How are the stimulus tax rebates being funded?

Question

I am hearing that it is just an advance on next years refund

Answer 1

The government borrowed the money from a foreign country. I'm not saying what country but.............look Asian.

now, suddenly we are getting all cozy with them......

It has been in the papers and on the net.

Every year we go further and further in debt owing money to foreign countries. We are trillions of dollars in deficit spending.

Answer 2

You've heard about it. Now find out how to get yours.

What is it? It's an economic stimulus payment that more than 130 million households will receive starting in May. It's not taxable, and it won't reduce your 2007 or 2008 refund or increase the amount you owe when you file your 2008 return.

Are you eligible? The vast majority of people who file a 2007 income tax return qualify, and many who don't regularly file a tax return may qualify as well. You're eligible if you have a valid Social Security Number (SSN), can't be claimed as a dependent on a tax return and have either an income tax liability or "qualifying income" of at least $3,000. Qualifying income includes any combination of earned income and certain benefits from Social Security, Veterans Affairs or Railroad Retirement. Additional information is below, and a full legal description is available in Revenue Procedure 2008-21.

Both people listed on a "married filing jointly" return must have valid SSNs to qualify for the payment — if only one has a valid SSN, neither can receive the payment.

Can you use an ITIN instead of an SSN? Taxpayers with an Individual Taxpayer Identification Number (ITIN) instead of an SSN are not eligible to receive a stimulus payment. Both people listed on a "married filing jointly" return must have valid SSNs to qualify for the payment — if only one has a valid SSN, neither can receive the payment.  

Not eligible at the current time? If you're not eligible this year but you become eligible next year, you can claim the economic stimulus payment next year on your 2008 tax return.  

How do you get it? Just file a a federal tax return for 2007, even if you normally don't have to because your income usually doesn't meet the filing threshhold. You can't get it if you don't file.

How much will you get? The actual amount depends on the information contained on your tax return. Eligible individuals will receive between $300 and $600. Those who are eligible and file a joint return will receive a total of between $600 and $1,200. Those with children will get an additional $300 for each qualifying child. To qualify, a child must be eligible under the Child Tax Credit and have a valid Social Security number. We have various examples for you check out.

The payments phase out at certain income levels, so those with higher incomes may receive a reduced payment or even no payment.

Answer 3

It's an advance on next year's tax credit.

The "funds" come from the funds that all income taxes and withheld payroll taxes come from.

Answer 4

For 2008 there is a one-time tax cut for income in the 10% bracket - the rebate is an advance on that.  If your rebate is more than the tax cut would have given you, you don't have to pay back the extra.  so your refund next year will be the same as it would have been if there had been no stimulus bill (no tax cut, and no rebate).

But if you don't get a rebate this year and have any tax liability next year, or if your rebate this year is less than your tax liability next year and you haven't already gotten the maximum $600, then you'll benefit from the tax cut when you file your 2008 return.

What this means to you is that if you would normally have gotten $2000 next year and you got the rebate this year, you'll get $2000 next year.  If you did NOT get the rebate this year, and would have gotten $2000 next year, you will get MORE than $2000 next year if you owe any tax, because you'll also get the benefit of a one-year tax cut.  If you get the rebate this year, you won't get that extra, because you will have already gotten it.

Answer 5

Ignore the rumors.

The actual money comes from the same place any other federal deficit does.

As for "an advance," sort of yes, sort of no.

The law that created the rebate did a one-time tax cut on the 2008 tax return, thereby bumping your hypothetical refund for 2008 by $300-$600.  Rather than wait until 2009 for the money, the government is sending you the increase now.  If you get the money now, your refund for 2008 will not be increased, but it will still be the SAME as it would have been before the rebate was passed.

Do not listen to anyone who says because it was an advance that you will have to pay it back.  The reality is you are getting MORE money.  You just don't get the money twice.  

For individuals who get nothing now (or less than the max), there will be a 2nd chance worksheet on the 2008 tax return.  The problem is, many people use software to generate their taxes.  Most software will have you input your personal data and W-2 and then will immediately start predicting what your refund might be.  During the last 2 rebates, the software programmers stupidly included the rebate amount in their refund projection and then asked the taxpayer if they'd already gotten a check.  If the taxpayer said yes, the software reduced the refund by the same amount.  There would have been a lot less frustration if the software had presented it differently.  That is, show the smaller refund until determining that the taxpayer hadn't previously gotten a rebate, then increase the refund shown....which is how the worksheet and doing a tax return by hand at the kitchen table would have done it.