Is The Taxman Really Only Going to Giveth???

April 14th, 2008 at 02:02pm Scott K. Laue

  Scott K. Laue, J.D., CRPS

Starting in May, the Treasury will begin sending “economic stimulus payments,” also known as checks, to more than 130 million households ($53,300,000 in postage? – ouch).  The good news is that the money is not taxable and will not reduce your 2007 or 2008 refund or increase the amount you owe when you file your 2008 return.  So yes, the tax man in this case is truly only going to giveth!!  So what’s the catch?  Before you succumb to the numerous business marketing plans being developed, make sure you are eligible before starting your individual stimulus program.

Eligibility – The vast majority of people who file a 2007 income tax return qualify. You need a valid social security number, can’t be claimed as a dependent on another’s tax return, and have “qualifying income” of at least $3,000.  Qualifying income includes any combination of earned income and certain benefits from Social Security.  Dividends, interest, and capital gains income is not included when determining qualifying income.

Income Limitations – The stimulus payment, both the basic component and the additional funds for qualifying children, begins to phase out for individuals with adjusted gross income (AGI) over $75,000 and married couples filing a joint return with AGI over $150,000.  The combined payment is reduced by 5% of the income over the AGI thresholds. 

How Much – The actual amount depends on information provided on your tax return, thus the requirement to file.  Eligible individuals will receive between $300 and $600 and eligible joint filers between $600 and $1,200.  Those with children under age 17 as of December 31, 2007 may receive an additional $300 for each qualifying child. 

When – If you filed your tax return and elected the direct deposit option, payments will be electronically deposited to your bank account starting May 2^nd.  Paper checks will be mailed starting May 16^th.  The exact timing will be determined by the last two-digits of your social security number. 

The IRS.gov website is the best source for additional information and answers to questions regarding the stimulus payments.

Be aware that identity thieves are already pushing scams involving the stimulus payments.  As always, do not give out your social security number, bank account, or financial information to anyone you don’t know.

Good luck developing your spending plan in accordance with the spirit of our government’s generosity …but  remember, it’s not a bad idea to save a portion for that proverbial rainy day.

Entry Filed under: Tax