Still Waiting on Your Rebate Check?

November 28, 2008 will stand as a day to remember for thousands of U.S. residents. While “Black Friday” usually brings consumers and shop-a-holics much needed joy, this year it might bring some taxpayers unnecessary heartache. As it stands right now, more than $266 million in tax rebate and regular tax refund checks are circulating through the mail system and eventually returned to the IRS because of bad mailing addresses. Can you contact the IRS and give them a correct mailing address? Absolutely……the catch, I’m afraid, is that you only have until November 28th to claim your money.

Most of the money that has not been delivered is from rebate checks. Now if you are like me, you were tracking that check and awaiting its arrival. Granted, it was not a lot of money (the average rebate around $583), but it was still some money. You would think during this economic flu that those owed money would be as proactive as they could be in obtaining any cash that is rightfully theirs.

If you are still waiting on a rebate check, you should go to the IRS's "Where's My Stimulus Payment?" online tracking tool. Once there, you can check the status of your stimulus check and receive instructions on how to update your mailing address. If you are not so internet savvy, they you can also do the same by calling the IRS at (866) 234-2942.

The IRS MUST mail out the remaining rebate checks by December 31st. This is why the IRS has established the November 28th address change cutoff date to ensure that it can update its records and meet the final mailing deadline.

If you haven’t received your check, you need to hurry…..don’t let this year’s “Black Friday” take on a completely new meaning.

Cheers!
Taxus

Oh.... what to buy?

Well the time has finally arrived, and the economic stimulus checks have begun landing in bank accounts this month. How you receive the rebate depends on how you filed your taxes. The exact timing for receiving both direct deposit and paper checks will depend on the last two digits of your Social Security number. Paper checks will begin going out tomorrow (May 9th).

But this is all information that I assume you already know. What you may not already know is how you will spend the money once you receive it. The rebates, which are expected to reach 130 million households, range up to $600 for individuals and $1,200 for married couples, plus $300 per child for eligible parents. But with all things considered, such as the heightened price of gas and groceries, spending may be less extavagant than previously expected.

Usually any money sent to the taxpayer has been spent before the check clears. Most taxpayers for one reason or the other usually spend their tax return money on luxury items and drive themselves into further debt. But with these economic stimulus checks, many taxpayers are planning to put the money towards current bills. One reason is due to high prices of our daily/weekly necessities. The other being that the money being received is not that much to begin with. It would seem that this year, you might as well use the money wisely rather than blow it on that new TV. I know personally I will be putting the money towards gas and other bills.

All and all, most are anxiously awaiting their stimulus check. I am afraid though that at the current state our economy is in, it's going to take a lot more of a rebate to pull us out. So spend the money how you wish, but remember that we are probably screwed for awhile.

Cheers!

- Taxus

The Letter You Will Receive

As we blogged earlier, the IRS will be sending out letters to households to notify them of the tax rebate. We just got ours this week.

Most households have already received this letter from the IRS, but if you have not, this is what is on its way:

Economic Stimulus Payment Notice

Dear Taxpayer:

We are pleased to inform you that the United States Congress passed and President George W. Bush signed into law the Economic Stimulus Act of 2008, which provides for economic stimulus payments to be made to over 130 million American households. Under this new law, you may be entitled to a payment of up to $600 ($1,200 if filing a joint return), plus additional amounts for each qualifying child.

We are sending this notice to let you know that based on this new law the IRS will begin sending the one-time payments starting in May. To receive a payment in 2008, individuals who qualify will not have to do anything more than file a 2007 tax return. The IRS will determine eligibility, figure the amount, and send the payment. This payment should not be confused with any 2007 income tax refund that is owed to you by the federal government. Income tax refunds for 2007 will be made separately from this one-time payment.

For individuals who normally do not have to file a tax return, the new law provides for payments to individuals who have a total of $3,000 or more in earned income, Social Security benefits, and/or certain veterans' payments. Those individuals should file a tax return for 2007 to receive a payment in 2008.

