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Dear Tax Talk,
The tax rebate -- is it a present or an advance?
I think I read that it was an advance on my 2008
return, meaning if I am entitled to $2,000 on
my '08 return (excluding the rebate) and I got
a $1,200 rebate now, I will get back just $800
come next April. Is this true?
Does it matter what my '08 return comes out to? What if I break even on my '08 return (excluding the
rebate) -- will I have to pay back $1,200? What if I am entitled to $1,000 on my '08 return (excluding the rebate) --
do I need to pay the IRS $200? You get the drift.
Someone told me that if I am entitled to a $1,200 or less return (excluding the rebate), the IRS will
not ask me to pay them anything, but if I am entitled to more than $1,200, then $1,200 will be deducted. That does not
seem fair, and it seems like I should be paying less taxes throughout '08, so I can get this money for "free."
Also, does it make sense that it needs to be paid back? What has the government done -- given me a $1,200
loan at zero percent for one year? What is that worth? Assuming I could have gotten that loan for less than 10 percent,
it is like a $120 present. Is that a big deal?
-- Saar
Dear Saar,
Don't look a gift horse in the mouth. The stimulus payment depends on your income level, tax liability and qualifying
children. See this article
on frequently asked questions about the tax rebate for details. If you do not qualify for the maximum stimulus payment
currently, you may get more back when you file your 2008 tax return in 2009.
This will happen if your circumstances changed in 2008, principally if your income level was too high in
2007 but it decreased in 2008 or you had a child in 2008. For example, a taxpayer who had a one-time gain in 2007 may have
been ineligible to receive a stimulus payment in 2008, but because of decreased income in 2008, he or she may get an
additional amount back when filing 2008 taxes.
If you received less than the maximum rebate, you need to keep a copy of the letter from the IRS that
explains how your payment was calculated. You will need this letter when preparing your 2008 tax return.
The stimulus payment will not reduce
your refund or increase the amount you owe when
you file your 2008 return. In this way it is not
an advance on your 2008 tax return refund. You
will not owe the IRS the $200 back or have created
an interest-free loan as per your examples. The
bottom line is that you can only get more back
when filing your 2008 tax return.
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