back???

98 Ryan

4_Leaf_Clover: You aren’t paying the stimulus check back – the stimulus was basically a prepayment against your 2008 taxes. 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.

99 fredct

4_Leaf, the same advice goes to you as to all the previous posters on this thread in the same situation.

Print out your return. Lay it side-by-side with your return from last year. And you tell us whats different. I could suppose a dozen things, but none of it would help you. Only you have all the facts at hand.

Compare the two, and you tell us whats changed. Really, I’m interested to know. I’d be interested if R got back to us too (he did send me a note of thanks saying he would look into it).

The one thing you won’t find is anything about paying back any stimulus.

100 4_Leaf_Clover

I know….ya’ll keep saying that….and I’m not trying to prove anybody wrong…I am simply trying to understand this.

I understand what you are saying about turbo tax factoring in and assuming that you didnt get the stimulus and then they take it away when they find out that you did BUT….if thats the case….if we normally get about $1000 tax refund, turbo tax should show a refund of $2200 until I tell it that I got the stimulus. It then should dive $1200 and show our tax refund of $1000 which would be normal. Instead, it shows a total of $1000 (which is normal) and then dives $1200 when we tell it we got the stimulus which has us owing in. How would a tax rebate dive exactly $1200 below what you NORMALLY get when NOTHING has changed? Same income, same amount in household, same everything. Sure I can understand a few dollars, but exactly $1200? Does this make sense what i’m saying??

I can feel the gray hairs growing. LOL

101 fredct

4_Leaf, glad to see you have a pretty good understanding of it. Yes, I understand what you’re saying.

The only answer is that something has changed. I just can’t tell you what. Let me assume you are absolutely correct that your income and dependents are identical. Here are some total guesses about what could have changed:
– A typo in inputting the data (happens to the best of us!)
– A bug in TurboTax ’09 (yes, they exist, I’ve found bugs in tax software myself)
– A change in the withholding amount from your paycheck(s), perhaps due to a screw up by your employer (who knows, its possible)
– A change in a tax law such that something that was previously deductible no longer is at all
– A change in the tax law such that something that was previously deductible no longer is *for you* (due to some personal detail)
– An extra deduction last year due to some specific event that did not occur this year (large medical expenses, casualty losses, etc, etc).
– An alternation in contribution to retirement plans, or taking some money out of retirement plans.

Anyway, if my lunch time wasn’t nearly over I could probably come up with 10 more. But the answer is there are hundreds of things that could have changed.

Its just up to you to determine what that is by looking at your current return and last year’s return side-by-side.

102 4_Leaf_Clover

Thank ya’ll for ya’lls help….I really appreciate it. I will look into it tonight after work. Thanks again.

103 Harry & Norma Williams

Would you please email us back with the information to the following questions?

Are we going to receive Economic Stimulus Applications like we did last year?

We are receive Social Security Income, and do not file taxes anymore.
Thanks for your help.

Harry & Norma

104 Ryan

Harry: I am not sure if you will or not. This year’s economic stimulus program is different from last year’s. You can read more about it in this article: 2009 Economic Stimulus Personal Tax Breaks.

Regarding your specific situation, I recommend contacting the IRS or an accountant. Best of luck to you.

105 Jack

To answer any questions about the stimulus check and if it was a refund advance or not, it was. My tax return got rejected by the IRS due to this. After I adjusted my return, my refund went down by $600 and my tax return was accepted. It has nothing to do with tax software and how it is programmed.

106 fredct

Yet again, not true , Jack.

If you look at your initial return, Jack, you’ll probably see something on the “Recovery Rebate Credit” line, which is *additional* stimulus money you are requesting.

I would bet you that if you look there on your return, you w ill see $600 on that line.

And, since you said you got your stimulus check already, your return was double-dipping, and trying to get your stimulus again. *Thats* why they reduced it. You – unintentionally – were asking for the stimulus twice.

Chances are this means that either your software screwed up, or you didn’t understand what it was asking when it asked you what you had already gotten.

107 Ryan

Tax season is over, and this comment thread is now closed. I understand there may be some confusion regarding this topic. Please read through these comments to see if your question has already been answered, or check with the IRS website: http://www.irs.gov/newsroom/article/0,,id=179211,00.html.

If you are not able to find an answer to your question, please contact the IRS or an accountant for more information. Best of luck!

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