What You Need to Know about the 2008 Tax Rebate Plan: The first piece of tax legislation in 2008, the Economic Stimulus Act provides that the taxpayers will receive a one-time rebate in mid-2008. The rebates, or "stimulus payments" as they are being called by the IRS, will be mailed or sent via direct deposit to individuals who file a 2007 tax return and meet certain eligibility requirements. The IRS will calculate the amount of the rebate for you based on your 2007 income information.

What's the Maximum Stimulus Rebate Payment: $600 for unmarried persons and $1,200 for married couples. Plus an additional $300 per qualifying child.

How Will the Rebate be Calculated: The rebate is limited to the net tax liability. For many people, this amount will be the same as found on Form 1040 Line 57, Form 1040A Line 35, or Form 1040EZ Line 10. The rebate is reduced if the net tax liability is less than the maximum credit. The rebate will also be reduced for people with higher incomes. The stimulus rebate is reduced by 5 percent of the amount of income in excess of $75,000 (or $150,000 for married couples).

Who's Eligible for the Rebate: Individuals who have at least $3,000 in qualifying income.

Who's Not Eligible for the Rebate:
Dependents, or people who could be claimed as dependents by another taxpayer, are not eligible. Also ineligible are non-resident aliens, anyone without a valid Social Security Number, and estates and trusts.

Qualifying Income:
Wages, self-employment, Social Security benefits, Railroad Retirement benefits, and veterans' disability compensation, pension or survivors' benefits received from the Department of Veterans Affairs in 2007. Supplemental Security Income (SSI) does not qualify for the rebate.

Qualifying Children and Dependents:
Any child under age 17 who is related to the taxpayer by blood, marriage, adoption or foster arrangement and whom the taxpayer can claim as a dependent. Dependents age 17 and over do not qualify for the additional rebate. Dependents of any age do not qualify for the rebate in their own name even if they earn their own income.

Impact on 2008 Tax Returns:
The stimulus rebates will be calculated by the IRS using information on the 2007 tax returns. If taxpayers were entitled to a larger rebate based on their 2008 income, those taxpayers will be able to claim a tax credit for the additional amount. Taxpayers won't have to pay back the rebate, however, if using their 2008 income would result in a lower rebate amount.

How Rebates will be Processed:
The IRS will mail out two notices to taxpayers. The first notice will inform people about the rebate. The second notice will confirm the taxpayer's eligibility, amount of the rebate that the IRS has calculated, and when the taxpayer should receive the rebate payment. Rebates will be sent by direct deposit, if bank account information was provided on the 2007 tax return, or by paper check.

Filing a Return:
Individuals must file a 2007 tax return to receive the stimulus rebate payment. Even if the person does not have a filing requirement and does not have a tax liability, they will still need to file a return so that the IRS will know that the person qualifies for the rebate.

If you are filing a 2007 tax return solely for the purpose of claiming the stimulus rebate repayment, show your nontaxable Social Security benefits, veteran's disability pension, or Railroad Retirement benefits on Form 1040 Line 20a or Form 1040A Line 14a. This will let the IRS know that you have qualifying income for the purposes of the rebate, even if you have no taxable income.

Direct Deposit Issues:
The IRS wants to send out rebate payments via direct deposit. This means you need to make sure your direct deposit information is absolutely, 100% accurate. Any mistake here could result in losing your rebate forever.

Refund Offset Issues:
The rebates are subject to the same offset procedures as other tax refunds. If a taxpayer owes back taxes, is in arrears on child support, or has defaulted on a student loan, the rebate payments will be applied to pay those debts.

Labels: 2007 tax rebate plan, federal income tax rebate plan