2008 Tax Stimulus Package – Update

On February 13, 2008, President George Bush signed a multibillion-dollar economic rescue package that means $300 to $1,200 for many American households.

Rebates are to go out beginning in May to taxpayers and low-income people, including seniors living off of Social Security and veterans who depend on disability checks.

IRS – Fact Sheet

Starting in May, the Treasury will begin sending economic stimulus payments to more than 130 million individuals.  The stimulus payments will out through the late spring and summer.

The vast majority of Americans who qualify for an economic stimulus payment will not have to do anything other than file their 2007 individual income tax return to receive their payment this year.  They will not have to complete applications, file any extra forms or call the Internal Revenue Service to request the payment, which is automatic.  The IRS will determine eligibility, figure the amount and issue the payment.

Stimulus payments will be direct deposited for taxpayers selecting that option when filing their 2007 tax returns.  Taxpayers who have already filed with direct deposit will not need to do anything else to receive the stimulus payment.  For taxpayers who have not filed their 2007 returns yet, the IRS reminds them that direct deposit is the fastest way to get both regular refunds and stimulus payments.

Basic Eligibility

The IRS will use the 2007 tax return to determine eligibility and calculate the basic amount of the payment.  In most cases, the payment will equal the amount of tax liability on the return with a maximum amount of $600 for individuals ($1,200 for taxpayers who file a joint return) and a minimum of $300 for individuals ($600 for taxpayers who file a joint return).

Even those who have little or no tax liability may qualify for a minimum payment of $300 ($600 if filing a joint return) if their tax return reflects $3,000 or more in qualifying income.  For the purpose of the stimulus payments, qualifying income consists of earned income such as wages and net self-employment income as well as Social Security or certain Railroad Retirement benefits and veterans’ disability compensation, pension or survivors’ benefits received from the Department of Veterans’ Affairs in 2007.  However, Supplemental Security Income (SSI) does not count as qualifying income for the stimulus payment.

Low-income workers who have earned income above $3,000 but do not have a regular filing requirement must file a 2007 tax return to receive the minimum stimulus payment.  Similarly, Social Security recipients, certain Railroad retirees, and those who receive the veterans’ benefits mentioned above must file a 2007 return in order to notify the IRS of their qualifying income.

The IRS emphasized that people with no filing requirement who turn in a tax return to qualify for the economic stimulus payment will not get a tax bill.  People in this category will not owe money because of the stimulus payment.

Limitation

To be eligible for a stimulus payment, taxpayers must have valid Social Security Numbers.  Anyone who does not have a valid Social Security Number, including those who file using an Individual Taxpayer Identification Number (ITIN), an adoption Taxpayer Identification Number (ATIN), or any other identification number issued by the IRS is not eligible for this payment.  Both individuals listed on a married filing jointly return must have valid Social Security Numbers to qualify for a stimulus payment.

Eligibility for the advance payment is subject to maximum income limits.  The payment amount will be reduced by 5 percent of the amount of income in excess of $75,000 for individuals and $150,000 for those with a Married Filing Jointly filing status.

Individuals who pay no tax and who have less than $3,000 of qualifying income will not be eligible for the stimulus payment.

Additional Payments for Parents and
Others with Qualifying Children

Parents and anyone else eligible for a stimulus payment will also receive an additional $300 for each qualifying child (subject to income phase-outs).  To qualify, a child must be eligible under the Child Tax Credit and have a valid Social Security Number.

Anyone who is not eligible for the basic payment amount due to the phase-out provision or any other exception will not be eligible for this additional amount for children.

Special Circumstances for Recipients of Social Security, Railroad Retirement and Certain Veterans Benefits

Individuals who receive Social Security benefits, Railroad Retirement benefits and certain veterans’ benefits may have to follow special filing requirements in order to receive the basic amount:

Those who have already filed a 2007 return reflecting qualifying income of $3,000 or more do not have any additional filing requirements and do not need to do anything more to receive their payment.

Those who have already filed a 2007 return showing less than $3,000 in qualifying income and did not list their Social Security, Railroad Retirement or certain veterans benefits should file a Form 1040X to list those non-taxable benefits and qualify for a payment.

Those who are not required to file a 2007 return but whose total qualifying income including Social Security, certain Railroad Retirement and certain Veterans benefits would equal or exceed $3,000 should file a return reporting these benefits on Line 14a of Form 1040A or Line 20a of Form 1040 to establish their eligibility.  Please note the form lines just mention Social Security, but use these lines even if your only benefits were Railroad Retirement or veterans’ benefits.

Notices

Most taxpayers will receive two notices from the IRS.  The first general notice from the IRS will explain the stimulus payment program.  The second notice will confirm the recipients’ eligibility, the payment amount and the approximate time table for the payment.  Taxpayers will need to save this notice to assist them when they prepare their 2008 tax return next year.

Anyone who moves after they have filed their 2007 tax return should notify the IRS by filing Form 8822, Change of Address, and also notify the Post Office.