Individuals who qualify may receive as much as $600 ($1,200 if married filing jointly). Even if you pay no income tax but have a total of $3,000 or more in earned income, Social Security benefits, and/or certain veterans' payments, you may receive a payment of $300 ($600 if married filing jointly).

In addition, individuals eligible for payments may also receive an additional amount of $300 for each child qualifying for the child tax credit.

For taxpayers with adjusted gross income (AGI) of more than $75,000 (or more than $150,000 if married filing jointly), the payment will be reduced or phased out completely.

To qualify for the payment, an individual, spouse, and any qualifying child must have a valid Social Security number. In addition, individuals cannot receive a payment if they can be claimed as a dependent of another taxpayer or they filed a 2007 Form 1040NR, 1040NR-EZ, 1040-PR, or 1040-SS.

All individuals receiving payments will receive a notice and additional information shortly before the payment is made. In the meantime, for additional information, please visit the IRS website at www.irs.gov.

Try my 2008 Economic Stimulus Package tag for more info on the tax rebate.

Be Prepared: You WILL Get A Letter From The IRS!

So, you've gotten you're taxes together, you're done it by the book, and all the signatures and required documents are included. You're all set to mail it when...

You get a letter from the IRS. (Dah Dah Dah!)

You go into a tail spin. Why? Why me? I'm a good citizen!! I pay my taxes!! I keep out of the Hall of Shame!! I have 5 more weeks left to file!!

Alas, relax my friend. If you actually open the letter (as many people rarely do), you'll see that they're mailing you so that they can remind you of money, that is, your rebate.

See this IRS press release for more. See here for the CNNMoney article.

(Although I'd hate to spoil a happy post about the IRS, I must point out that as Don't Mess With Taxes covered, the mailing of these letters will cost the government $42 million in postage and printing. Wow. This is where you say thanks for the gesture but it's really not necessary...)

That Rebate Check Could Be Just the Right Bait...

Everyone has heard the news by now that the Department of U.S. Treasury will be sending out rebate checks to taxpayers who qualify as part of the 2008 Economic Stimulus Act. This has come as a pleasant surprise for most people and they look forward to receiving their checks. One thing that taxpayers need to be on the lookout for now, other than the rebate they are so eagerly anticipating, is conmen.

At this point, the promise of a speedy delivery of the rebate check could convince some to hand over personal information to scammers. The bait is obviously there folks. Just be on the lookout for such scams. Once the identity thief has your personal and financial data, he or she will use this information to empty your financial accounts, run up charges on your existing credit cards, apply for new loans, credit cards, services or benefits in your name, file fraudulent tax returns or even commit crimes. Most of these fraudulent activities can be committed electronically from a remote location, including overseas. Committing these activities in cyberspace allows conmen to act quickly and cover their tracks before you, the victim, become aware of the theft.

Bottom line…do not let this happen to you. Those who have received a questionable e-mail claiming to come from the IRS may forward it to a mailbox the IRS has established to receive such e-mails: phishing@irs.gov. You may also send an email to this address if you have received any questionable phone calls as well.

Be smart and be patient.


Cheers!
-Taxus

Additional Resources

6 Tips for Avoiding E-Mail Tax Scams

How Will My Rebate Go if I TurboTax and Owe??

Yes, it rhymes. But let's get past that...

IRSMind has gotten some good questions lately. One of their most recent ones goes as so:

"What if I file through TurboTax and owe? The software will show a balance due but the rebate will probably cancel that balance out. Should I pay the IRS and then get the money back or should I just file and not pay, and allow them to keep my rebate?"

The answer is that your balance due has no bearing on your rebate. Essentially, they are two separate transactions so treat them as so.

