130 Million People Will Get Tax Rebates…Will You? You won’t, if…

Everyone’s talking about the rebates. It’s heady stuff, I know. I thought it might be good to mention a little fact that seems to be getting swept under the rug. . . not everyone will get one. Are you on that list? Well, here’s what you need to know to find out.

You’re not getting a rebate if…

• You are claimable on someone else’s tax return (that is, someone else can claim you as dependent on their return, whether or not they actually claim you). You know who you are.
• You and/or your spouse don’t have a valid Social Security Number. For example, individuals who have no taxpayer ID number or who have an ITIN. (If filing jointly, both spouses MUST have a valid SSN.)
• You are not a U.S. citizen or full-year U.S. resident.
• You don’t file a 2007 return.
• You don’t file Form 1040, 1040A, or 1040EZ. That nixes nonresident aliens.
• You don’t have at least $3,000 of eligible income and don’t pay tax.

This eligible income (as mentioned in that last bullet point there) includes:

• Wages that are reported on Form W-2.
• Net self-employment income.
• Social Security benefits reported in box 5 of the 2007 Form 1099-SSA.
• Tier 1 Railroad Retirement benefits reported in box 5 of the 2007 Form 1099-RRB.
• VA disability and survivor benefits received in 2007.
• Nontaxable combat pay if the taxpayer elects to include it as earned income.

No other income qualifies. Not alimony, not third party disability, not SSI, not. . . okay, you get the idea.
Note: If you pay tax, it doesn’t matter what type of income you have.

By the way, “pay tax” means having a tax liability greater than $0, but you can’t necessarily just look at the return (unless you file Form 1040EZ, that is). This is how it’s calculated for rebate purposes:

Form 1040EZ: Line 10
Form 1040A: Line 35 + Line 32
Form 1040: Line 57 + Line 52

If you’re a tax geek like me, you can also think of the “pay tax” calculation as your tax liability based on your taxable income less nonrefundable credits other than the child tax credit. If that made your head swim, you are not a tax geek.

Tax geek or not, you have to know that other taxes like self-employment tax and the 10% penalty on early withdrawal of retirement funds don’t count, so don’t even try.

Your also not getting a tax rebate if:

• Your income is too high. The rebate is fully phased out for individuals who have an AGI of $87,000 ($174,000 for joint filers). These numbers shift $6,000 for each child-tax-eligible kid on your return. So if you’re filing a Head of Household return, say, and have one eligible child, you’re completely phased out of the rebate if you have an AGI of $94,000 ($87,000 + $6,000). Two kids and it’s $100,000.

Okay. There it is. Now you know. You may not be getting a rebate. But take heart. And don’t panic. You might still get the benefit of a stimulus payment on your 2008 return if your situation changes and you don’t meet any of the tests above for that return.

Oh yeah. If you owe back taxes, child support, or any other liability for which the IRS is capturing your refunds, you might be eligible for the rebate, but you won’t get a check. The IRS will apply your rebate to the amount you owe. Of course, if there’s anything left after paying off the balance, the IRS will send you the rest.

Note: The IRS will send a letter explaining how the rebate was applied. You are considered to have received the full rebate, even if you don’t see any of the money.

Author: Brenda Schafer, The Tax Institute at H&R Block, CPA, EA, MSA, CFP; she’s been with H&R Block for about 25 years and can be contacted at bschafer@hrblock.com.

Filed Under: Debtfinancial educationTaxes

  • http://mytradersjournal.com/stock-options/ Alex – My Trader’s Journal

    You left off your list those who make over a certain amount. I can’t recall the exact number, but know our household is over it. I think that number should be even lower. I don’t like the rebate checks, not bec/ I’m not getting one, but because I think it will actually do nothing to kick start the economy. It’s a one time event. Manufacturers and retail chains won’t hire hoards of new employees to handle a one time extra shopper. It’s a waste and our tax dollars could have gone to something better.

  • http://mytradersjournal.com/stock-options/ Alex – My Trader’s Journal

    You left off your list those who make over a certain amount. I can’t recall the exact number, but know our household is over it. I think that number should be even lower. I don’t like the rebate checks, not bec/ I’m not getting one, but because I think it will actually do nothing to kick start the economy. It’s a one time event. Manufacturers and retail chains won’t hire hoards of new employees to handle a one time extra shopper. It’s a waste and our tax dollars could have gone to something better.

  • http://thefinancialengineer.blogspot.com/ Kristin

    Thanks for the link.

    One of the best parts about the rebate is that those who owe child support, back taxes etc, will not get a check until thier liability is paid off. TX does the same with the state lottery.

