What you should know about tax rebate
TEXT OF INTERVIEW
KAI RYSSDAL: Somewhere right near the top of your list of things to do this weekend ought to be three little letters: I-R-S. Not only are taxes due soon, but if you don’t get them done you might miss out on some free cash. Uncle Sam’s going to be giving away money this year. The rebate checks most of us are going to get came with the stimulus package Congress and the White House agreed on a couple of months ago, but, as with so many things having to do with your taxes, there’s a catch or two. Tess Vigeland hosts our personal finance program, Marketplace Money, which means we go to her when we’ve got tax questions. Hey Tess.
TESS VIGELAND: Hello, Kai.
RYSSDAL: Explain to me, would you, why we still have to talk about this.
VIGELAND: Well, because there is still a raft of confusion about the stimulus check. People are very excited to get it, of course.
RYSSDAL: Yeah, right.
VIGELAND: But there are some misconceptions about what that check is going to mean in the overall tax picture, specifically for 2008. Why talk about it right now? Because, uh oh, it’s less than a week until tax day, and you cannot get one of these checks unless you file tax forms for 2007. No exceptions. You do not file, you do not get a check.
RYSSDAL: Say that again.
VIGELAND: You do not file, you do not get a check.
RYSSDAL: There you go. Alright, so let’s unearth some of these misconceptions and then knock them down. One of the big questions we’ve been getting in our inbox is, is this stimulus check going to be taxed next year?
VIGELAND: And the answer, Kai, is an unequivocal no. You will not pay taxes on the stimulus check. The IRS says next year there may be a line on your tax forms asking you to say how much you received, and the point of that is that you may have actually been underpaid this year in terms of your stimulus if your situation changed. So they want you to go ahead and put that on your form next year, and you may actually get more money. They will not take away from you if your situation changed for the negative. You will still get to keep all that money, but that’s really the only thing that’s going to happen on your 2008 taxes. This money will not be taxed.
RYSSDAL: Is it going to a affect next year’s refund, though?
VIGELAND: That’s a really big one that seems to be out there a lot. In fact, we actually have someone here at Marketplace whose accountant told her that this check was an advance on next year’s refund, and that she should plan for her 2008 taxes accordingly. It’s simply not true. This check will not affect next year’s taxes really at all, and you know Kai, we’ve been trying to figure out where all this information has come from. Specifically this one, this notion that this is an advance on next year. Well, I called the very kind people at the IRS . . .
RYSSDAL: Probably ought to say that again too.
VIGELAND: Very kind, and they reminded me that actually, the last time the federal government issued checks, back in 2001,the stimulus was indeed an advance, of sorts, on the Bush administration’s tax cuts. The bottom line went from 15 percent 10 percent. So, maybe folks are assuming that it is the same this time. It is not. This is not an advance on next year’s refund.
RYSSDAL: Alright, one last thing before we go. You have to file this year if you want to get your check. That is even if you usually wouldn’t because you don’t make enough money. .
VIGELAND: That’s right. You know, here we’re talking about people who are on, say social security, or they’re living on veterans’ benefits, certain railroad retirees and of course folks who don’t make enough usually to have to file taxes. Most of those will be eligible for a $300 to $600 check, but they need to file, even if they wouldn’t usually, and there’s a special form called the 10-40A. It’s very simple, and the IRS will send you a stimulus check as long as you have filed for your taxes for 2007, but if you don’t, you will not get a check.
RYSSDAL: Marketplace’s Tess Vigeland. She hosts our personal finance show Marketplace Money. Thank you Tess.
VIGELAND: Thank you, Kai.
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