Now, here's my two cents. Pay your balance and then wait for your rebate. You don't want to play the odds and risk getting penalties and interest on the money you owe for not paying on time. Although the tax rebates are set to go out in May, anything can happen. So don't rely on your rebate to pay your balance. And don't try to hold out on filing to get the rebate first and use it to pay your balance. To get a rebate, you must file.

Simply put: there's no way around paying a balance. If you owe, pay it. A rebate during the spring will eventually lessen the pain.

See IRSMind's original write-up here. Also, see my most recent post "The Tax Rebate in Plain English" for the final shakedown, the events leading up to the rebate in its final version, and my opinion on the rebate.

The Tax Rebate in Plain English

So, Mr. Bush has signed the tax rebate (a.k.a. "economic stimulus package"). So what's been decided?

(To follow the story leading up to this see "Free Money is 'o8" and "Congress Approves Tax Rebate.")

In true "Tax Facts" fashion, here's the simple breakdown.

What is it?
The rebate, meaning a credit, shouldn't have any bearing on our '08 return. In fact, if you don't get the whole amount, you may be able to get the rest next year. This is a departure from 2001's rebate (and what I've previously blogged), which was an advance on the next filing season's refund. To be honest though, no one really knows how this rebate will affect the '08 return and we won't really know until the close of the year. In essence though, it seems as if the IRS is giving us a tax break (for once).

How Much Will I Get?
There are many rebate calculators calculating what your rebate will be. For individuals the max rebate is $600, married filing jointly $1,200, and $300 per qualifying child. However, I have it on good authority that your rebate will probably match your refund (max being the above values), thus the '08 "pre-bate" moniker. There are income caps, however: $75K for individuals and $150K for joint filers. Your rebate will be deducted 5 cents for every dollar you're over the cap.

What do I have to do?
File your 2007 return. That's about it. The IRS will handle the rest. And remember that the filing deadline is April 17th this year (because the 15th is a Sunday and the 16th is Emancipation Day)

What if I don't normally file?
(You must have at least $3,000 in Adjusted Gross Income to qualify for the rebate.) If you're an individual that doesn't usually file, such as receivers of Social Security income, certain Railroad Retirement plans, or a Veteran, then you must file a special form, 1040A to receive the rebate. See IRSMind for more info on these specials cases.

When will I get it?
The first rebate is set to go out in early May after the '08 filing season ends. If you file late, don't worry. The money will be sent out until December 31st, 2008. The IRS has a Refund Cycle Chart that will give you a better idea of when it will come. And if you paid/got your refund electronically, you'll receive the rebate electronically. If you paper filed and paid/got your refund in a paper check, your rebate will come by paper check.

Happy Pre-Bating!
~The Good Tax Helper

See what I think of the rebate here and here!
See here for how the rebate will be handled if you owe.
Want a more in-depth explanation? BabyBoomer has a great port with some nice resource links.

Tax Rebates BAD!! You'll Think So Too...

I blogged earlier about how the tax rebate is a wolf in sheep's clothing. Americans see money, are encouraged to spend it (by businesses and the government), and only further the mentality of spend spend spend rather than save, pay down debt, and make money grow. We wonder why we're a society of debt? It's because no one understands the value of saving and having money work for you. What encouragement do we get instead? Spend it rather than save it.

But for once, I have found solace in the tax community for someone (important people) agree with my discontent! Paul L. Caron at the Tax Prof Blog and Dalton Conley of the New York Times both have put out articles advocating investment vehicles instead of rebates to build wealth and recharge the economy. Rather than giving out rebates, why not hand out mutual funds?

I strongly recommend checking out Dalton Conley's article in the New York Times. It's a beauty and explains my argument to the "T".

Will I Get a Rebate if I Owe Money?

In a simple word: no. I believe the rebate is acting like a refund and when a refund is due, it's usually applied to the any remaining balances first. However, TaxGirl is less sure of this statement.

So, the bottom line is the jury's still out. But I'd urge, as TaxGirl says, for you to ask your tax preparer.

What Are You Going to do with Your Tax Rebate?