  • betty

    Is there a way to proactively try to get a rebate? Sorry if that is a dumb question!

  • jon

    When you say “agi” is that the same as “magi”? As in joint filers over 174k do not qualify?

  • http://www.digits.hrblock.com Brenda Schafer

    The way to proactively get the rebate is to file a tax return. If you are not required to file a return but have at least $3,000 of eligible income, a return must be filed to report this income. For more information go to http://www.hrblock.com and look for the Tax Rebate Center.

  • http://www.digits.hrblock.com Brenda Schafer

    AGI is not modified for tax rebate purposes. So the reference to “AGI” is to the amount shown on the return. For more information go to http://www.hrblock.com and look for the Tax Rebate Center.

  • Jeff Benter

    Is this something that is actually filed by H&R Block when I file my taxes through them? If so, do they take a cut of it?

  • http://www.digits.hrblock.com Denise Sposato, H&R Block

    The majority of Americans who qualify for the tax rebate will not have to do anything other than file their 2007 tax return to receive their rebate this year; you will receive it automatically from the Internal Revenue Service (IRS).

    The IRS will determine eligibility, compute the amount and issue the rebate.

    A faster way to receive your rebate is to choose Direct Deposit on your 2007 return. For those that choose this option, the IRS will deposit your rebate directly into your bank account. For those who don’t, a rebate check will be mailed.

  • Jeff Benter

    ah – perfect, thanks!

  • http://myinvestingblog.com Art S15

    Is the rebate based on your amount you’re with holding in the first place?
    I mean, I’m always told, as a good investor, to NOT want a refund at the end of the year by keeping my w-4s set up so that I get the most out of every paycheck.

  • http://www.thepennysaved.com Jesse

    To whichever poster was asking above: you shouldnt have to do anything extra to get the rebate: the IRS is automatically distributing it.

  • http://www.digits.hrblock.com Denise Sposato, H&R Block

    Art, the good news is that the tax rebate is based on your Adjusted Gross Income (AGI), not on your withholding. For individuals, the tax rebate could be worth up to $600 with an AGI of up to $75,000 and $1200 for couples filing joint returns with an AGI up to $150,000. An additional rebate is available for families of $300 per qualifying child.

    Tax rebates are reduced by five percent for each $1,000 of AGI over $75,000 for individuals and $150,000 for joint returns. For taxpayers without children, the maximum payment is fully phased out at $87,000 and at $174,000 for joint filers. In other words, if you’re an individual with an AGI of $87,000 and above or a joint filer with an AGI of $174,000 and above, you are not eligible for the tax rebate.

  • Malissa

    I have this h &r block debit card. According to them its a checking account/ savings. Will the tax rebate be directly deposited to that?

  • http://www.digits.hrblock.com Denise Sposato, H&R Block

    Malissa:
    There’s been some confusion around this issue so let me see if I can help clear it up.

    If you had your taxes prepared at an H&R Block tax office and had your federal tax refund put on an Emerald Prepaid MasterCard, you will receive a Direct Deposit of the Tax Rebate payment on the Emerald Card account.

    However, if you received a bank product that involved a temporary bank account with the Emerald Card, the account will not be considered a viable account for Direct Deposit by the IRS. Bank products include Refund Anticipation Loans, Refund Anticipation Checks, Simple Pay and other settlement products.
    You will then receive your Tax Rebate payment as a mailed check from the IRS.

    The schedule for both Direct Deposits and mailed checks is based on the last two digits of the Social Security Number, and for joint returns, it’s the first Social Security Number listed on the return.

    For the IRS schedule for the distribution of the Tax Rebate, please check out http://www.digits.hrblock.com, “When Will I Receive My Refund?”

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  • RIPPED

    Great, another way to keep me from my benefits. My wife has an ITIN but me and my kids have ss#’s WHAT A SCAM

  • http://www.digits.hrblock.com Denise Sposato, H&R Block

    Ripped…
    I understand your frustration. As you now know, both individuals listed on a Married Filing Jointly (MFJ) return must have valid Social Security Numbers to qualify for the tax rebate. The IRS has determined that anyone who does not have a valid Social Security Number, including those who file using an Individual Taxpayer Identification Number (ITIN), an Adoption Taxpayer Identification Number (ATIN) or any other identification number issued by the IRS is not eligible for the rebate.

    It’s too late, but a possibility might have been for you to file using the status Married Filing Separately (MFS) since you do have a valid Social, but the overall tax liability you and your wife may have paid on separate returns may have exceeded your tax rebate.