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STIMULUS PACKAGE
On
February 13, President Bush signed the long awaited stimulus package
designed to put money into the pockets of many American
taxpayers. This month, more than 130 million American households will
begin receiving Internal Revenue letters reminding them to file a
2007 tax return in order to receive a 2008 stimulus payment. The
maximum rebate amount is $600 ($1200 if married jointly) for
taxpayers whose adjusted gross income (AGI) is below $75,000
(single) and $150,000 (joint returns). Additionally, eligible
taxpayers who qualify for a payment will receive an additional $300
for each qualifying child under the age of 17. This basic credit
will phase out as income levels rise above these levels. Here are
two examples of how the phase out works: An individual with AGI of
$80,000 (overage of $5,000 x 5% = $250) will have her rebate reduced
to $350; a married couple with two children, AGI of $160,000 would
qualify for $1,800 rebate. But because of the couple’s AGI exceeds
$150,000, their rebate is reduced by $500 ($10,000 x 5%) the couple
receives an economic stimulus payment of $1,300.
Low-income earners, Social security beneficiaries, certain railroad
retirees and those who receive benefits from the Department of
Veteran Affairs who normally don’t file, MUST file this year to
receive the stimulus payment A simplified Form 1040A has been
created to capture this population of filers. Income of at least
$3,000 from any combination of these sources is required and this
group of taxpayers will receive $300 (single) and $600 (joint). It
is anticipated that the Treasury Department will start sending out
payments in May and will be automatically deposited into bank
accounts if that option was chosen with the 2007 tax return filing.
Some people will not receive the stimulus rebate under the following
circumstances: Part or all of your payment can be used to pay
past-due federal or state income taxes or non-tax federal debt such
as student loans and child support. If this occurs, you will receive
a letter explaining how the stimulus package was applied. You don’t
file a 2007 tax return. Your qualifying income is less than $3,000.
You can be claimed as a dependent on someone else’s return. You do
not have a valid Social Security Number. You are a nonresident
alien. You file Form 1040NR for 2007.
Good news. You will not owe tax on your payment when you file your
2008 federal income tax return. But you should keep a copy of the
IRS letter you receive later this year listing the amount of
payment. You will need to know this amount next year when you fill
out your 2008 return. Any questions regarding items mentioned in
this column, please email me or call at 516-TAX-SAVE.
Barry
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