Well, since Congress has approved the tax rebate, the question, "What are you going to do with your tax rebate?" becomes stronger and more appropriate.

I know what I'm going to do and it's probably not what they want me to do with it... it's going into savings. Nothing is more nagging this time of year than all the signs screaming "Spend your tax rebate here with me!!" I'm saving it out of spite; I don't want to succumb to their in-your-face marketing like the rest of America. Allow me my one small crusade.

But this raises another, bigger reason to save your refund: credit card debt. America is drowning in it. Just do a Google search and see how profitable a business it is. See all those ads on the top and sides? People pay big money to be there. That's because we are horrible with money. And the rebate (with these advertisements) is only furthering that spend-spend mentality.

Obviously we can't help ourselves, which is why credit card debt has been on the tongues of law makers recently. But there are other ways of helping yourself, like opting NOT to buy that big screen tv over paying down that debt. It is all about choices. I understand the mother who needs to buy groceries with the money. The rebate will do well there. But I hate the emphasis on spending. Maybe if our government wasn't in such a hole and turned upside down, the rest of the nation would be healthier. Maybe if they'd cut spending on stupid and frivolous things, our economy would be healthier. Maybe if they'd set a better example, the rest of the nation would be in less debt. But instead the focus is on spending, something we all (the government included) needs to do a whole lot less of. Instead of putting Americans more in the whole by giving them money and then encouraging spending, the government should work on other ways of stimulating the economy.

So, when I ask "What Are You Going to do with Your Tax Rebate?" don't feel compelled to answer. Just think. Spending it will help the economy, but will it help you? Please, spend smart.

Congress Approves Tax Rebate

So, the rebate has been approved by Congress. Yay. What the heck does this mean? It means the Senate and the House have come to a compromise (see here for their individual proposals) and now Mr. Bush needs to sign the thing. Then the money starts flowing. But how much money?

$300-$600 for Individuals
Up To $1,200 for Joint returns
$300 per Child

(Don't Mess With Taxes has a good post with a fact sheet breaking down possible refund scenarios)

You are eligible for the rebate if you had $1 or more in tax liability or $3K or more in Adjusted Gross Income for 2007.

This plan makes some winners and some losers. But the most notable specific that should be highlighted is that this is a pre-bate, meaning a pre-rebate for the 2008 tax year. So, if you don't get your full refund this year, you may be able to claim it in 2008. However, you may also have a lesser refund in 2008 for getting the rebate for 2007 (thus the "pre" in the name).

Additionally, there's been some argument over when the checks will come out. And there is some doubt as to the effectiveness of the rebate. Will the money be placed in the hands of those who need it most for spending? I guess we'll have to wait and see.

Free Money in '08?

Well, nothings really free. There's no free lunch remember? But although it comes from somewhere, the important point is that it comes to your wallet.

The specifics

In order to stimulate a waning economy, the government is proposing a tax rebate. The rebate is being issued in hopes that people will spend the money and breathe some life into the economy. Whether this happens or not or whether an actual plan is decided on remains to be seen. But let's get to what the rebate means to you.


Senate Version

$500 per Individual
$1,000 per Joint return
$300 per Child
And there is no limit on income


Congress Version

$600 per Individual
$1,200 per Joint return
$300 per Child
Limitations: Filers must have more than $300 in Adjusted Gross Income and there will be a 5 cent deduction in the rebate per $1 over an AGI of 75K for individuals and $150K for joint filers.


**And if you have tax debt, don't get excited. That rebate money goes to the government!**


But It's January!

If you're worried the Senate and House won't get their act together until it's too late, don't worry. In 2001 when this was done Bush signed the dotted line and 4 months later the checks was given out--this would mean if the bill is signed during February, the money would come out in June. Not that bad...



Additional Resources...

Is a Tax Rebate Coming Your Way??

Bush Calls For 'Direct and Rapid Stimulus'

Tax Rebates: Where's Your Check?