Tax rebate - what will it cost me in 2009?

frenchy · Joined: 08 Feb 2008 Posts: 1

I've read conflicting stories on the rebates, one said I will have to
pay the entire rebate of $600 back in reduced tax refund or an actual
increase in my taxes by the whole amount, on my 09 return (MSN money
article) - another said I will only have to pay TAX on the $600 as it
would increase my income by that amount. What's the correct answer?
Thanks!

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Archived from group: misc>taxes>moderated

Paul Thomas, CPA · Joined: 25 Aug 2007 Posts: 3094

"frenchy" wrote
> I've read conflicting stories on the rebates, one said I will have to
> pay the entire rebate of $600 back in reduced tax refund or an actual
> increase in my taxes by the whole amount, on my 09 return (MSN money
> article) - another said I will only have to pay TAX on the $600 as it
> would increase my income by that amount. What's the correct answer?

Federal tax refunds are not taxable income on federal returns. Although
Congress could change it for this rebate.

Other than that, remember that this gimmick ~has~ to be paid for by someone
at some time. They aren't overflowing with money in DC, so this'll just add
to the deficit (ie: money collected being less than money spent). If not
paid for directly on the 2008 tax returns in some manner, expect increasing
taxes (increase in tax rates, decrease in deductions/exemptions, or both) in
the future years.

Ya can't have it all and have others pay for it all.

So that old commercial saying "You can pay me now, or you can pay me later"
applies here - you're going to pay later for what you get today.

--
Paul A. Thomas, CPA
Athens, Georgia

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Phil Marti · Joined: 25 Aug 2007 Posts: 2520

"frenchy" wrote:

> I've read conflicting stories on the rebates, one said I will have to
> pay the entire rebate of $600 back in reduced tax refund or an actual
> increase in my taxes by the whole amount, on my 09 return (MSN money
> article) - another said I will only have to pay TAX on the $600 as it
> would increase my income by that amount. What's the correct answer?

Door number 3.

It's a refundable credit toward 2008 taxes. In effect it reduces your 2008
tax liability by the rebate amount, and if the rebate winds up being more
than your 2008 tax, you get to keep the change.

You ignore the rebate through the year. Don't adjust your withholding or
estimated tax payments, and you'll wind up with about the same
refund/balance due when you file your 2008 return as you would have without
the rebate. Of course, you will have had the rebate check previously.

If you wind up not getting a rebate check you'll get the credit when you
file your 2008 return.

--
Phil Marti
Clarksburg, MD

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cpabakem01 · Joined: 25 Aug 2007 Posts: 48

On Feb 8, 12:50 pm, frenchy wrote:
> I've read conflicting stories on the rebates, one said I will have to
> pay the entire rebate of $600 back in reduced tax refund or an actual
> increase in my taxes by the whole amount, on my 09 return (MSN money
> article) - another said I will only have to pay TAX on the $600 as it
> would increase my income by that amount. What's the correct answer?
> Thanks!
>
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http://tinyurl.com/yq3643

Milt Baker CPA
Michigan

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removeps-groups · Joined: 09 Dec 2007 Posts: 98

On Feb 9, 9:34 pm, cpabake...@yahoo.com wrote:

> http://tinyurl.com/yq3643

The bill has finally passed both branches of congress, and signed by
the president.

See http://thomas.loc.gov/cgi-bin/bdquery/z?d110:h.r.5140:
Click Text of Legislation
Click [H.R.5140.ENR]

Seems the rebate amount will be determined by the 2008 taxable year,
but they will use the 2007 tax return to determine how much of a
rebate check to send to you this year in May -- well, this is my
reading of section g1, but the language is too cryptic for me to
understand fully. So if your 2007 income is too high you might get
nothing in May, but if your 2008 income is low you could get a credit
on the 2008 return which you file in 2009. Is that right? If your
2007 income is low enough you might get something, but if your 2008
income is too high then what? The URL referenced above says you get
to keep the rebate.

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Phil Marti · Joined: 25 Aug 2007 Posts: 2520

wrote:

> Seems the rebate amount will be determined by the 2008 taxable year,
> but they will use the 2007 tax return to determine how much of a
> rebate check to send to you this year in May -- well, this is my
> reading of section g1, but the language is too cryptic for me to
> understand fully.

You understand, although I'd use different words. The "rebate" is a
refundable credit on your 2008 taxes. "Refundable" means you get it even if
it reduces your tax below zero.

The checks to be sent out in 2008 are an estimation, based on your 2007
return, of what your 2008 credit will be.

> So if your 2007 income is too high you might get
> nothing in May, but if your 2008 income is low you could get a credit
> on the 2008 return which you file in 2009. Is that right?

Change "might" to "will," and you got it.

> If your
> 2007 income is low enough you might get something, but if your 2008
> income is too high then what? The URL referenced above says you get
> to keep the rebate.

That is correct. When you file your 2008 return in 2009 the credit applies
to your return. It is reduced by the amount of the advance check you got,
BUT NOT BELOW ZERO. That means you keep the change.

--
Phil Marti
Clarksburg, MD

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