How the Economic Stimulus Check impacts your 2008 Tax Return
Many Americans received an economic stimulus check last year. If you are filing your return with a program such as TurboTax you will notice that there's a section to enter the amount of your stimulus check. When you do this, the amount of our tax return drops by the exact amount of your stimulus check. Many Americans didn't care to read the "fine print" last year because, well, it was "last year" and it was money in their hands. Here is why it appears this way.
2008 Stimulus Checks were an advance on your 2008 tax return
The stimulus check was not free money as many people assumed. The stimulus was in reality a change to the tax code that was to take effect for the 2008 federal tax season (taxes filed this year).
The new tax code did away with the 10% tax bracket. The economic stimulus package was a modification in the tax code that wiped out the 10% bracket for the first $6,000 of taxable income in 2008. However, the US Government desired to give its citizens the money up front in the hopes they'd go out and spend it to energize the economy.
How tax software programs address the stimulus check. Commercially available tax software such as TurboTax, TaxCut , etc. will complete your tax return based on the 2008 federal tax code eliminating the 10% tax bracket from the first $6,000 of your income. When you input your information, the tax program automatically grants you that additional $600 (10% of $6,000 for single filers) as part of your tax return. When you entert the amount of your economic stimulus check into the tax program you use, the software will reduce your 2008 tax rebate by that amount since you've already received that money.
What if your 2007 and 2008 income is different? Will it alter the total of your Stimulus check payment?
Great question, and yes it may, but it may not. The stimulus check was based on your 2007 tax return since 2008 federal tax returns hadn't yet been filed. Nevertheless, that means the tax situation may have changed for some folks between the two years. There is some good news though if the government overpaid you based on the amount you would have received this year, you do not have to pay it back. If the government underpaid you, you will receive it as part of your 2008 federal tax return.
Here are two examples:
You didn't receive a stimulus check because you earned too much money in 2007.
Eligibility for the stimulus check phased out above certain incomes, starting at $75,000 for single tax filers and $150,000 for joint tax filers. Single filers who earned more than $87,000 and joint filers who earned more than $174,000 didn't get a stimulus check as they made too much money to be eligible. If your 2008 income dripped below those levels, you may find yourself eligible for the amount of the stimulus you would have qualified for. That amount will be figured into your 2008 federal tax return
The IRS mailed you a stimulus check but your 2008 income won't qualify for it - you keep it.
Conversely, if you earned below the phase out limits in 2007 and received a full stimulus check, but made more than the phase out limits in 2008, you don't have to repay the stimulus check you received. Please note this is for income limits and not for other errors. If the IRS added a zero to your stimulus check and mailed you $6,000 instead of $600, they may want that back!
How to determine how much you received from the stimulus check
When filling out your federal income tax return you'll need to input the amount you received from the 2008 stimulus check. If you don't remember, you'll be able to find out from the IRS thru this online stimulus payment tracker . Just input your information and the IRS will inform you the amount you received from the stimulus.
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You're wrong on this you may want to check the second line on the IRS Website under Basic Information on the Stimulus Payment ~ it states "It's not taxable, and it won't reduce your 2007 or 2008 refund or increase the amount that you owe when you file your 2008 return. It's articles like this that are confusing people!
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