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2008 Economic Stimulus Rebate Good – Fast Refunds Bad

February 21, 2009

This article is ONLY relevant to Tax Year 2008.  This information is historical and provided as a courtesy to SSA recipients and Taxpayers filing their 2008 Tax Return.

The Recovery Rebate Credit is a one-time benefit for people who didn’t receive their full Economic tax-form-1040-fbStimulus Payment in 2008 and whose circumstances may have changed for 2009, making them eligible now for some or all of the unpaid 2008 portion.

Your Recovery Rebate Credit will be included as part of your refund, as shown on your tax return.

Who Can Be Eligible For More Economic Stimulus?

  • Individuals who did not receive an economic stimulus payment at all.
  • Those who received less than the maximum economic stimulus payment in 2008 — $600 per taxpayer; $1,200 if married filing jointly — because their qualifying or gross income was either too high or too low.
  • Families who gained an additional qualifying child in 2008. (qualifying means age 16 or under)
  • Individuals who could be claimed on someone else’s tax return in 2007, but who is not claimed as a dependent on their 2008 tax return.
  • Individuals who did not have a valid Social Security number in 2007 but who did receive a Social Security number in 2008.

How to Get the Recovery Rebate Credit:  Claim the recovery rebate credit on your 2008 Form 1040, 1040A or 1040EZ. Instructions for these forms will show you which lines to use. This year, the recovery rebate credit will be included in your tax refund for 2008 and will not be a separate payment.

The IRS Will Figure the Recovery Rebate Credit for You

You can let the IRS figure the credit when you file your 2008 Form 1040, 1040A or 1040EZ. If you’re filing on paper, simply follow the line-by-line instructions to choose this option. If you’re filing electronically, the software will figure the credit for you.

Many people are becoming confused by thinking the 2009 Economic Stimulus will be part of their 2008 Tax Return.  NO it will not.  The New Stimulus will be available in your 2009 Tax Return that you will file next year, in 2010:

  1. “Making Work Pay” Tax Credit. The bill would cut taxes for more than 95% of working families in the United States. For 2009 and 2010, the bill would provide a refundable tax credit of up to $400 for working individuals and $800 for working families..
  2. Economic Recovery Payment to Recipients of Social Security, SSI, Railroad Retirement and Veterans Disability Compensation Benefits. The bill would provide a one-time payment of $250 to retirees, disabled individuals and SSI recipients receiving benefits from the Social Security Administration, Railroad Retirement beneficiaries, and disabled veterans receiving benefits from the U.S. Department of Veterans Affairs.
  3. Refundable Credit for Certain Federal and State Pensioners. The bill would provide a one-time refundable tax credit of $250 in 2009 to certain government retirees who are not eligible for Social Security benefits.
  4. Increase in Earned Income Tax Credit. The bill would temporarily increase the earned income tax credit for working families with three or more children. Under current law, working families with two or more children currently qualify for an earned income tax credit equal to forty percent (40%) of the family’s first $12,570 of earned income.
  5. Increase Eligibility for the Refundable Portion of Child Credit. The bill would increase the eligibility for the refundable child tax credit in 2009 and 2010. For 2008, the child tax credit is refundable to the extent of 15 percent of the taxpayer’s earned income in excess of $8,500.
  6. Sales Tax Deduction for Vehicle Purchases. The bill provides all taxpayers with a deduction for State and local sales and excise taxes paid on the purchase of new cars, light truck, recreational vehicles, and motorcycles through 2009.
  7. Temporary suspension of taxation of unemployment benefits. Under current law, all federal unemployment benefits are subject to taxation. The average unemployment benefit is approximately $300 per month. The proposal temporarily suspends federal income tax on the first $2,400 of unemployment benefits per recipient.
  8. Extension of AMT relief for 2009. The bill would provide more than 26 million families with tax relief in 2009 by extending AMT relief for nonrefundable personal credits and increasing the AMT exemption amount by $70,950 for joint filers and $46,700 for individuals.

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UPDATE:  If you get a CP12 letter from IRS, most likely it concerns a correction they made to the  “Recovery Rebate” line of your tax return.  If that correction sent you more money than you expected AND you happened to get a Refund Loan, most people will discover the Preparers Bank will not give that money to you unless you call them about it.  They conveniently sound surprised at the unexpected ‘windfall’ (that they collect interest on) and hopefully give it to you.

The flip side is, the CP12 notice may tell you that you claimed too much or you already received that credit and reduce the amount of refund you expect.  In that case, when the Loan Bank discovers the refund deposit from IRS is less than expected, you will have to pay the Loan Bank back.

Don’t Get A Refund Anticipation Loanmousetrap3

fishing-dollar Please, don’t be scammed by sleazy tax preparers who see dollar signs when you walk through the door.  They will sell you the best refund you ever imagined, they will promise your refund in 24 hours.  They will tell you only 2 kids can be used on your tax return – Big Lie!  That lie gives them an opportunity to sell your eligible kids to someone else, who will split a bigger refund with them.  This is a terrible thing to do, because it compromises your kids identity.  Once their Social Security numbers are sold, they will suffer identity theft for years. fast-money-for-less

Don’t be SCAMMED

  1. If a preparer tells you  to claim only 2 children, just pack up and walk out!
  2. If a preparer tells you to remove your dependent because “someone has already claimed them”, pack up and walk out!
  3. If a preparer tells you its OK because you can come back and file an amended tax return and claim that child, they are seeing more dollar signs from you.  Amended Returns can cost you.  It takes 3 months to process an amendment.  Someone is enjoying your money if you fall for this scam.  If you hear this speech,  you tell your preparer to MAIL your return AS IS!  SIX weeks is much better than THREE months to wait for your money.  Plus, this lets IRS catch the person who claimed your child and MAKE THEM PAY!
  4. Always know, if you are promised a refund in less than 10 days, you are signing for a HIGH INTEREST BANK LOAN!  The Refund Anticipation Loan Bank will do a regular credit check to see if you are worth the risk,  if they deny you, you will still pay …

Its all about Earned Income Tax Credit. This credit has been scammed for so long, preparers will tell someone to claim someone elses SSN to get the “Big Bucks”.  This credit is the most watched item on a tax return that claims it.  Do not be surprised if IRS holds your Earned Income Credit and only refunds your withholding, if that happens your being audited, or “examined”.  IRS and the Treasury are clamping down on  people who claim they did not know the rules, or their tax preparer did it without their knowledge.  If you never owed Federal Taxes before, you will if you claim this credit and don’t qualify.  The other consequence is that you are prohibited from claiming Earned Income Credit, for 2 to 10 years.  You have to file a Form 8862 and ask permission from IRS first.

If you are encouraged to file your tax return right away, and you don’t have all your W-2s or Form 1099s, you risk being caught “Not reporting ALL your income”.  You will get a bad surprise when you discover you owe Federal Taxes on that income you forgot.

Don’t be afraid to call IRS first to make sure there are no surprises waiting for you.  You’ll be glad you did. 1-800-829-1040 – yes, there may be a long wait.  Its worth it.

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Hat Tip

AlterNet UPDATE:  Tax Time Dangers: Cyber Theives Are Licking Their Chops to Steal Your Info


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