IRS Expects the Rebate Amount on 2008 Returns

The Stimulus Rebate payment that was issued by the Treasury Department earlier this year was actually an advance payment of a new credit called the Recovery Rebate Credit on your 2008 tax return.  This credit can be as much as $600 for single taxpayers and $1,200 for joint return filers plus $300 for each qualifying child.  Congress required the IRS to use a taxpayer’s 2007 tax return information to estimate the credit and issue the advance payment to stimulate the economy.  This means that the rebate amount would have to be accounted for on the taxpayer’s 2008 tax return with the following results:

• If the rebate amount was less than the credit computed on the taxpayer’s 2008 return, the additional amount will be credited to the 2008 return.

• If the rebate amount was more than the credit computed on the taxpayer’s 2008 return, the difference will not have to be repaid.

• If the taxpayer did not receive a rebate, he or she will receive the full amount of the credit on the 2008 return to the extent that he or she qualifies for the credit.
 
Some taxpayers qualify for this credit even though they are not required to file a tax return.  However, to receive the rebate credit, a return must be filed.  To qualify, a taxpayer must have at least $3,000 of qualifying income, which generally includes earned income (wages, salaries, self-employment income, etc.), Social Security Benefits and certain disability benefits, or have a net tax liability greater than zero and gross income greater than the sum of the standard deduction and exemption amounts on the tax return.
 
The amount of a taxpayer’s adjusted gross income (AGI) affects the amount of the credit.  When AGI is over $75,000 ($150,000 for married couples who file jointly), the credit is phased out by 5% of the income above the AGI thresholds.  Taxpayers who did not receive the full rebate payment in 2007 because of the AGI limitation may be eligible to receive the difference as a credit on their 2008 returns, depending on the amount of their 2008 AGI.

If you did not receive a rebate payment during 2007, it may have been because the rebates were subject to offsets for any federal debts owed, including back taxes, unpaid child support, or federal student loans.  Even if you did not receive a cash payment because of one of these offsets, you must still treat the rebate as if you had received the cash when accounting for it on your 2008 return.  Please call the office if you have questions regarding the rebate payment.

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