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 firstname.lastname@example.org.