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2008 Economic Stimulus Payment and Your IRS Taxes

February 14th, 2009

economic-stimulus-payment-tax.jpgLast year the IRS was besieged by telephone calls regarding treatment of the 2008 economic stimulus payments. Complicating matters even further was the fact that some people who did not get a stimulus payment may still be due one, as this article by Anthony Ventre explains. It remains to be seen whether the Obama administration’s attempt at a stimulus will cause similar confusion, but it’s interesting to see how messy and complicated income taxes have become.

There were so many questions stemming from the 2008 Bush administration economic stimulus package that the Internal Revenue Service had to detail extra people to answer the barrage of questions from people who received it and people who didn’t. According to the IRS, there were 119 million tax payers who received these payments. Owing in part to the tough economic times, the Internal Revenue Service has noted an increase in early filers and a concomitant increase in tax errors in the current 2008 filing year.

Most of the mistakes stem from what’s called a “recovery rebate credit.” The credit was put in place to accommodate those people who received no payment at all or only part of last year’s stimulus payment and who have subsequently lost their jobs or had a child. Military veterans who did not file federal income taxes in 2007 are also potentially eligible.

With regard to common mistakes noted by the IRS, some early filers took the additional credit even though they weren’t entitled to it. Others entered an incorrect amount for the credit. So the IRS issued a clarification called “Avoid Recovery Rebate Credit Confusion,” which can be found on the IRS website. Interestingly, the IRS gave an unintended plug to commercial tax software providers like Intuit, makers of Turbotax, noting that tax software products accurately entered data pertinent to the credit.

Another area of common concern is whether the stimulus payments received by 119 million tax filers is taxable. Stimulus payments are not taxable, says the IRS, and are not to be counted as income under their rules.

There is also confusion regarding the issuance of the recovery rebate credit. The IRS makes clear on its web site that separate checks will not be issued to tax filers who are entitled to the additional credit. Eligible taxpayers will receive only a single refund payment which will include any stimulus plan credit to which they are entitled.

The categories of people who would be potentially eligible for the 2008 stimulus credit and who received only a partial stimulus payment need to know the amount of stimulus payment they did receive. If the tax filer doesn’t have this information ready at hand, there are several ways to obtain it so that it can be entered on a separate worksheet.

On the IRS Web site is a link to “How Much Was My Stimulus Payment.” Another way to obtain the information is to simply make a telephone call to the IRS at 866-234-2942. But there is certainly no need for taxpayers to panic. The IRS information provided on the Web site says that the tax agency will compute and send any credit due to the taxpayer as a matter of course.

Related Articles:

Do We Really Need A Tax Rebate?
Fair Tax Pros and Cons

2 Responses to “2008 Economic Stimulus Payment and Your IRS Taxes”

  1. comment number 1 by: Ireland5

    Well - I don’t think there will be much confusion or much money. Most is going to welfare and government projects. The “tax credit” has shrunk to $400 for individual ($800 family) - $200 less than under Bush. Also - it will not be paid in a lump sum (as was the Bush credit). Instead, the whopping $400 will be a reduction in payroll tax deductions. According to several news sources, including ABC and in this quote Fox News - “Millions of workers can expect to see about $13 extra in their weekly paychecks, starting around June, from a new $400 tax credit to be doled out through the rest of the year.

    Let’s think about this — $13 a week - awesome…..

  2. comment number 2 by: Greg

    Wow!! Just think-25 years ago or so that might have been a tank of gas . Now? Take your ‘favorite’ political leader to McDonalds for a happy meal.

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