http://finance.yahoo.com/taxes/article/106140/Taxpayers-Get-Second-Chance-at-StimulusTaxpayers Get Second Chance at Stimulusby Tom Herman
Wednesday, November 12, 2008
Remember those economic-stimulus checks the government was handing out this
year? Many taxpayers didn't qualify for the full amount -- or for any
payment at all -- because their 2007 income exceeded a certain threshold.
But many people who lost their jobs this year, or whose incomes fell for
some other reason, will get a second chance next year, thanks to a
little-noticed tax-law twist.
Like many other people, Colleen Kilbreath of Westminster, Colo., thought
eligibility for the program was based solely on what she had reported on her
tax return for 2007 -- and assumed she wouldn't get anything because her
income for that year was too high. Ms. Kilbreath, a construction-project
manager, was laid off in June "and could really use the assistance," she
wrote in a recent email.
For 2008, she says, her adjusted gross income will be about $50,000, well
below the law's threshold, which means she should qualify for a recovery
rebate credit when she files her 2008 return next year. "I did not know"
that the law worked that way, she says. "I'm sure there are a ton of us out
there that are in the dark."
Under the economic-stimulus law, which was enacted in February, eligibility
for this tax break is based on your income and other factors, such as family
size, as reported on your federal income-tax return for either 2007 or 2008,
says Mark Luscombe, principal tax analyst at CCH, a Wolters Kluwers
business.
Thus, if you weren't eligible based on your 2007 return or received less
than the maximum amount, you still might qualify for a "recovery rebate
credit" on your 2008 return, to be filed in 2009, Internal Revenue Service
officials say. Other people, such as a family with a child born in 2008, may
also be eligible for a credit on their 2008 return, Mr. Luscombe says.
Huge amounts of money are involved. About $10 billion will be distributed
next year in rebate credits, says Treasury Department spokesman Andrew
DeSouza. The Treasury won't send out separate economic-stimulus payments, as
it did this year. Instead, those eligible will claim the rebate credit on
their 2008 returns. That will affect how much of a refund they'll get or how
much they'll owe Uncle Sam.
With the economic slump deepening, the extra help will come in handy in many
households. According to the latest government figures, employment has
dropped by about 1.2 million in the first 10 months of this year -- with
over half the decrease coming in the past three months. The Labor Department
reported that the unemployment rate rose to 6.5% in October from 6.1% the
previous month, and many forecasters expect it to climb above 8% by the end
of next year.
Pressure is growing in Congress for additional economic-stimulus measures,
either this year during a lame-duck session or next year after Barack Obama
is sworn in as president, or both.
Under the law enacted in February, most people who paid federal income taxes
were eligible to receive as much as $600 for an individual, or as much as
$1,200 for a married couple filing a joint return, with an additional $300
for each eligible child. The amounts phase out for individuals whose incomes
exceed $75,000, or joint filers with income above $150,000. Under the
formula, you lose 5% of the dollar amount above the applicable threshold --
such as $50 for each $1,000 above the cap. (Separately, many low-income
people who paid little or no federal income tax were entitled to some
payment, too.)
Through last month, the Treasury had distributed about 117.4 million
economic-stimulus payments totaling more than $95 billion. During October
alone, the government distributed about 1.4 million payments totaling about
$976.6 million.
The IRS will post tools on its Web site to help people figure the recovery
rebate credit, says Eric Smith, an IRS spokesman. There will also be a
worksheet to help figure out the amount in the 2008 tax packages, he says. A
draft has been posted on the IRS site.
For those do-it-yourselfers who don't want to risk losing their sanity doing
the number-crunching, consider buying tax-preparation software. Intuit
Inc.'s TurboTax, the top-selling consumer software, will automatically
notify customers about this issue when they're working on their 2008 tax
returns next year, and will also calculate any additional rebate amount,
says Julie Miller, an Intuit spokeswoman.
Some people who were eligible for a payment this year haven't received it
yet because of a wrong address. The IRS said recently that it's searching
for people who are missing more than 279,000 economic stimulus checks
totaling about $163 million -- and more than 104,000 regular refund checks
totaling about $103 million -- that were returned by the U.S. Postal Service
due to mailing address errors.
"All a taxpayer has to do is update his or her address once," the IRS said.
The government "will then send out all checks due."
If you're worried about a missing stimulus check and want it this year,
don't procrastinate. "It is crucial that taxpayers who may be due a stimulus
check update their addresses with the IRS by Nov. 28," the IRS said. The
reason: By law, those stimulus checks must be sent out by Dec. 31 this year,
the IRS said. To check the status of a stimulus check and get instructions
on how to update an address, go to the IRS Web site and click on "Where's My
Stimulus Payment?" or call 866-234-2942.
The IRS said the regular refund checks that were returned averaged $988
apiece. These checks will be re-sent as soon as taxpayers update their
addresses. You can do that with the "Where's My Refund" tool on the IRS Web
site, or call 800-829-1954.
* * *
Estate-tax returns fell in 2007.
Only about 38,000 federal estate-tax returns were filed in 2007, down from
49,050 in 2006, according to the IRS. Of those 38,000 returns, about 17,400
were taxable, down from nearly 23,000 taxable returns in 2006.
Among the 2007 taxable returns, there were 2,860 estates valued between $3.5
million and less than $5 million, the IRS said. There were 2,906 estates
valued between $5 million and less than $10 million, 1,104 estates valued
between $10 million and less than $20 million -- and only 654 estates valued
at $20 million or more.
Further declines in the number of filings are likely again next year, when
the basic federal estate-tax exclusion, now $2 million, is set to increase
to $3.5 million.
The top federal estate-tax rate, now 45%, is set to remain unchanged in
2009.
* * *
Voters deliver a mixed verdict on state-tax proposals.
Massachusetts voters turned down the proposed elimination of the state's
income tax over two years. Critics such as the
Massachusetts Taxpayer Foundation had said approval of the measure would
have led to drastic spending cuts in almost all state programs. In another
closely-watched contest, Oregon voters rejected a proposal to allow
taxpayers to deduct unlimited amounts of their federal income taxes on their
state returns. North Dakotans said no to a proposal to cut personal
income-tax rates by 50%.
But voters "were also hesitant to raise taxes in a difficult economy," said
Jennie Drage Bowser of the National Conference of State Legislatures. For
example, Colorado voters rejected a sales-tax increase and also said no to
major changes to the state's strict Taxpayer Bill of Rights law. Maine voted
to roll back new taxes on beer, wine and soft drinks.
Minnesota, however, approved a sales-tax increase to protect the environment
and benefit the arts.
Email:
taxreport@wsj.com
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