2008 Economic Stimulus Rebate Payments By now you've probably heard about the recently-passed economic stimulus package (the Economic Stimulus Act of 2008), the centerpiece of which is the government's issuance of rebate checks to most Americans. In brief, the measure will bring tax rebates of $600 for individuals and $1,200 for couples to most taxpayers and $300 check to low-income people including disabled veterans and the elderly. Here are the key details of the rebate provisions in the stimulus package. Amount of rebate The new law allows a refundable credit against tax (the "recovery rebate credit") to low and middle-income individuals for 2008 in an amount calculated as the greater of: Net income tax liability, not to exceed $600 ($1,200 for joint filers) or $300 ($600 for joint filers) if the individual has either: At least $3,000 of any combination of earned income, Social Security benefits and certain veterans' benefits (including survivors of disabled veterans), or Net income tax liability of at least $1 and gross income greater than the sum of the applicable basic standard deduction amount and personal exemptions ($8,950 for singles, $17,900 for joint filers.) For most low and middle-income taxpayers, the rebate in effect gives back whatever tax was paid for the 2007 tax year at the 10 percent bracket level up to $6,000 of taxable income ($12,000 for joint filers.) For example, a single individual with $4,000 taxable income and $400 in net income tax liability for 2007 will receive a $400 rebate; someone with $40,000 taxable in come and $6,400 in net income tax liability will receive the maximum $600 rebate. (See "phase out" below for exclusion for higher-income individuals.) There is an additional $300 credit for each qualifying child for whom the child tax credit can be claimed. This is generally a dependent child who is under age 17 at the end of the year. Taxpayer Qualifying Income Rebate Amount Single $3,000 in Social Security benefits $300 Single $50,000 in earned income $600 Single/one child $50,000 in earned income $900 Married couple/two children $60,000 in earned income $1,800 Married couple/four children $70,000 in earned income $2,400   Phase Out The amount of the rebate credit (both the basic and qualifying child amounts) will phase out at a rate of 5% of adjusted gross income (AGI) above $75,000 ($150,000 for joint returns). For joint filers with no children who would otherwise get the maximum $1,200 basic credit, the credit will be entirely lost at AGI of $174,000. A single filer with no children who would otherwise get the maximum $600 basic credit will lose the entire credit at AGI of $87,000. The amount of the rebate is not includible in gross income and does not otherwise reduce the amount of withholding. The rebates will be subject to offsets for items like past-due child support and debts owed to the federal government. Eligible individuals An eligible individual is any individual other than a nonresident alien, a dependent, or an estate or trust. Residents of the U.S. possessions will also receive the benefit. However, in an effort to bar illegal immigrants from receiving rebates, the rebate will not be available if an individual's tax return does not include social security numbers of the taxpayer, spouse, and any qualifying children. Taxpayer identification numbers (ITINs) that the Internal Revenue Service issues to aliens who are ineligible for social security numbers are not valid for this purpose. Arrival of rebate payments The IRS announced that it will begin sending more than 130 million economic stimulus payments starting May 2. The initial round of payments will be completed by early July. Stimulus payments will be made by direct deposit to people who chose to receive their 2007 income tax refund through direct deposit. All others will receive their economic stimulus payments in the form of a paper check. Stimulus payments will be sent out in the order of the last two digits of the Social Security number used on the tax return. On a jointly filed return, the first Social Security number listed will determine the mail-out time. Taxpayers who chose direct deposit and will have their return processed by April 15 can expect to receive their economic stimulus payment between May 2 and May 16. For taxpayers who did not choose direct deposit or file their return after April 15, paper checks will be in the mail starting May 16. They will be sent in batches over a nine-week period with the initial mailings completed by July 11. For taxpayers whose returns are processed after April 15, the IRS will continue sending weekly payments. People who file tax returns after April 15 and receive a refund can expect to receive their economic stimulus payment about two weeks after receiving the tax refund, but not before the date they would have received payment if the return had been processed by April 15. To ensure taxpayers receive their stimulus payment this year, they must file a tax return by October 15. The Rebate and 2008 Income Tax Filing When taxpayers file their 2009 returns in early 2009, they will reconcile the amount of the credit with the rebate they received in the following manner. They will complete a worksheet calculating the amount of the credit based on their 2008 tax return. They will then subtract from the credit the amount of the rebate they received. For many taxpayers, these two amounts will be the same. However, if the result is a positive number (because for example, the taxpayer paid no tax in 2007 but is paying tax in 2008), the taxpayer will be able to claim that amount as a credit against 2008 tax liability. If the result is negative (because for example, the taxpayer paid tax in 2007 but owes no tax for 2008), the taxpayer will not be required to repay the rebate amount to the Treasury. We hope this information is helpful. If you would like more details about this or any other aspect of the new law, please do not hesitate to call us. Direct Deposit Selected: Last Two SSN Digits: Payments Will Be Transmitted: 00 through 20 May 2 21 through 75 May 9 76 through 99 May 16   Paper Check or Return Processed After April 15: Last Two SSN Digits: Payments Will Be Mailed By: 00 through 09 May 16 10 through 18 May 23 19 through 25 May 30 26 through 38 June 6 39 through 51 June 13 52 through 63 June 20 64 through 75 June 27 76 through 87 July 4 88 through 99 July 11