With tax season coming to an end last week, the next big thing is the economic stimulus rebate which the government approved earlier this year. With that in mind, here is some information about the economic stimulus package, and how it will affect military members.Keep in mind, this information is gathered primarily from the IRS web page, and I am not a tax professional. So if you are in need of professional tax advice, please consult the IRS or a tax professional.
What is the economic stimulus package?
The economic stimulus package is a change in the tax code that will eliminate the 10% bracket from 10% to zero for the first $6,000 of taxable income in 2008. In order to spur the economy, the government made the rebate effective immediately, giving people more money to spend now. For more information about the rebate, read the economic stimulus explained.
Who is eligible for the rebate?
The economic stimulus rebate check is available to qualifying tax payers, based on IRS calculations. Single tax filers with adjusted gross income (AGI) less than $75,000 and couples filing jointly with AGIs less that $150,000 will qualify for full rebates. Those with AGI levels above the maximum will receive a reduced rebate based on a phase-out schedule.
Persons who do not owe income taxes, but earned at least $3,000 in wages, Social Security benefits, or veterans disability benefits, will get rebate checks of $300 for individuals and $600 for couples.
How much will I receive for the rebate?
Qualifying single filers (AGI less than $75,000) will get rebates of up to $600. Qualifying couples (AGI less than $150,000) will get rebates of up to $1,200, plus $300 per dependent child younger than 17, with no maximum number of eligible children. The rebate starts out at $300 per person, but rises to $600 per person to match the taxes you will pay based on your 2007 Adjusted Gross Income (AGI).
Your AGI is generally lower than your salary, and is based on your earnings after tax deductions such as 401(k) and Traditional IRA investments and other qualified deductions. However, if you earn above a set limit, you may receive less than $600. The tax rebate decreases by $50 for every $1,000 earned above $75,000.
What do I have to do to get my rebate check?
If you file taxes in 2007 and qualify for the rebate, it will be automatically sent to you. To receive the economic stimulus rebate, you are required file a 2007 tax return, either a form 1040, 1040A or 1040-EZ. If you are someone who normally doesn’t file a tax return (for example, a pensioner, retiree, of someone whose income is based on Social Security, military veteran’s disability, or other income), you will need to file a tax return in order to receive the rebate.
If you filed your tax return by the April 15th deadline, you will receive your rebate check automatically starting May 2. For those who elected to receive their rebate check via electronic deposit, checks will begin being sent by the IRS on May 2nd. For those who will receive their check via mail, the checks will be sent starting May 16. If you filed your taxes late or filed for an extension, you may not receive your rebate check for several weeks after you file, and there have been some reports that it may take several months to receive your rebate.
My only income is military disability pay. Will I receive a rebate?
Yes. People receiving benefits from the Department of Veterans Affairs for disability, pension, or survivors’ benefits are eligible to receive the economic stimulus rebate. If you have already filed a return, you will automatically receive the rebate.
For eligible veterans who do not normally file a tax return, the IRS has prepared a 10-page informational package that includes instructions, a sample Form 1040A and a blank Form 1040A — everything needed to file a tax form today.
- Package 1040A-3, 8-page informational package for people who normally do not file a tax return.
Tax filers should note that Line 14a of the Form 1040A and Line 20a of Form 1040 are designated for Social Security. However, these lines should also be used to include any veterans’ benefits.
For more information, go to the IRS economic stimulus FAQ section for those receiving military benefits.
Others may need to amend a previously filed tax return to include benefits to reach the $3,000 qualifying income level. Adding these benefits on an amended tax return will not increase an individual’s tax liability but will establish eligibility for the stimulus payment. Taxpayers can use IRS Form 1040X to amend a tax return in order to qualify for the stimulus payment. File the form after April 14, 2008, and allow 8-12 weeks of processing time before making any inquiries about the payment. See a sample with instructions.
All of my income in 2007 came from a tax free zone. Will I still receive the rebate?
Yes. As long as you file your taxes and otherwise qualify, you will automatically receive your rebate check.
I was in a tax free zone and filed for an extension on my taxes. Will I still receive the rebate?
Yes. The rebates are based on taxpayers’ 2007 tax returns. Those who file extensions or file late would likely receive their checks later than regular filers, but they will still receive them. The checks will be sent out automatically; taxpayers don’t need to apply. If you are unsure whether you are eligible to file an extension without penalties, consult the Military Tax Extension IRS FAQ page or go to a qualified tax professional for more details.