Exclusions

Individuals who file Form 1040NR, 1040PR, or 1040SS are not eligible for the stimulus payments.  These returns are normally filed by Nonresident Aliens, residents of Puerto Rico and residents of the U.S. Virgin Islands, Guam , American Samoa and the Commonwealth of the Northern Mariana Islands (CNMI).  Residents of U.S. possessions will be receiving their rebates directly from the possessions.

Also ineligible are individuals who can be claimed as dependents on someone else’s return.

Dividends, interest and capital gains income is not included when determining qualifying income.  Supplemental Security Income (SSI) does not count as qualifying income for the stimulus payment.  Also not included in qualifying income are non-veterans or non-Social Security pension income (such as those from Individual Retirement Accounts).

Stimulus payments will be subject to offset against outstanding tax and non-tax liabilities in the same fashion as regular tax refunds.

In addition, the IRS emphasizes the stimulus payments will not count toward or negatively impact any other income-based government benefits, such as Social Security benefits, food stamps and other programs.

IRS Fact Sheet

FS-2008-16, February 2008

Some low-income workers and recipients of Social Security, certain veterans’ benefits and certain Railroad Retirement benefits may qualify for economic stimulus payments this year from the federal government.

In most cases, payments will range from $300 to $600 for individuals and $600 to $1,200 for joint filers.  Taxpayers may receive $300 for each qualifying child.

Most taxpayers do not need to take any extra steps to receive the payment beginning in early May.

But there are some exceptions:

Individuals who might not otherwise be required to file a 2007 tax return will need to file a return this year to receive the stimulus payment.  The return must show at least $3,000 in qualifying income.

In other words, low-income workers who had at least $3,000 in earned income in 2007 but do not otherwise earn enough to be required to file a federal tax return need to file a return in order to get the stimulus payment.  Likewise, Social Security recipients, veterans and retired railroad workers who might not otherwise need to file a tax return must do so to receive the economic stimulus payment.

Certain Benefits Count toward Qualifying Income

Normally, certain Social Security, Railroad Retirement benefits and certain veterans’ payments are not subject to income tax.  However, the economic stimulus law passed in February contains a special provision allowing Social Security recipients and recipients of certain veterans’ benefits and certain Railroad Retirement benefits to count those benefits toward the qualifying income requirement of $3,000 and thereby qualify for the stimulus payment.

This means a taxpayer who had, for example, $500 in earned income and $2,500 in any combination of the benefits described above can count those benefit payments toward his or her qualifying income to reach the $3,000 earned income requirement, even though the individual would not otherwise owe taxes on such income.

For purposes of meeting the qualifying income requirement, the following benefits need to be reported in any combination on Line 20a of Form 1040 or Line 14a of the Form 1040A.

Social Security benefits reported on the 2007 Form 1099-SSA, which people would have received in January 2008.  People who do not have a Form 1099 may estimate their annual Social Security benefit by taking their monthly benefit, multiplying it by the number of months during the year they received the benefits, and entering the number on Line 20a of Form 1040 or Line 14a of the Form 1040A.

Railroad Retirement benefits reported on the 2007 Form 1099-RRB, which recipients would have received in January 2008.

The sum of veterans’ disability compensation, pension or survivors’ benefits received from the Department of Veterans’ Affairs in 2007.  People are allowed to estimate their annual benefit by taking their monthly annual veterans’ benefit, multiplying it by the number of months during the year they received benefits, and entering the number on Line 20a of Form 1040 or Line 14a of the Form 1040A.

People should note that Line 20a of Form 1040 and Line 14a of the Form 1040A are designated for Social Security.  To qualify for the economic stimulus payments, these lines should also be used to include any qualifying Railroad Retirement or veterans’ benefits.

For Those Who Have Already Filed

Some recipients of the benefits described above may have filed a 2007 tax return reporting at least $3,000 in qualifying income.  They do not need to do anything else.  They will begin receiving their stimulus payments in early May.

Others may need to amend a previously filed tax return to include benefits to reach the $3,000 qualifying income level.  Adding these benefits on an amended tax return will not increase an individual’s tax liability but will establish eligibility for the stimulus payment.  Taxpayers can use IRS Form 1040X to amend a tax return in order to qualify for the stimulus payment.

IRS News Release

Washington, DC

IR-2008-18, February 13, 2008

The Internal Revenue Service today advised taxpayers that in most cases they will not have to do anything extra this year to get the economic stimulus payments beginning in May.

The IRS will begin sending taxpayers their payments in early May after the current tax season concludes.  Payments to more than 130 million taxpayers will continue over several weeks during the spring and summer.  A payment schedule for taxpayers will be announced in the near future.

To accommodate taxpayers who file tax returns later in the year, the IRS will continue sending payments until December 31, 2008.  The IRS also cautions taxpayers that if they file their 2007 tax return and then more their residence that they should file a change of address card with the U.S. Postal Service.

The IRS will mail two informational notices to taxpayers advising them of the stimulus payments.  However, taxpayers should be alert for tax rebate scams such as telephone calls or emails claiming to be from the IRS and asking for sensitive financial information.  The IRS will not call or email taxpayers about these payments nor will it ask for financial information.  Scam emails and information about scam calls should be forwarded to [email protected].