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Accounting for your tax rebate on next year's return
Dear Tax Talk:
How do I account for my $600 rebate check
(2001 advance payment check) on the 2001 tax return form? Will my
refund next April be reduced by $600 because the check was an advance
payment?
Tom
Dear Tom:
You're very perceptive to realize that the rebate is an
advance payment of your 2001 tax refund. You're also lucky that
you got the full amount possible for married taxpayers who file
jointly. In this case, you don't have to do anything regarding the
payment when it comes to filing your 2001 taxes next year. And any
other tax refund amount you may earn will not be reduced.
However, taxpayers who didn't get the maximum possible
check amount may
be able to get the money when they file their 2001 returns.
The Internal Revenue Service recently released its draft 2001 Form
1040, which on line 47 provides space for these filers to claim
additional credit.
You'll only get additional credit if you didn't get
the full rebate during 2001. You might have not received the full
rebate if your 2000 taxable income was low, your filing status changed,
you didn't file or you were a nonresident for income tax purposes.
A draft
worksheet is provided for figuring additional credit.
The credit is a result of a new 10-percent tax bracket
Congress created this year. But for practical 2001 tax-filing purposes,
it doesn't exist. Check out the 2001
tax brackets and income amounts they cover.
Instead, the rebate comes from the difference between
the new tax rate of 10 percent applicable to income up to $6,000
for a single taxpayer, $10,000 for head of household and $12,000
for a married couple vs.- the old tax rate of 15 percent that applied
to those income amounts. Therefore, 5 percent (the difference between
the 15 percent and 10 percent tax brackets) of $6,000 is $300, which
is the tax rebate you received if you were single, and had taxable
income of $6,000 in 2000. For heads of household, the rebate was
$500. A married couple received $600 for the same reasons.
Money taxed at the 10 percent rate was given back
in the form of the credit or the rebate already received. The effect
is that you calculate your tax on your return next year without
the lower tax bracket. If you didn't get the rebate, depending on
your filing situation you could get some of it back when you file
your 2001 return. If you did get the full rebate, you won't be getting
anything more, and there is no need to account for it on your 2001
tax return.
If you had taxable income in 2000 of at least
the above-mentioned amounts, filed your 2000 tax return but have
not received a check or explanation, contact IRS at (800) 829-1040
to determine where your rebate is.
-- Posted: Oct. 26, 2001
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